General Average Guarantees And Actionable Fault - The Meaning Of 'Properly Due'

In the "BSLE SUNRISE" [2019] EWHC 2860 (Comm) the English High Court has considered whether actionable fault of the shipowner is a defence to a claim made by the shipowner against a cargo insurer under a general average guarantee issued on the standard AAA / ILU approved wording. This wording obliges the insurers to pay general average contributions that are "properly due".

Facts

The dispute arose out of the grounding of a vessel at Valencia in September 2012. The vessel was carrying a cargo of pipes which had been shipped from Jebel Ali (destination Antwerp) pursuant to three bills of lading on the standard Congenbill form, which were subject to the Hague-Visby Rules and also provided for general average to be adjusted in accordance with the York Antwerp Rules 1974.

Following the grounding, the owners incurred expenditure in attempting to re-float the vessel and then carrying out temporary repairs before resuming the voyage. The vessel eventually arrived safely at Antwerp, where all of the cargo was discharged. The owners declared general average and the receivers of the cargo issued general average bonds and the cargo insurers issued general average guarantees.

Each of the standard wording GA guarantees was addressed to the owner and provided:

"In consideration of the delivery in due course of the goods specified below to the consignees thereof without collection of a deposit, we the undersigned insurers, hereby undertake to pay to the ship owners ... on behalf of the various parties to the adventure as their interest may appear any contributions to General Average ... which may hereafter be ascertained to be properly due in respect of the said goods." [emphasis added]

The average adjusters appointed by the Owners subsequently prepared a general average adjustment which calculated cargo's proportion of general average being in the sum of US$1,073,395.

The cargo insurers were represented by Clyde & Co. Their case was that the grounding occurred because the Owners failed to exercise due diligence to ensure that the vessel was seaworthy before and/or at the commencement of the voyage in breach of Article III.1 of the Hague-Visby Rules.

In those circumstances, the cargo insurers argued that an "actionable fault" defence was available under the GA guarantees under Rule D of the York Antwerp Rules.

The Owners argued that based on the wording of the Guarantee, the cargo insurers were obliged to pay cargo's proportion of general average whether...