T-389-80
Ellerman Lines Ltd. (Plaintiff)
v.
Gibbs, Nathaniel (Canada) Ltd., American
Motorists Insurance Company, American Manu
facturers Mutual Insurance Company, Lumber-
men's Mutual Casualty Company, Fidelity Life
Association, Federal Mutual Insurance Company,
Tetley Inc., Atlantic Mutual Insurance Co. and
Centennial Insurance Company (Defendants)
Trial Division, Addy J.—Montreal, November 1;
Ottawa, November 29, 1983.
Maritime law — Cargo owners not liable for general aver
age contribution where damage to ship engine discovered in
port and neither ship nor cargo in peril — No obligation on
cargo owners to keep cargo aboard ship until ultimate destina
tion indicated in bill of lading reached — Action dismissed.
Damage to the main engine of the City of Colombo was
discovered while the ship was docked at Montreal. She was on a
voyage from India to Toronto. The defendants tendered the
freight in full and requested their cargo to be off-loaded there.
The issues are whether the conditions existed for general
average to be declared and whether the defendants were en
titled to demand that their cargo be discharged in Montreal.
Held, the action should be dismissed. The conditions did not
exist at any relevant time for general average to be declared
because neither the cargo nor the vessel was ever in peril. As
for the second issue, neither general contract law nor admiralty
law obliges a cargo owner to keep his cargo aboard a ship until
the ultimate destination provided for in the bill of lading is
reached if he pays in full the freight charges provided for
therein for the entire voyage and requests off-loading at any
intermediate port where the ship has docked and facilities are
available. He cannot be held liable at law to contribute under a
general average claim for expenses subsequently incurred.
CASES JUDICIALLY CONSIDERED
APPLIED:
Kemp v. Halliday (1865), 34 L.J.Q.B. 233 (Q.B.D.); The
Royal Mail Steam Packet Company, Limited v. The
English Bank of Rio de Janeiro, Limited (1887), 19
Q.B.D. 362; Bank of St. Thomas v. The British Brigan
tine Julia Blake, et al., 107 U.S. 595 (1882); Domingo
De Larrinaga, 1928 A.M.C. 64 (U.S.D.C.).
COUNSEL:
Sean J. Harrington and P. Jeremy Bolger for
plaintiff.
Vincent M. Prager and Jacqueline Johnson
for defendants.
SOLICITORS:
McMaster, Meighen, Montreal, for plaintiff.
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for defendants.
The following are the reasons for judgment
rendered in English by
ADDY J.: This is an action by the owner of the
vessel City of Colombo against certain cargo
owners and their insurers for contribution to a
general average claim.
The action was tried by stated case and no
evidence was led. Since the facts are succinctly
stated therein the case is annexed as a schedule to
these reasons. It is an amended version, as certain
minor changes to the case as originally stated
were, on consent of the parties, inserted at the
hearing.
Although the York-Antwerp Rules and the New
Jason Clause (ref. par. 3 of the case) are included,
counsel for the parties agreed at the hearing that
there was nothing in these provisions which would
be of any assistance in determining the issues
before the Court and that they may therefore be
ignored. It was also agreed, as appears from
paragraph 4 of the stated case and as agreed by
counsel at the hearing, that nothing turns on the
practice of English average adjusters. The docu
ments mentioned in the stated case have not been
annexed as they are not relevant to the issues dealt
with in these reasons.
The questions which the Court has been request
ed to determine by the parties (ref. par. 22 of the
case) all depend in the first instance on whether, at
the time that the ship was docked in Montreal and
the defendants requested their cargo to be off-
loaded there, on tender of the freight in full as
provided for in the bills of lading, the conditions
existed whereby general average could legally be
declared.
Briefly, general average arises where property
involved in a common maritime adventure is
voluntarily sacrificed in time of peril for the pur
pose of preserving the remaining property, includ
ing the ship, engaged in the adventure. The most
common perils are grounding, loss of power or
control at sea, fire and collision.
