LORD JUSTICE STAUGHTON: S. SA, the plaintiffs in this action, are
Panamanian. They are said to be managed in Hong Kong. I shall call them
the shipowners. They say that they have a claim for general average
contribution in the sum of US $1,462,380.10. The claim is made in the
first place against the owners of a cargo of crude oil, P. SA, and in the
second place against their insurers, C. Those two company are both
domiciled in Belgium. According to the Brussels Convention in the First
Schedule to the Civil Jurisdiction and Judgments Act 1982 they should be
sued in Belgium under Article 2.
However, the shipowners rely on other provisions in the Schedule to the
Act. The first of those is Article 5. It provides:
"A person domiciled in a Contracting State may, in another Contracting
state, be sued --
1. In matters relating to a contract, in the courts for the place of
performance of the obligation in question."
The second provision relied on by the shipowners is Article 17:
"If the parties, one or more of whom is domiciled in a Contracting State,
have agreed that a court or the courts of a Contracting State are to have
jurisdiction to settle any disputes which have arisen or which may arise
in connection with a particular legal relationship, that court or those
courts shall have exclusive jurisdiction. Such an agreement conferring
jurisdiction shall be either (a) in writing or evidenced in writing or (b) in
a form which accords with practises which the parties have established
between themselves, or (c) in international trade or commerce, in a form
which accords with of which the parties are or ought to have been aware
and which in such trade or commerce is widely known to, and regularly
observed by, parties to the contracts of the type involved in the particular
trade or commerce concerned."
Although there is room for argument whether an obligation to contribute
in general average is by its nature contractual, it is very commonly,
almost invariably, regulated by contract; and it is beyond dispute that the
obligation is contractual in the present case. The cargo owners were or
became parties to two bills of lading for the carriage of crude oil, each
of which in turn incorporated this term from a charterparty (which is not
identified on the face of the bills of lading, but nobody seemed to worry
about that):
"General Average shall be payable according to the York Antwerp Rules
1974 (as amended 1990) and shall be adjusted in London."
In addition the cargo owners signed a general average bond, which said
this:
"TO: The Owners of the mt. W
...
In consideration of the delivery to the Consignees thereof at Rotterdam
of the merchandise specified above without payment of deposit we, as
Cargo Owners, hereby guarantee to pay the proper proportion of any
salvage and/or General Average and/or special charges which may be
ascertained to be due and payable by us as Cargo Owners under an
adjustment prepared in accordance with the provisions of the contract of
affreightment governing the carriage of the goods."
There was a also a general average guarantee signed by the insurers of
the cargo in these terms:
"In consideration of the delivery of the merchandise specified below
without payment of deposit to the Consignees thereof against signature
of a General Average Bond, we as Cargo Underwriters concerned, hereby
guarantee to the Shipowners and/or other parties to the adventure as
their interest may appear, the payment of any contribution for General
Average and/or Salvage and/or Special Charges which may be properly
due and payable in respect of the said merchandise."
It is not said that there is any material difference between those three
contractual obligations for present purposes.
Each of the bonds and the guarantee had a non-separation agreement
attached to it. I am thankful to say that we do not today have to enter
into the question what a non-separation agreement means.
There is no need to discuss the casualty which is said to have given rise
to the shipowner's claim for contribution. There was, it seems, a collision
some time after the W had left Kharg Island, off the cost of Mauritania,
followed by fire and explosion. It is evidently the shipowners' case that,
general average sacrifices were made or expenditure incurred.
We are told that at least some aspects of the claim are disputed. R.
were appointed as adjusters by the shipowners. But there has also
been an agreement that a Belgian firm should act as co-adjusters. The
shipowners commenced the present action in this court claiming the
cargo's contribution.
The cargo interests, by which I mean the cargo owners and their insurers,
have contested the jurisdiction of this court. They say that they ought to
be sued in Belgium where they are domiciled. They applied to Langley J to
set aside service upon them in the English action under Order 12, rule 8.
