View source for Star Axe 1 v Royal & Sun Alliance and Ors - The Star Antares

DMC/SandT/23/08

'''England'''

'''Star Axe I LLC v Royal & Sun Alliance Luxembourg S.A. and Others (The “Star Antares”)'''

'''English Commercial Court: Butcher J: [2023] EWHC 2784 (Comm): 10 November 2023'''

Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2023/2784.html

Chirag Karia KC (instructed by Shoreside Law) for Star Axe I (Carriers)

Richard Sarll (instructed by Birketts LLP) for Royal & Sun Alliance and Others (Cargo Insurers)

'''BILLS OF LADING: CONGENBILL 1994 FORM: GENERAL AVERAGE (“GA”): YORK-ANTWERP RULES (“YAR”): WHETHER YAR 1994 OR YAR 2016 APPLIED TO ADJUSTMENT, STATEMENT AND SETTLMENT IN LONDON OF GA INCIDENT ARISING IN 2021'''

'''Summary'''

In finding in favour of Cargo Insurers, the Judge held that YAR 2016 applied to a general average incident in 2021 under bills of lading on the Congenbill 1994 form, which by clause (3) materially stated “General average shall be adjusted, stated and settled according to [YAR] 1994, or any subsequent modification thereof, in London …”, because there was no difficulty, as a matter of the ordinary use of language, in describing YAR 2016 as a “modification” of YAR 1994, each of the YARs having been produced by the same body, directed to the same end, and containing many of the same provisions, but introducing some changes.

Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, IMI Qualified Mediator, LMAA Supporting Member and International Contributor to DMC’s Case Notes

'''Background'''

Cargoes of ferro-chrome were shipped on board the Carriers’ bulk carrier, “Star Antares”, in Mozambique and South Africa, for which seven bills of lading were issued on Congenbill 1994 form, which by clause (3) materially stated:

“General average shall be adjusted, stated and settled according to York-Antwerp Rules 1994, or any subsequent modification thereof, in London unless another place is agreed in the Charter Party”

In November 2021, the vessel allegedly struck an unknown object on the way to the port of discharge in China, and suffered damage.  Carriers declared GA and Cargo Insurers issued Average Guarantees to Carriers, undertaking to pay any GA contribution due and payable in respect of the cargo.

A dispute arose as to whether the parties’ rights and obligations were governed by YAR 1994 or YAR 2016.  Carriers commenced proceedings in the English High Court to resolve the issue of the correct interpretation of clause (3) of the Congenbill 1994 form bills of lading.

'''Judgment'''

Parties’ Arguments

The Judge first set out the materials on which Carriers sought to rely – the Comité Maritime International (“CMI” – fn.1) commentary on the YAR 1994, which it drafted and promulgated, an industry circular (BIMCO) and insurer article (Gard), and legal practioner works (Lowndes & Rudolf: Law of General Average and the York-Antwerp Rules, 15th Edition 2018, Voyage Charters, 4th Edition 2014, and General Average: Law and Practice, 3rd Edition 2017) – for the proposition that the words used in clause (3) of Congenbill 1994 form were understood in the relevant trade only to apply to amendments to YAR 1994 itself, so did not include new versions of YAR.

Carriers considered that, had the parties intended otherwise, they would have used Congenbill 2016 form or amended clause (3) of the Congenbill 1994 form to incorporate YAR 2016.  As neither was done, Carriers contended that the parties had agreed YAR 1994.

The Judge next set out the relevant uncontentious factual matrix, which was not disputed by Carriers, as submitted by Cargo Insurers, which was:

“(1) That shipowners and charterers are in the habit of using contract wordings for many years, even after newer wordings have been published. There could have been no assurance, when drafting a wording such as Congenbill 1994, that the market would only use it until such time as an updated wording became available.

(2) The YAR constitute a code for regulating the adjustment of general average. The first version of the Rules appeared in 1877, their aim being to harmonize the treatment of general average by the principal seafaring nations. 

(3) The YAR have been periodically revised, with further versions being published in 1890, 1924, 1950, 1974, 1994, 2004 and 2016. At least since 1950, the revisions have been overseen by CMI. Following a consultation process, the new version will be approved at a CMI meeting and published in the CMI yearbook.

(4) In addition to these further versions, an amended version of the 1974 Rules was issued in 1990, on [sic] order to take account of the Salvage Convention 1989.

(5) Apart from that specific instance, the periodic updating of the YAR is, in general terms, to be explained by a desire for the adjustment of general average to march in step with developments in shipborne commerce and to suit the changing expectations of ship and cargo interests.”