Lowndes & Rudolf s The Law of General Aver
age and the York-Antwerp Rules, British Ship
ping Laws, Volume 7, Tenth Edition (1975), con
tains the following introductory paragraph [at
page 3]:
The first known statement of the law of General Average is a
small fragment of ancient Greek legislation, which forms the
text for a chapter in the Digest of Justinian: "Lege Rhodia
cavetur ut si levandae navis gratia jactus mercium factum est,
omnium contributione sarciatur quod pro omnibus datum est."
"The Rhodian law decrees that if in order to lighten a ship
merchandise has been thrown overboard, that which has been
given for all should be replaced by the contribution of all." This
short sentence contains both the principle and a perfect exam
ple of the peculiar communism to which seafaring men are
brought in extremeties [sic]. What is given, or sacrificed, in
time of danger, for the sake of all, is to be replaced by a general
contribution on the part of all who have been thereby brought
to safety. This is a rule which from the oldest recorded times
has been universal amongst seafaring men, no matter to what
country they belonged, being obviously founded on the necessi
ties of their position.
At paragraph 34 of the same text [at page 17],
the authors include the following quotation from a
judgment of Blackburn J. in the case of Kemp v.
Halliday':
"In order to give rise to a charge as general average, it is
essential that there should be a voluntary sacrifice to preserve
more subjects than one exposed to a common jeopardy. An
extraordinary expenditure incurred for that purpose is as much
a sacrifice as -if, instead of money being expended for the
purpose, money's worth were thrown away. It is immaterial
whether a shipowner sacrifices a cable or an anchor to get the
ship off a shoal, or pays the worth of it to hire those extra
services which get her off": Kemp v. Halliday, per Blackburn J.
In the case of The Royal Mail Steam Packet
Company, Limited v. The English Bank of Rio de
(1865), 34 L.J.Q.B. 233 (Q.B.D.), at p. 242.
Janeiro, Limited 2 which has since been frequently
referred to with approval, we find the following
passages at pages 370 and 371 of the report:
I take it to be settled now that the circumstances which
impose a liability in the nature of general average must be such
as to imperil the safety of ship and cargo and not merely such
as to impede the successful prosecution of the particular
voyage: Svensden v. Wallace; Harrison v. Bank of Australasia.
I take it also to be settled that if the cargo as a whole be landed
and in safety the expenses of getting the ship afloat incurred
thereafter are not general average: Job v. Langton, a case with
which Moran v. Jones has been supposed to conflict, but which
does not seem to me, so far as principles are concerned, to be
open to that observation.
These principles, though they deal with different epochs, so
to speak, in the chain of events which give rise to general
average, the first dealing with the state of things at the
commencement of the liability, and the other with a state of
things at which the liability has terminated, have this in
common. Both point to the necessity, in order to establish a
case of general average, for the existence of common danger of
destruction at the moment when the liability is incurred. This
necessity is laid down as the cardinal element necessary to
establish a general average contribution in Arnould on Insur
ance, p. 917 (1st ed.), p. 934 (2nd ed.), where the learned
author says, "All which is ultimately saved out of the whole
adventure, i.e., ship, freight, and cargo, contributes to make
good the general average loss, provided it have been actually at
risk at the time such loss was incurred, but not otherwise,
because if not at risk at the time of the loss, it was not saved
thereby." [Footnotes omitted.]
I consider this to be good law in Canada today.
Several United States cases were referred to by
counsel and it is clear that the same principle that
there must be actual risk or peril for a general
average situation to arise, has been consistently
applied.
In the case at bar, the damage to the engine was
discovered in the Port of Montreal some four days
after the ship had put into port. (Ref. par. 7 of
case.) Neither the ship nor the cargo was in peril
at the time. It follows that a general average
situation could not and did not at law exist at the
time. The action stands to be dismissed on that
ground alone.
Counsel for the plaintiff argues that, as there
was a common adventure, there was a common
undertaking on the part of the ship and the cargo
owners whose goods were to be transported,- to
2 (1887), 19 Q.B.D. 362.
Toronto that they were all to proceed in pursuance
of that common adventure from India to the Port
of Toronto and that, as a result, all were obliged to
contribute to whatever mishap or misadventure
might occur during the entire voyage. They also
argue that, unlike certain other cases where the
ship had voluntarily parted with possession of
some of the cargo en route and where that cargo
was for that reason held not to be liable for
contribution to general average expenses incurred
subsequently, in the present case the ship's owners
never parted voluntarily with the cargo but did so
only because they were obliged to do so in order to
comply with the mandatory injunction issued by
this Court (ref. par. 13 of stated case).