The judge did set aside the proceedings, but he granted the shipowners
leave to appeal.
Jurisdiction under Article 5(1) of the Convention depends upon the place
of performance of the obligation in question, that is the obligation of
the cargo interests to pay general average contribution. At first sight
one might guess that the place of performance would be the same as
the place for the payment of freight under the bill of lading contract.
That might be the port of discharge which was Rotterdam, or the place
named in the bills of lading which was ("as agreed"), or the place named
in the charterparty which was ("to be advised"), or Panama where the
shipowners are incorporated, or Hong Kong where their managers are
said to operate. However, the cargo interests say that the place for
payment of general average contribution is London. They say that general
average is different from freight and all other obligations under their
contract. Furthermore, they say that the contribution has to be paid to the
adjusters, R.
Now it is both old and modern law that an average adjustment in the
ordinary way is not binding upon those who are parties to it. It is simply
a statement of the opinion of a professional man as to how the rights
of the parties should be calculated. Furthermore, as Mr Schaff for the
cargo interests has pointed out, an average adjustment is not essential
for the shipowners or indeed whoever is the recipient party in general
average to have a cause of action. That is established by the cases of
Chandris v Argo [1963] 2 LLR 625 and Castle Insurance v Hong Kong
Island Shipping [1984] 1 AC 226. The position is or may be different if
there is an average bond, but when one is merely dealing with a contract
that general average is to be payable and is to be adjusted, it does not
follow that an adjustment is an essential feature for there to be a cause of
action.
The first point taken by Mr Gross for the shipowners is this: he says that
the word 'adjusted' in the context of the charterparty includes paid. He
reaches that conclusion by the following route. First there is the decision
of Roskill J in Alma Shipping Corporation v Union of India [1971] 2 LLR
494. In that case there were two clauses almost adjacent to one another
in which the word 'settlement' was used. Roskill J said at 501:
"'Settlement' in clause 34 to my mind means 'determined', 'decided'
or 'finally disposed of' – if one has to find a synonym in the context of
that claim. It seems to me in clause 31 'settled' means adjustded in
an adjustment prepared in London. I do not think there is any conflict
between the use of the word 'settled' in the one place and in the other."
If I am allowed to say so, having been the unsuccessful counsel in that
case, I find it hard to see how the very learned judge, having set out two
different meanings in two clauses, could say that there was no conflict.
However that may be, what Mr Gross does in selecting the plum and
leaving the duff is to say that the word 'settled' means adjusted in an
adjustment prepared in London.
Then he moves on to the case of Union of India v Aaby's Rederei [1975]
AC 797. There Lord Dilhorne said of the words "to be settled in London":
"At first sight those words appear to me to mean no more and no less
than that the contributions to be made have to be determined in London
and paid there, and that implies determined in accordance with English
law."
Mr Gross, operating on the Euclidean principal that things equal to the
same thing are equal to each other, says that according to Lord Dilhorne
'settled' equals paid. According to Roskill J 'settled' equals adjusted.
Therefore 'adjusted' equals paid. I regret to say that I cannot accept that
argument, much as I admire it. It does not appear that Lord Dilhorne
would necessarily have agreed to what Roskill J said, and in any case they
might argue that each had been speaking of the use of the word 'settled'
in a very different context. To my mind the word 'adjusted' in the context
of the charterparty in this case means simply calculated by somebody
who purports to know something about general average. Whether or not
he has to be a professional is not something we need decide today. So I
reject the notion that 'adjusted' includes 'paid'.
Then it is suggested that there is to be implied a term that the general
average contribution will be paid in London. When one asks why there
should be that implication two answers are given. First it is said, "Well,
there is no other provision for where general average contribution is to be
paid". It is very common for there to be an absence of specific detail as to
where obligations should be paid, and the law has to supply an answer;
which it can do.
