AVERAGE, a legal term (for mathematical meaning, see LAW OF PROBABILITIES), may be either particular or general. Par ticular average signifies damage or a partial loss sustained by ship, goods or freight through some accidental cause. According to s. 64 (I) of the Marine Insurance Act 1906, particular average is "a partial loss of the subject matter insured, caused by a peril insured against, and which is not a general average loss." It is borne by (or is "particular" to) the parties to whose property the misfortune occurs, unrelieved by any contribution from their co-adventurers. The loss may or may not be recoverable from their insurers (if any) according to the terms of the marine in surance policy (see INSURANCE, Marine). The essence of a par ticular average loss, however, lies in the fact that it is wholly accidental.
General average on the other hand consists of a voluntary sacrifice of part of the property at risk, or the incurring of an expense, for the common safety of the adventure, and such sacri fice or expense is borne by the property saved. It is defined in s. 66 (2) of the Marine Insurance Act 1906 (the only statutory definition of general average) as follows : "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 property imperilled in the common adventure." The equity of the underlying principle of general average has been recognized throughout the centuries, and every State possess ing a maritime trade has adopted the rule that a loss caused by a sacrifice in time of peril at sea shall not be borne by one but by all. It will be appreciated, however, that although nothing could be more simple than the fundamental principle of general average, its application to the adjustment of losses arising under modern conditions of maritime commerce is far from simple and has called into existence a profession of experts, known as average adjusters (q.v.). The complications of adjustment are added to by the fact that the law of no two countries in the world agrees as to what losses are to be treated as general average, or how such losses shall be borne. In actual practice, the settlement of general average losses and contribution is a matter usually dealt with by underwriters where the interests are insured. Liability to contribute, however, arises quite independently of insurance. Ref erence is made below to the movement for obtaining some measure of international uniformity in matters of general average.
Dealing with the subject from the point of view of English law, it will be convenient to treat it briefly under the following head ings: I. What losses and expenses are allowable as general average. 2. How much is allowable. 3. What interests contribute to the general average, and on what basis. 4. The question of security to be given for payment of the contributions.
(2) Damage done in extinguishing a fire is a very common case of general average and one that entails very complicated calcula tions in the adjustment of the loss. For many years it was the custom of average adjusters in England not to treat the loss caused by the use of steam, water or other means of quenching a fire as general average. As the result of a series of cases in the courts, however, it was established that any damage done in this way is properly allowable as general average. In practice, how ever, an exception is made to this rule—that no allowance is made for damage to cargo by water, etc., when the packages so affected were themselves on fire when the water was thrown upon them. This is justified by the argument that the particular packages were already doomed to destruction by fire and the water, therefore, could cause no additional loss to them. The damage done in scut tling or beaching a ship in order to extinguish a fire is also treated as general average.
The case of a fire on board a ship which is extinguished by the use of water or other agency illustrates clearly the distinction be tween general and particular average. The damage done by the fire itself is particular average, being entirely accidental; on the other hand the damage done by the water used to extinguish the fire is caused by a voluntary act, deliberately performed to avert the destruction of the ship and cargo, and forms, therefore, the subject of contribution by all interests on board saved by that act.
(3) When a ship is aground and in a state of peril, it is of ten found necessary to lighten her by discharging the cargo into lighters or other craft alongside. Such work can seldom be carried out without causing loss or damage to the cargo discharged, and in so far as the discharge is ordered for the general benefit and not merely to save the cargo itself, e.g., when the ship has already be come a total wreck, the cost of discharge and the resulting loss or damage is allowable as general average. Similarly, any loss caused by the discharge of cargo at a port into which the ship has put in distress is treated as general average, where the discharge is effected for the common safety or for the purpose of carrying out repairs to the ship necessary for the prosecution of the voyage.
(4) It may happen that owing to delay on the voyage due to bad weather or other circumstances a steamer's supply of fuel runs out. If the conditions are such as to threaten the common safety, the loss of cargo used as fuel in this emergency is treated as gen eral average, provided that the original supply of ship's fuel was reasonably sufficient for the voyage.
(5) Where the shipowner is only entitled to freight upon the safe delivery of the cargo, the loss of cargo by, say, jettison causes of course a corresponding loss of freight, and in the event of the loss of cargo being allowable in general average the freight so lost is also made good in general average.
