1

NOTE. The decision of the House of Lords in 1879 (Aitchison v. SECT. 66. Lohre), that salvage charges could not be recovered under the "sue and labour clause" occasioned some surprise (see Arnould, Ed. 6, p. 792). The case proceeded on the ground that salvors are not the agents of the assured, for English law does not recognize the foreign doctrine of "agents of necessity." The payment of salvage charges under a foreign adjustment is usually provided for by a special clause in the policy, a common form of which runs: General average and salvage charges payable according to foreign statement, if so made up, or per York-Antwerp Rules, 1890, if in accordance with the contract of affreightment."

The expression "salvage" requires definition, because it is used in various senses. In maritime law it is applied alike to the salvor's service and the salvor's reward. It is used to denote the services of a salvor, who intervenes voluntarily, and whose rights are given him by maritime law, and also the services of a salvor who is employed by the ship, and whose rights depend on contract. In insurance law it is also used, to denote the thing saved, as, for instance, in the phrase "without benefit of salvage," or when a loss is referred to as a "salvage loss." 2

Life salvage, apart from the salvage of property, is the creation of modern statutes, and the shipowner's liability therefor is not covered by the ordinary form of policy on ship. It must be covered by a special insurance.3

In the present section the term is used to denote salvage strictly so called, that is to say, the salvor's reward, under maritime law, for saving property, or property and life conjointly. "With regard

to salvage, general average and contribution," says Lord Bowen, "the maritime law differs from the common law. That has been so from the time of the Roman law downwards. The maritime law, for the purposes of public policy, and for the advantage of trade, imposes in these cases a liability upon the thing saved-a liability which is a special consequence arising out of the character of mercantile enterprise, the nature of sea perils, and the fact that the thing saved was saved under great stress and exceptional circumstances."4

1 Aitchison v. Lohre (1879), 4 App. Cas. at p. 765.

2 Cf. Sharpe v. Gladstone (1805), 7 East, at p. 37.

3 Nourse v. Liverpool Sailing Ship Association (1896), 2 Q. B. 16, C. A. ;

cf. Kennedy's Law of Civil Salvage, p. 46.

♦ Falcke v. Scottish Ins. Co. (1887), 34 Ch. D. at p. 248; Kennedy's Law of Civil Salvage, p. 6.

SECT. 67.

General

average

loss.

§ 67.—(1.) A general average loss is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice.1

(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 [ship and cargo.]2

(3.) Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution from the other parties interested, and such contribution is called a general average contribution. Apart from special contract, the parties interested are the owners of ship freight and cargo.3

(4.) Subject to any express provision in the policy, where the assured has suffered a general average loss he may recover from the insurer in respect of the proportion of the loss which falls upon him; [and in the case of a general average sacrifice,] he may recover from the insurer in respect of the whole loss without having enforced his right of contribution from the other parties liable to contribute. But nothing in this subsection affects the insurer's right of subrogation on payment.1

1 McArthur, Ed. 2, p. 164; Lowndes on General Average, Ed. 4, p. 20; Ocean Steamship Co. v. Anderson (1883), 13 Q. B. D. at p. 666, C. A.; Svensden v. Wallace (1884), 13 Q. B. D. at p. 84, C. A.

66

2 Ibid.; Iredale v. China Traders' Ins. Co. (1900), 2 Q. B. at p. 519, C. A. Qu., say common adventure" instead of "ship and cargo." Cases might be put where there was a common adventure, but no cargo, e.g., ship in ballast going out to earn chartered freight.

3 Lowndes on Average, Ed. 4, p. 304; Svensden v. Wallace (1885), 10 App. Cas. at p. 415.

4 McArthur, Ed. 2, p. 134; Dickinson v. Jardine (1868), L. R. 3 C. P. 639; The Mary Thomas (1894), P. at p. 125, C. A. See subsect. (1) under which "loss" includes expenditure as well as sacrifice.

(5.) Subject to any express provision in the policy, SECT. 67. where the assured has paid, or is liable to pay, a general average contribution he may recover therefor from the insurer.1

Provided that, in the absence of express stipulation, the insurer is not liable for any general average loss or contribution where the loss was not incurred for the purpose of avoiding, or in connexion with the avoidance of, a peril insured against.2

(6.) It is the duty of the ship-owner and his agents to take such steps as may be reasonable to provide that all general average contributions (whether due to himself or others) are adjusted and collected, and he has a lien on the cargo until this be done:

(7.) [Where ship freight and cargo, or ship and freight, are owned by the same assured, and insured with different insurers, the assured may recover pro tanto from the insurers for any loss which would constitute a general average loss if there were different owners.]*

Illustrations.

1. Policy on goods. Certain goods are jettisoned by a general average act. The insurer of these goods must pay the insured value of them as an ordinary loss under the policy, but he then stands in the place of the assured as regards claims for contribution from the other contributories.5

1 McArthur, Ed. 2, p. 206; The Brigella (1893), P. 198; 7 Asp. Mar. Cas. at p. 405.

2 Harris v. Scaramanga (1872), L. R. 7 C. P. at p. 496.

3 McArthur, Ed. 2, p. 199; Lowndes on Average, Ed. 4, p. 335; Crooks v. Allan (1879), 5 Q. B. D. 38; approved Strang, Steel and Co. v. Scott (1889), 14 App. Cas. at p. 607.