The second argument is that if the contribution is not to be paid to the
adjuster in London there may on occasion be an awkward situation. There
may be quite a number of parties to a general average adjustment. We
are told of one case where there were 2000 bills of lading. That does
happen from time to time, though I do not suppose for one moment that
it is very common. There may be some cargo owners who are contributors
and some who are receivers in the general average, and there may be
an awkwardness as to who shall be the clearing house. It does not follow
that the law will imply a term to solve the difficulties which the parties
could have solved for themselves, if they had chosen to do so. If this
difficulty is really a significant one they could have made provision. I do
not think that the law can make a contract for them when they have not
done so.
In any event, in the present case, no such situation was at all likely
to arise. There were actually two kinds of cargo in the vessel: Iranian
light and Iranian heavy. There were two bills of lading; and there might
possibly have been or become two owners of the cargo. But it was no
worse than that. That does not seem to me a ground for implying a term
in this case.
Mr Gross's next argument needs more detailed consideration. He says
that it is the custom and practice of general average adjustment in
London that contributions are paid here and are paid to the adjusters,
in this case R. The evidence in support of that is to be found first in the
affidavit of Mr Moore, a solicitor, who says this:
"7.2 I am informed by Mr B. and believe that the practice and custom is
for the Adjuster to gather in any security required or given in return for
the delivery of the cargo; to calculate the contributions owing and due;
to prepare the Adjustment in London; and to perform the complicated
exercise of collecting the contributions due from those liable (including
those who have given security, who will usually be insurers both English
and foreign), receiving the contributions on behalf of those entitled, and
distributing them on behalf of those entitled.
7.3 It follows that in London Adjustments the invariable custom and
practice is that those liable (in the present case the Defendants) are
obliged to pay the Adjuster in London, and the Adjuster receives payment
as agent on behalf of the payees (in the present case, the Plaintiffs)."
In answer to that there is the affidavit of Mr Crighton, who is also a
solicitor. He says this:
"Mr Moore goes on to conclude in Paragraph 7.3 that 'it follows that in
London adjustments the invariable custom and practice is that those
liable (in the present case the defendants) are obliged to pay the Adjuster
in London...'. I do not believe that there is any obligation upon the
Defendants to pay the sums adjusted by the Adjuster(s), whether by
custom or practice or otherwise."
I interpolate, there is not an obligation to pay the sums as adjusted by
the adjuster, since an adjustment is not binding. All are agreed on that.
The obligation is to pay what is due.
Mr Crighton continues:
"I have discussed the Plaintiffs' assertion with Mr D. of P. Adjusters Ltd
who tells me, and I verily believe, that the making of a contribution to
the Adjuster is purely a matter of expediency, and in no way can it be
said that there is any obligation to pay the adjuster. In the present case,
where a Belgium co-Adjuster has been appointed, then if relevant (which
I would not accept) it would clearly be more convenient for my Belgium
clients to pay their contribution -- when it has been decided what is
legally and properly due -- to the co-Adjuster in Belgium rather than to
the co-Adjuster in London."
Thirdly there is the affidavit of Mr B. himself, who is the managing director
of R. Ltd. He says at paragraph 3(b):
"the second point relates to the custom and practice in London
adjustments for payment of contributions in General Average to be made,
in the first instance, to the Adjuster for onward distribution to those
entitled.
I agree that this practice is founded upon expediency. The peculiar and
complex nature of settlements of general average rights and obligations
make it essential that receipt and distribution of funds is made through
a single party in whom all interests in the adventure have confidence.
Frequently funds have to be distributed to many different creditors: the
contributors would have no idea to whom the funds should be disbursed.
In theory the funds could be paid via the Shipowner, but few Shipowners
would have the expertise to distribute the funds correctly. It should be
appreciated that in some cases not all the contributions get paid, they
may be paid over a lengthy period of time and the adjuster needs to
exercise his judgment as to whom and how the funds will be distributed."
