Australia: Who bears the burden of proof in a General Average dispute?

Last Updated: 7 June 2018
Article by Andrew Tulloch

In brief - UK court considers meaning and effect of Rule D of the York-Antwerp Rules

Mr Justice Teare's decision in MT "Cape Bonny" Tankschiffahrts GmbH & Co KG v Ping An Property and Casualty Insurance Company of China Limited, Beijing Branch [2017] EWHC 3036 has clarified some long unresolved questions of burden of proof in general average.

Insurer denies liability to pay contribution to general average alleging vessel owners failed to exercise due diligence

The oil tanker "Cape Bonny" suffered an engine breakdown in July 2011 whilst undertaking a voyage from Argentina to China. At the time, making matters more difficult, she was attempting to avoid the effect of a typhoon. Towage was arranged and as she was not permitted to enter a Japanese port of refuge, she was towed to South Korea where cargo was transferred to another vessel. She was then towed to sea again to avoid another typhoon before returning to South Korea for repairs.

General average was declared and the defendant provided a guarantee on behalf of cargo interests to pay any contribution to general average "which may hereafter be ascertained to be properly due". Cargo's contribution was assessed at approximately US$2.1 million.

The defendant insurer denied liability to pay the contribution alleging that the casualty was caused by actionable fault on the part of the vessel owners, that being a failure to exercise due diligence to make the vessel seaworthy.

A dispute arose as to who bore the burden of proof that expenditure was reasonably incurred.

Vessel owners and cargo insurers disagree over what caused metal particles that damaged no. 1 main bearing

The owners accepted that the vessel was unseaworthy at the commencement of the voyage as there were metal particles in the luboil system but not circulating within the luboil itself at the commencement of the voyage. The owners were accordingly obliged under the Hague-Visby Rules, to show that they exercised due diligence to make the vessel seaworthy before the commencement of the voyage.

The owners said the main engine failure was caused by sudden and catastrophic damage to the no. 1 main bearing which was caused in turn by the metal particles, which it said had been present in the luboil piping since the vessel's construction in 2005, but which "weld slag" had broken off form the piping in bad weather and had worked their way through the piping over a period of weeks.

The cargo insurers did not accept that the particles were weld slag but rather said that they were generated by spark erosion or damage to the vessel's chain gear drive or through poor crew procedures in cleaning filters. They said damage would have been avoidable had the owners exercised due diligence.

Owners' failure was causative of loss, judge finds

After hearing evidence from a number of witnesses, Mr Justice Teare concluded that the metal particles were the consequence of abnormal wear to main bearing no. 1 immediately before the casualty and particles were only able to cause damage because the luboil filters were damaged.

Did this amount to a failure to exercise due diligence?

He found the failure to adequately inspect filters did amount to a want of due diligence but was not causative.

The cargo insurers said that a prudent engineer or shore side superintendent should have recognised the significant movement in the trend in crankshaft deflection readings taken by the crew and then acted to take bearing cleaning measurements - which, had it been done, would have detected wear and led to repair. That was accepted by the judge who held that failure by the owners was causative of loss.

The York-Antwerp Rules

Rule D of the York-Antwerp Rules provides:

Rights to contribution in general average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure, but this shall not prejudice any remedies or defences which may be open against or to that party in respect of such fault.

Mr Justice Teare noted there was no present authority on the true construction of Rule D and how it operates. He noted the object was to keep questions of fault out of the general average adjustment calculation and to leave those to the stage of enforcement.

The Rule Paramount states:

In no case shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred.

Rule A provides:

(1) There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.

Burden of proof held by vessel owners

Mr Justice Teare found that the burden of proving expenditure was reasonably incurred lies upon the vessel owners.

He rejected reliance upon a comment in Lowndes & Rudolf on General Average (14th ed at p 75) where it is stated that "the sacrifice or expenditure will be deemed to have been reasonably made or incurred unless the contrary is established, and the master will be given the benefit of the doubt."

He apparently did so as he said (at [163]) that "with improved communications the position now is that, whereas in the past the master took the necessary decision to incur, for example, towage assistance, today the master is able to communicate with his owners and it is they, rather than the master, who take the relevant decision." But he accepted that owners and managers should be given the benefit of the doubt if a prompt decision is required, and should not be influenced by the benefit of hindsight.

Was the expenditure incurred reasonable?

It was found that the expenditure incurred was reasonable, but that as it was caused by the fault of the vessel owners no contribution by the cargo interests was payable.

Judgment brings some clarity to issue of burden of proof in general average

The case is an interesting one less for its findings on factual matters and more for its consideration of the meaning and effect of Rule D of the York-Antwerp Rules and implications for the burden of proof in general average.

It brings some clarity to an area of law often shrouded in its own historical mystery.

Andrew Tulloch
Transport and Logistics
Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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