(6) A sacrifice of part of the ship, e.g., the cutting away of a mast when the ship is on her beam-ends, or of her equipment or gear, e.g., the jettison of ship's stores, etc., is treated as a general average loss when necessary for the common safety as much as a sacrifice of cargo. There is this distinction, however, between a sacrifice of cargo and of ship. In the case of the cargo, it should never be voluntarily exposed to peril, and if this be done for the general benefit, the ensuing loss or damage is, broadly speaking, always the subject of general average. The case of the ship, how ever, is not quite on the same footing. The shipowner is bound to give the services of his ship in exchange for the freight or hire received, and he is bound to give its services even under condi tions of stress without claiming compensation for so doing. A ship is not built for fine weather only and even though she may suffer in a gale, and her equipment be severely damaged in bring ing her safely through it, no claim can be made by the owners for compensation in general average. Where, however, any part of the ship or her equipment is put to an abnormal use for the purpose of avoiding an imminent peril, the case is different. The cargo is entitled to expect the full use of the ship, even under exceptional circumstances, but not that the ship or any part of her should be abused in the sense that it is put to a use for which it was never intended. A typical case of the former would be the loss of sails blown away in avoiding a lee shore; of the latter, the cutting up of spars to make a jury rudder. When a ship is aground and in a position of peril, damage caused to her engines in endeavouring to refloat her, as well as the coal used in the operation, is allow able in general average (The Bona, P., p. 125). Damage to or loss of sails in similar circumstances is also the subject of gen eral average.
The deliberate running of a ship ashore to avoid sinking or driv ing on to rocks or other emergency would seem at first sight to be a clear case of general average sacrifice. Both the main elements of general average appear to be present—the existence of immi nent danger and the deliberate decision to incur a certain loss to avert a greater—but no decision has been given in the English courts on the point, although several cases have been decided in America, and the question is by no means free from doubt. The chief argument against the allowance of loss arising from volun tary stranding in general average is that in fact the element of sacrifice does not exist. At the moment of decision to put the vessel ashore she was apparently doomed to destruction by, say, sinking or by striking a reef. This fate is averted by manoeu vring her ashore at a place of comparative safety. The damage caused by this act, therefore, cannot be described as having been incurred for the benefit of all, for the mere selection of a better rather than a worse spot to take the ground is in fact a benefit con ferred upon and not a sacrifice of the interest thereby damaged. If the grounding saved the ship from sinking in deep water, again no sacrifice is incurred, but merely a diminished loss. This argu ment, however, is not generally accepted and the better opinion seems to be that where the facts justify the view that there has been a deliberate decision to incur the certain loss which would fol low a voluntary stranding, the loss so incurred is properly allow able as general average. To argue that because a lesser loss has been incurred rather than a greater, no sacrifice has been made, is to deny the benefits of general average contribution to all whose property is sacrificed for the common benefit, for the very essence of the principle of general average is that a lesser loss is deliber ately incurred to avoid a greater. Cargo jettisoned, or a mast cut away, to save the adventure from total loss during a hurricane are instances of comparatively minor losses voluntarily incurred to avert a greater, but they are regarded, quite properly, as typical cases of general average. In fact the greater the peril, the better grounds there are for regarding the means used to avert it as general average.
According to a series of American decisions, the principle is definitely recognized that loss through voluntary stranding is gen eral average where it is clear that there was any act of volition at all, and this agrees with the law of most other countries. The practice of English average adjusters, however, is to the contrary, as will be seen from the wording of one of their rules of practice : "The custom of Lloyd's excludes from general average all damage to ship or cargo resulting from a voluntary stranding. This rule does not necessarily exclude such damage as is done by beaching or scuttling a burning vessel to extinguish the fire." It has been held in England that damage sustained in resisting enemy attack is not general average, nor is the cost of replacing the munitions expended, nor the cost of medical attention to sea men wounded (Taylor v. Curtis, 1815, 4 Camp. 337). It was held that there was no sacrifice, but that the seamen merely did their ordinary duty and nothing beyond it, and that no part of the property had been sacrificed for the general benefit. The same principle is extended to cases of damage to ship by carrying press of sail to escape an enemy, as well as to rockets or storm oil which are used in time of peril. They are carried for the special purpose and cannot be said to be sacrificed when used for that purpose.