He gives an example of the case where there were 2000 bills of lading
and the ship caught fire and was salvaged, and there was damage to ship
and cargo and such like. There could be 300 cargo debtors, all guaranteed
by their insurers. Mr B. concluded:
"An important part of the Adjuster's job is to collect the contributions
from the debtors and to settle the amount collected with the creditors. It
avoids the unthinkable prospect of payments being made directly between
debtors and creditors. Nobody other than the Adjuster is in a position to
fulfil this function."
Those last two sentences, I would point out, are difficult to square with
the facts in the present case, where it is neither unthinkable that payment
be made between debtors and creditors, nor is it a fact that nobody other
than an adjuster could arrange and organise the payments.
There are a number of points about that evidence which leap to mind.
Mr Gross points out that there was no challenge to the statement that
there is an invariable practice for the monies to be paid to the adjusters,
although I must say for my part that I wonder if it is quite as invariable
as all that. But what is not said is that it is recognised to be an obligation
that the contributors shall pay in that way. Furthermore one wonders
whether there might be cases where contributors or recipients would feel
a bit cautious about the money being entrusted to the adjusters if it were
a very large amount; although not of course if they were members of the
Average Adjusters Association.
In the present case. The bottom line figures of the adjustment on
pages 378 to 379 show that there are three contributing parties: The
H. Underwriters, the Concerned I. Club. There are four recipient parties
shown in the adjustment. The first is R Ltd. for their fee, the second is
the Belgian adjuster G., for his fee, the third is the Shipowners and/or
their managers (as it is put), both for the general average contribution
to which they are entitled, and also for matters which they have a claim
against their underwriters. Fourth is an outfit called F. They, it seems, had
arranged some surveys for somebody. They had not been paid their bill
of $49,000, which was partly regarded as a general average expenditure;
and they persuaded the adjusters to put their claim for that sum into the
adjustment. They were no party to a general average incident in any way.
It was not a matter of any great complexity for the contributions in the
adjustment to be distributed to the people to whom they were due.
Can it really be correct that in law the shipowners lost their right to
enforce payment and that it became the right of the adjusters? Mr Gross
does not go as far as that. Perhaps he cannot, because he is suing for
the sum in this action in the name of the shipowners. What he says is
that the money is still due to the shipowners, although it has to be paid
to the adjusters. But supposing there is a dispute and the case goes to
court, what then? After the court has decided how much is due, does the
defendant then have to pay it to the adjuster and the adjuster pay it to
the shipowner? Supposing that the defendant has a set off, is the adjuster
entitled or bound to take that into account? Those are problems about
the theory that it becomes the legal obligation of the contributors to pay
general average contribution to the adjusters.
There is another problem apparent from the adjustment in this case.
There is a sum of $656,956.08 shown as due from the H. Underwriters.
That would be due to the shipowners. It does not relate to general
average at all. It relates, presumably, to particular or to the shipowners'
right to be indemnified against the share of general average expenditure
which they have to bear. Similarly the I. Club are shown as contributors;
but what they contribute is not general average. I can see no ground
for saying that those two parties, the H. Underwriters and the I., are
obliged to pay the adjusters rather than their own assured. Surely the
H. Underwriters, with whom the shipowners have insured their ship,
should be entitled to pay the shipowners direct. No doubt Mr B. is right
in saying that in practice the H. Underwriters and the I Club might or
indeed will pay the adjusters so that they can pass the money on to
the shipowners. I cannot see that they can conceivably be obliged to
do so. They are not parties to any clause saying that general average
will be adjusted in London, and if they were it would not apply to their
obligations. But unless the whole of the money coming into the pool is to
go to the adjusters, then the B. theory, whatever its convenience, breaks
down. The adjusters must either control everything that is due or they
cannot effectively control anything at all.
I need not pause to analyse the position of F, who presumably have a
claim against somebody who appointed them to make some surveys but
do not seem to have any independant right under the adjustment at all.