There is a simple and, in my view, unassailable
answer to that argument: neither general contract
law nor admiralty law obliges a cargo owner to
keep his cargo aboard a ship until the ultimate
destination provided for in the bill of lading is
reached if he pays in full the freight charges
provided for therein for the entire voyage and
requests off-loading at any intermediate port
where the ship has docked and facilities are avail
able. There were no special clauses in the bills of
lading in issue which would change this state of
affairs.
In the case of Bank of St. Thomas v. The
British Brigantine Julia Blake, et al., 3 Chief Jus
tice Waite speaking on behalf of the Supreme
Court of the United States after reviewing several
cases including English jurisprudence on the sub
ject stated at page 600 of the report:
The cargo owner is not bound to help the vessel through with
her voyage under all circumstances. It is the duty of the vessel
owner, and of the master as his appointed agent, to do all that
in good faith ought to be done to carry the cargo to its place of
destination, and for that purpose the cargo owner should con
tribute to the expense as far as his interests may apparently
require, but he is under no obligation to sacrifice his cargo, or
to allow it to be sacrificed, for the benefit of the vessel alone.
He ought to do what good faith towards the vessel demands,
but need not do more. If he would lose no more by helping the
vessel in her distress than he would by taking his property and
disposing of it in some other way, he should, if the vessel owner
or the master requires it, furnish the help or allow the cargo to
be used for that purpose. To that extent he is bound to the
3 107 U.S. 595 (1882).
vessel in her distress, but no further. When, therefore, a cargo
owner finds a vessel, with his cargo on board, at a port of
refuge needing repairs which cannot be effected without a cost
to him of more than he would lose by taking his property at
that place and paying the vessel all her lawful charges against
him, we do not doubt that he may pay the charges and reclaim
the property. Otherwise he would be compelled to submit to a
sacrifice of his own interests for the benefit of others, and that
the law does not require. [The underlining is mine.]
The same principle was reiterated in the Ameri-
can case of Domingo De Larrinaga 4 wherein it is
stated:
Or a separation may occur through the withdrawal of a portion
of the cargo before the termination of the voyage. This every
owner has a right to do at any time, on payment of freight for
the entire voyage, and the cargo thus withdrawn is exempt from
contribution for any subsequent loss or expense. In other words,
while the property remains connected the owners have a
common interest in the enterprise, but the tie which connects
them, being purely accidental, not conventional or contractual,
may be broken at will at any time by any of the parties.
The Court then quotes from part of the above-
mentioned extract from the Julia Blake case.
This I consider to be part of the admiralty law
of Canada. The action will therefore be dismissed
on the two above-mentioned grounds, namely:
1. That conditions did not exist at any relevant
time nor at any time during the voyage, for that
matter, for general average to be declared because
neither cargo nor the vessel was ever in peril.
2. That, in any event, had general average con
ditions existed and expenses relating to same exist
ed following the arrival in Montreal, the cargo
owners were nevertheless fully justified in requir
ing that their cargo be discharged forthwith in
Montreal on payment of the freight charges for
the entire voyage. They were not obliged to contin
ue the voyage to Toronto nor can they be held
liable at law to contribute under a general average
claim for expenses subsequently incurred, whether
they be engine repairs or wharfage or other
charges incurred during the period of repairs.
4 1928 A.M.C. 64 (U.S.D.C.), at p. 67.
Having regard to these conclusions, it would be
futile to even consider the other questions men
tioned in paragraph 22 of the stated case, for, if
the contract was completed at Montreal or if
performance of same was frustrated, this would
only serve to furnish further valid defences to the
action.
Since the action had previously been discon
tinued against the last three defendants mentioned
in the style of cause, it will be dismissed only as
against the remaining defendants who will be en
titled to their costs.
* * *
This is the Schedule referred to in the reasons for
judgment of Addy J. in the case of Ellerman Lines
Ltd. v. Gibbs, Nathaniel (Canada) Ltd., et al.,
dated Tuesday, November 29, 1983.
