General Average Guarantees And The Actionable Fault Defence: The BSLE Sunrise [2019] EWHC 2860 (Comm)

• Published date: 07 August 2020
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation
• Law Firm: Quadrant Chambers
• Author: Mr Benjamin Coffer

In a judgment handed down in November 2019, following a hearing on a preliminary issue, the Commercial Court held that the "actionable fault" defence under Rule D of the York Antwerp Rules is available to the issuer of a general average guarantee in the standard AAA / ILU form.

The Case

The dispute arose from the grounding of the "BSLE SUNRISE" off Valencia in September 2012. The owners declared general average. Cargo interests issued general average bonds. The defendant insurers provided security for those bonds on the standard form general average guarantee approved by the Association of Average Adjusters and the Institute of London Underwriters.

Owners brought a claim under the guarantees for contribution in general average and it was agreed that the question of whether the wording of the guarantees made a Rule D defence available in principle to the guarantors would be decided by way of preliminary issue.

The guarantees provided that the insurers undertook to pay '"any contribution to General Average and/or Salvage and/or Special Charges which may hereafter be ascertained to be properly due in respect of the said goods."

Judgment

HHJ Pelling QC, siting as a High Court Judge, held that if the actionable fault defence was available to the receivers, no sums were payable under the guarantees. The standard form wording preserved the insurer's right to rely on the defence available to the receivers under Rule D if the loss was caused by the shipowner's actionable fault.

The Judge considered that the word "due" in the bonds signified a sum that was legally owing or payable. He relied on the judgment of Sheen J in The Jute Express [1991] 2 Lloyds Rep 55 in holding that "and which is payable" means "and which is legally due." He noted that the payment was to be made "on behalf" of the cargo interests concerned, suggesting that what the insurer was agreeing to pay was what the parties to the adventure would otherwise have had to pay...