There are other problems. For example, Rule 23 of the York Antwerp
Rules dealing with the treatment of deposits seems to regard the
obligation, even when there is an adjuster, as an obligation between those
who are parties to the general average.
There is no evidence at all that this custom or practice has ever been
recognised by anyone as binding. In a sense, I follow Mr Gross's
argument that the more universal is the agreement on a particular point,
the more difficult it is to find evidence that it is regarded as binding. But I
would not regard that as an answer. No one has, so far as we have been
told, ever heard of this custom or practice before Mr Moore's affidavit in
the present case. The contract in the bill of lading and the charterparty,
as it seems to me, remain a contract between the owners of the cargo
and the shipowners. The forms used for the general average bond and
the average guarantee create a contract between on the one hand the
shipowners and on the other the cargo owners or their insurers. That, as
it seems to me, is inconsistent with the notion that there is an obligation
to pay the adjusters.
I would therefore reject the case for such an obligation, and the claim
that there is jurisdiction under Article 5(1).
Mr Gross submitted that it was enough for him to show a good arguable
case and that he had done that. Mr Schaff agreed that a good arguable
case was required, but argued that a judge, and even the Court of Appeal,
is entitled to scrutinise what is put forward as a good arguable case; and
if, in the course of a fairly brief day, the court comes to the conclusion
that the case is no longer good or arguable, it is entitled to say so.
The alternative ground was Article 17, an agreement as to jurisdiction.
This was rejected by the judge and did not feature in the Notice of
Appeal. Application is made today to amend the notice of appeal. We
grant that application.
The basis on which it is put is this: there is not, in terms, any agreement
which says that the English courts shall have jurisdiction in relation to
claims for general average. But it is pointed out that since the dawn of
time, or at any rate 300BC general average was a matter to be dealt
with at the port of discharge upon the termination of the adventure. It
was there that the cargo and ship (or what remained of them) fell to be
valued; it was there that the ship's master would seek security in the
form of a deposit, unless he could work out the contributions that were
due then and there; it was there that the ship's master would exercise
a lien if the cargo failed to provide security; and it was by the law and
practice of that place that the general average contributions would be
calculated. Now all that is well established law.
Mr Gross refers to paragraph G.38 in Lowndes & Rudolf, The Law of
General Average and The York-Antwerp Rules (11th ed) which does not,
as far as I can discover, appear in the previous edition. It says:
"In many of the reported cases, phrases such as "the place of
adjustment" are used to describe the place where the adventure ends,
that being the place:
(a) at which the interests involved in the common adventure are to be
valued,
(b) whose law and practice is to be adopted in the adjustment,
(c) where rights of contribution are enforced, and
(d) whose courts would be resorted to in the event of a dispute."
I should explain that (c) and (d) occur by reason of the fact that if the
Master purports to exercise a lien for contributions that he is not entitled
to, it would naturally be at the place of discharge that that lien would be
contested in court.
Mr Gross says that when the parties by contract choose some other place
for an adjustment to be made, such as happened here when they chose
London instead of Rotterdam where the cargo was to be discharged,
they take with them all those points. He is partly right. They then choose
London as the place whose law and practice is to be adopted, that is
agreed. They do not choose London as the place where the interests
involved are to be valued, that remains Rotterdam. But I can see no
reason why they thereby choose, the place where rights of contribution
are to be enforced or the place whose courts are to be resorted to in the
event of a dispute. There is nothing to indicate that they choose that.
They do not say so, and I see no sufficient ground for implying it.
Accordingly I would reject the second ground of jurisdiction put forward
by the shipowners, that there is an implied agreement that this court
should have jurisdiction. I would dismiss this appeal.
LORD JUSTICE HENRY: I agree.
LORD JUSTICE THORPE: I also agree.
ORDER: Appeal dismissed with costs. Leave to appeal refused.