STATED CASE
(RULE 475)
THE PARTIES HERETO CONCUR IN STATING THE FOLLOWING
FACTS AND QUESTIONS IN THE FORM OF A SPECIAL CASE FOR
ADJUDICATION IN LIEU OF TRIAL:
1. THE PLAINTIFF was at all material times the owner of the
vessel City of Colombo and the party at interest;
2. THE DEFENDANTS were at all material times the owners of
cargo carried on board the said vessel City of Colombo during
a voyage from Bangladesh, India, Sri Lanka, East Africa and
South Africa for discharge at various Eastern Canadian ports,
or their underwriters and, in any event, the parties at interest;
3. THAT the Bills of Lading referred to in Plaintiff's Statement
of Claim comprise the full contract of affreightment and
include the following clause:
"28. GENERAL AVERAGE. General Average shall be adjusted
according to York-Antwerp Rules 1974, supplemented by the
practice of English Average Adjusters on all points on which
such Rules contain no provision, save and except that no loss
of or injury sustained by live animals whether by jettison or
otherwise, shall be recoverable. Adjustments shall be pre
pared at such port as shall be selected by the Carrier. If a
salving vessel is owned or operated by the Carrier, salvage
shall be paid for as fully as if the said salving vessel or vessels
belong to strangers. Such deposit as the Carrier or his Agents
may deem sufficient to cover the estimated contribution of
the goods and any salvage and special charges thereon shall,
if required, be made by the Shippers, Consignees and/or
owners of the goods to the Carrier before delivery; provided
that where an Adjustment is made in accordance with the
law and practice of the United States of America or of any
other country having the same or similar law or practice, the
following clause shall apply.
NEW JASON CLAUSE.
(a) In the event of accident, danger, damage or disaster before
or after the commencement of the voyage resulting from
any cause whatsoever whether due to negligence or not, for
which or for the consequence of which, the Carrier is not
responsible, by statute, contract or otherwise, the goods,
Shippers, Consignees and/or Owners of the goods shall
contribute with the Carrier in general average to the
payment of any sacrifices, losses or expenses of a general
average nature that may be made or incurred and shall
pay salvage and special charges incurred in respect of the
goods.
(b) If a salving vessel is owned and operated by the carrier,
salvage shall be paid for as fully as if the said salving
vessel or vessels belonged to strangers. Such deposit as the
Carrier or his Agents may deem sufficient to cover the
estimated contribution of the goods and any salvage and
special charges thereon shall, if required, be made by the
goods, Shippers, Consignees and/or Owners of the goods to
the Carrier before delivery."
4. Attached is a copy of the York-Antwerp Rules 1974. Neither
party in this case intends to lead any evidence either on the said
York-Antwerp Rules 1974 or on the practice of English Aver
age Adjusters;
5. THAT the said Vessel loaded the cargo of Cashews at Cochin,
India under Bills of Lading 1 and 2, 4 through 8 and 14
through 19, which are annexed hereto, and all freight charges
were paid;
6. THAT for the purposes of this case due diligence was exer
cised by the Plaintiff to make the vessel seaworthy before, and
at the commencement of the subject voyage;
7. THAT the vessel arrived at Montreal on April 10th, 1976 and
damage to her main engines was discovered on April 14th,
1976;
8. THAT general average was declared;
9. THAT the vessel was originally due to sail from Montreal to
Toronto and Hamilton, Ontario, on April 24th, 1976, to dis
charge import cargo and load export cargo;
10. THAT subsequent to repairs, on July 2nd, 1976, the vessel
did sail to Toronto and Hamilton, but only to load export
cargo;
11. THAT when the vessel proceeded to Toronto on July 2nd,
1976, she was not loaded with cargo;
12. THAT for consideration an agreement was reached with the
other owners of cargo on board the said vessel destined for
Toronto, etc., to discharge their goods in Montreal and forward
them by means other than the City of Colombo to their
respective intended ports of discharge, but no such agreement
was reached with the Defendants;
13. THAT by letter dated April 26, 1976, the Plaintiff, through
the average adjusters it appointed, informed the Defendants
that the repairs would take in the region of one and one-half
months to complete. Plaintiff offered to limit the delay by
forwarding the cargo from Montreal to Toronto by other means
but only if the Defendants would give as additional security to
the average bond a "Non Separation Agreement" which
provided:
NON SEPARATION AGREEMENT:
It is agreed that in the event of the Vessel's cargo or part
thereof being forwarded to original destination by other
vessel, vessels or conveyances, rights and liabilities in
general average shall not be affected by such forwarding,
it being the intention to place the parties concerned as
nearly as possible in the same position in this respect as
they would have been in the absence of such forwarding
and with the adventure continuing by the original vessel
for so long as justifiable under the law applicable or under
the contract of affreightment. The basis of contribution to
general average of the property involved shall be the values
on delivery at original destination unless sold or otherwise
disposed of short of that destination: but where none of her
cargo is carried forward in the vessel she shall contribute
on the basis of her actual value on the date she completes
discharge of her cargo:
THAT the Defendants offered security in the form of an
average bond but refused to agree to the Non Separation
Agreement and demanded delivery of the cargo at Montreal.