Cargo Insurers, against that matrix, considered that the disputed words clearly meant that the most current version of YAR applied to the GA adjustment.  In particular, “modification” was a word of wide import, being wider than “amendment”, so was amply wide enough to embrace a new iteration of YAR, with YAR 2016 technically being “a new set of rules” making no difference.

Principles of Construction

The Judge made reference to a number of authorities that, amongst others, included helpful commentary on what material forms part of the background knowledge which was reasonably available to the parties in the situation they were in at the time of contracting.

Saliently (fn.2):

“Lord Hoffmann's proposition [in Investors Compensation Scheme v West Bromwich BS [1998] WLR 896, 912-913] was that background included what ‘should have been reasonably available to the parties’. That formulation does not restrict background to what the parties actually knew; and raises questions about how to judge what would have been ‘reasonably available’. To take the second point first, it has been pointed out in Australia that in the age of the internet the range of material ‘reasonably available’ is almost limitless; and that a fact that is reasonably available to the parties should only be used as an aid to interpretation if it can be inferred that the parties actually knew it. This limitation has been held to be equally applicable in English law. In SAS Institute Inc v World Programming Ltd, Lewison LJ said:

‘Almost anything is available on the internet these days, and simply because something is available on the internet does not mean that it is relevant background.’”

Further (fn.3):

“(1) At least where there is no direct evidence as to what the parties knew and did not know, and as a corollary of the objective approach to the interpretation of contracts, the question of what knowledge a reasonable observer would have expected and believed both contracting parties to have had, and each to have assumed the other to have had, at the time of their contract… 

(2) that includes specialist or unusual knowledge which only parties entering into a contractual engagement of the sort in question might reasonably be assumed to have; and it also includes knowledge which it is to be inferred, from the nature of the actions they have in fact undertaken, that they had or must have had;

(3) however, it does not include information that a reasonable observer would think that the parties merely might have known: that would open the gate too far to subjective or idiosyncratic speculation...”

Discussion

The Judge considered that there was no difficulty, as a matter of the ordinary use of language, in describing YAR 2004 or YAR 2016 as “modifications” of YAR 1994.  Each was produced by the same body, was directed to the same end, and contained many of the same provisions, but introduced some changes.  Further, such an interpretation accorded with the most obvious purpose of including a reference to subsequent modifications of the specified YAR, namely to ensure that the adjustment of general average should be in step with major developments in shipborne commerce such as would be expected to be considered and taken into account by the CMI.

The Judge noted that the emphasis of Carriers’ argument was not on what the words might be taken to mean on their own, or as judged against what the Judge called the “uncontentious” components of the factual matrix.  It was rather that, given the specific materials on which Carriers relied, the words could only reasonably be understood as having the narrower incorporating meaning for which they contended.  The Judge, therefore, found it necessary to consider those materials in some detail, both as to whether they were reasonably available to the parties, and as to whether they would have affected the way in which the language of the document would have been understood by a reasonable person and if so how.

Having undertaken that exercise, the Judge was not convinced that all of those materials would necessarily have been reasonably available to the parties when contracting and, even if they had been and to the extent they may have supported Carriers’ proposition, the parties would have appreciated that those materials expressed opinions on the issue and were not themselves determinative of the issue.

Accordingly, for the reasons he had given, the Judge held that the parties had agreed that the relevant general average adjustment was to be conducted under YAR 2016.

'''Comment'''

This judgment is an interesting example of the need to identify correctly what is reasonably included in the material factual matrix of a case for the purpose of interpreting the contract to give true effect to the parties’ objective intentions.

While the views of those who serve industry, like adjusters, insurers and lawyers, can often be discovered, and to an extent may act as a useful guide to what the correct answer may be, this case demonstrates that such information may not necessarily be attributed to the knowledge of mercantile parties.

The Judge helpfully identified the legal principles for considering the material factual matrix of a dispute, against which the contract as a whole is to be interpreted, and considered each potential source of factual information to determine whether and to what extent it formed part of the factual matrix.

The case acts as a salutary reminder to consider to what extent information published online and in books is relevant to considering what the contract should be taken to mean objectively by parties who are in the business of shipping and international commerce, rather than those who serve them.


Footnote 1: The international association of national maritime law associations, founded in 1897

Footnote 2: Lewison, The Interpretation of Contracts (7th ed, 2020), para. 3.157

Footnote 3: Challinor v Juliet Bellis & Co [2013] EWHC 347 (Ch), [279], per Hildyard J