The Brigella (1893), 7 Asp. Mar. Cas. at p. 405; Montgomery v• Indemnity Mutual Mar. Ins. (1900), Times, November 20.

5 Dickinson v. Jardine (1868), L. R. 3 C. P. 639. (London usage to hold insurer only liable for the share of the loss cast upon the assured of the jettisoned goods held invalid.) See, too, Owen's Notes and Clauses, Ed. 3, p. 249.

SECT. 67.

2. Policy on ship from London to Liverpool and thence to Calcutta. The ship strands on a bank in Ireland. Half the cargo, consisting of salt, is jettisoned. The remainder is brought back much damaged to Liverpool. The amount to be made good in general average must be ascertained by valuing the jettisoned salt at the price it would have fetched in Liverpool, and the probability that it would have been damaged like the rest must be taken into account.1

3. Policy on cargo of corn from Varna to Marseilles, general average as per foreign statement. The ship springs a leak, part of the corn is sea-damaged, and the voyage has to be broken up at Constantinople. Average is adjusted according to the law prevailing there, and the damage to the wheat is charged to general average, though, according to English law, it would be particular average excluded by the memorandum. The insurer is liable to pay this sum.2

4. Policy on ship valued at £33,000. Her real value is £40,000. The ship incurs certain general average and salvage expenses which are adjusted abroad on her real value. The assured can only recover 33-40ths of the amount so adjusted from the insurer.3

NOTE.-The definition of general average given by Lawrence, J., in 1801, still remains the standard definition. "All loss," he says, "which arises in consequence of an extraordinary sacrifice made, or expense incurred, for the preservation of the ship and cargo comes within general average, and must be borne proportionately by all who are interested.4

Subsects. (1) to (3) are merely explanatory, and perhaps belong more properly to the law of general average than to the law of marine insurance. As Barnes, J., says, "The obligation to contribute to general average exists between the parties to the adventure, whether they are insured or not. The circumstance of a party being insured can have no influence on the adjustment of general average, the rules of which are entirely independent of insurance. If a contracting party is insured he can claim an indemnity against his underwriter in respect of the contribution which he has been compelled to pay in general average, but that is all. I do not forget that in some cases an assured may have a right to recover in full for the loss of sacrificed property,

1 Fletcher v. Alexander (1868), L. R. 3 C. P. 375.

2 Mavro v. Ocean Mar. Ins. Co. (1875), L. R. 10 C. P. 415, Ex. Ch.; cf. The Mary Thomas (1894), P. 808, C. A.

3 Steamship Balmoral v. Marten (1900), 2 Q. B. 748.

4 Birkley v. Presgrave (1801), 1 East, at p. 228.

but the underwriters have the right to contribution from the various SECT. 67. contributories, and, subject to certain differences of values, the result to

the underwriters should be practically the same as if the assured had only claimed his contribution from them."1

Subsect. (4) is probably rightly expressed. The principle appears to cover not only jettison (the point actually decided), but also any general average sacrifice, as opposed to a general average expenditure.

Subsect. (7) deals with a somewhat doubtful point. "If the plaintiffs," says Barnes, J., "had insured all their interests in one policy, expenses properly incurred in averting a loss of those interests by a peril insured against would fall to be borne by the underwriters under the sue and labour clause. If they had insured the ship in one policy, and the freight in another, it follows that the underwriters on the respective policies should recover the expenses of averting a loss. of those interests in proportion, not to the actual values saved, but to the benefits derived by the underwriters from the averting of the loss, that is to say, in proportion to the amounts insured by them respectively." 2 But Mathew, J., in a recent case, supports in terms the proposition laid down in the text.3

The whole subject of general average is in an unsatisfactory condition. The liability to contribute is a common law liability, independent of insurance, and consequently the liability of the assured under the contract of affreightment may differ from that of the insurer under the policy. For example, suppose goods are insured with a warranty free from capture and seizure. General average expenses may be incurred in avoiding capture, but the insurer would not be liable for them. The English rule of law, though not always logically carried out in details, is narrower than the consistent practice of average adjusters, and considerably narrower than the rule which prevails in nearly all foreign countries. In England general average is only payable when the sacrifice was made, or the expenditure incurred, for the preservation of the ship and cargo. Foreign laws for the most part include in general average nearly all expenses incurred for the benefit of the common adventure. As to the place of adjustment, and the law to be followed, see note to § 91, post, p. 116.

1 The Brigella (1893), P. at p. 195; 7 Asp. Mar. Cas. at p. 404.

2 The Brigella (1893), 7 Asp. Mar. Cas. at p. 405.

3 Montgomery v. Indemnity Mutual Mar. Ins. (1900), Times, November 20.

See discussion in McArthur, Ed. 2, p. 186, and article by T. G. Carver, on Port of Refuge Expenses, Law Quarterly Review, vol. viii. p. 229.