The Plaintiff refused to deliver the cargo at Montreal rather
than at Toronto and further purported to exercise a lien on the
cargo to secure its claim for general average contribution.
Accordingly, on May 17, 1976, Gibbs, Nathaniel (Canada)
Ltd. took action in The Federal Court of Canada under No.
T-1896-76 in which inter alia, it applied for a mandatory
injunction ordering Ellerman Lines Ltd. to deliver the cargo at
Montreal solely against provision of general average security
which did not include a Non Separation Agreement.
THAT on the same day the Honourable Mr. Justice Walsh
granted the said injunction and ordered:
"Injunction to go subject to furnishing by Plaintiff of general
average bond referred to in paragraph 4 of Affidavit and
without deciding whether period of general average will be
extended from the time of unloading in Montreal to the time
the vessel would have arrived in Toronto which question can
if necessary be decided by the Court at a later date in
appropriate proceedings, costs in the event."
THAT thereafter general average security without the Non
Separation Clause was provided and the cargo was delivered at
Montreal;
14. THAT all general average expenses were incurred thereafter;
15. THAT defendants took possession of their cargo at Montreal
and that there is no knowledge of what became of it or where it
went thereafter;
16. THAT the distance between Cochin, India, and Montreal,
Canada, is 15,134 miles;
17. THAT the distance between Montreal and Toronto is 349
miles;
18. THAT the carriage of goods by water from Montreal to
Toronto takes approximately 30 hours;
19. THAT the carriage of goods by road between Montreal and
Toronto takes approximately 8 hours;
20. THAT the carriage of goods by rail between Montreal and
Toronto takes approximately 12 hours;
21. THAT there was no difference in freight for carriage of
cargo between Cochin-Montreal and Cochin-Toronto at the
material time except the extra cost of Seaway Tolls being 900
per ton;
22. THAT the sole questions to be determined between Plaintiff
and Defendants are as follows:
(a) Did a general average and/or a common adventure situa
tion exist immediately after the cargo was delivered pursu
ant to the Court Order obliging delivery?
(b) Were the Defendants entitled to demand and/or take
delivery of the cargo in Montreal, the port of refuge, or
could they be forced to await the repairs of the vessel and
the onforwarding of the cargo to destination thereafter?
(c) Could the Plaintiff oblige the Defendants to sign a Non-
Separation Agreement before they took delivery in
Montreal?
(d) Was the contract of carriage frustrated at Montreal?
(e) For all intents and purposes was the contract of carriage
completed at Montreal?
(f) Is there an obligation on the Defendants to contribute in
general average for expenses incurred after the cargo was
physically discharged from the vessel but before the vessel
reached her intended port of destination?
23. THAT for the purposes of this case, the parties hereto have
agreed that quantum is fixed at Canadian $22,500.00 in
principal;
24. The cargo originally destined for and discharged at Mon-
treal was not asked to and did not contribute in general
average;
25. THAT if the response to question 22(f) is in the affirmative,
the said sum of $22,500.00 owed to Plaintiff will bear interest
at the average bank prime rate from August 1st, 1978;
THAT the Canadian Imperial Bank of Commerce average
bank prime interest rate since August 1st, 1978 is 14.45%.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.