(s) The expenses of refloating a stranded or sunk ship fre quently amount to a very considerable sum. The operations may extend over several weeks or even months, and as a rule involve general average sacrifice in the way of jettison or discharge of cargo into craft alongside as well as heavy expenditure for hire of tugs, labour, pumps and other salvage machinery. The expenditure is, for the most part, clearly extraordinary and as such forms a claim in general average.
(3) When a vessel is forced to put into a port of refuge in con sequence of damage received through heavy weather or other casualty, or as a result of a general average sacrifice, such as the cutting away of masts, the port charges and other expenses at tendant on her entry into the port are recoverable in general average. So also is the cost of discharging the cargo in order to effect repairs to the ship. The treatment of the subsequent ex penses, however, depends on the reason for the putting in to the port. If this act was in consequence of a general average sacrifice, all expenses at the port, including warehouse rent on the cargo discharged, reloading charges and outward port charges are allow able in general average. Should the vessel, however, have put in in consequence of accidental damage, the warehouse rent falls on the cargo itself and the cost of reloading and the outward charges are a charge on the freight (Svendsen v. Wallace, II Q.B.D. 616; 10 App. Cas. 404). In this respect again the law of England dif fers from that of other countries, for it is the general rule else where, with few exceptions, for all port of refuge expenses to be treated as general average whatever the cause of seeking the port. This rule extends also to the allowance of the wages and main tenance of the crew during the delay at the port, therein differing still further from the practice in this country, which regards such expense as a mere enhancement of the ordinary expense of the voyage, not extraordinary in nature, and as such not recoverable in general average.
It will be seen from the preceding paragraph that regard must be paid to the state of affairs existing at the termination of the adventure. The fact that a loss has been sustained by a general average sacrifice during the voyage is not enough to entitle the owner of the property sacrificed, or the shipowner who has in curred general average expenditure, to compensation. It is the rule in England and all other countries to consider the conditions upon the arrival of the vessel at her destination or, in the case of the voyage being broken up at an intermediate port, at that port, and generally speaking this rule applies both to cases of general average sacrifice and expenditure. Indeed, should the ship and cargo be totally lost before the end of the voyage, no compensa tion is payable either for sacrifice or expenditure (Chellew v. Royal Commission on the Sugar Supply, 1921, 2 K.B. 627).
Interests Contributing to the General Average.—Having considered the main principles of general average and the method of arriving at the amounts to be allowed, it remains to consider what interests contribute to the general average and on what basis. As a general rule it may be laid down that the principle referred to in the preceding paragraph holds good not only for the method of calculating the amount to be allowed, but also for assessing the contributing values, viz., the condition of affairs at the place where the ship and cargo finally part company. Both ship and cargo contribute on their actual values there after deduction of any damage sustained, and this because these values are the actual values saved by the general average act. From the value of the cargo has also to be deducted the freight payable at destination, dtlty, landing charges, etc., so as to arrive at the net value saved. The freight at the risk of the shipowner also contributes, deduct ing therefrom the wages of the crew from the date of the general average act and the port and other charges incurred since that date for the purpose of earning the freight. To the values so arrived at has to be added any amount allowed in general average to the particular interest. This is done in order that there may be "equality of contribution as between those whose property has been sacrificed and those whose property has been preserved" (Lowndes, Law of General Average, 6th ed., p. 344) . The same result could be arrived at by making a deduction from the amount allowed of the same percentage of contribution as falls on the property saved, but in practice, for reasons of convenience, the equalization is effected by the method described. A difficult ques tion arises, upon which the law of England differs from others, when a ship is in ballast and under charter and a general average act is performed. It has been decided in England that contribu tion is due from the ship and the amount to be earned under the charter (Carisbrook S. S. Co. v. London & Provincial Marine Ins. Co., 1901, 2 K.B. 861; 1902, 2 K.B. 681 C.A.), but this is not the rule in other countries, which regard the presence of cargo on board as an essential of general average. Ship, freight and cargo form the main contributing interests, but there are others which are at risk on a sea voyage, notably passengers' effects and luggage and mails. In theory, being saved by a general average act, they should contribute, but although they frequently represent a con siderable sum of money, the practical difficulties of obtaining con tributions are so great that, speaking generally, they are ignored.
Security for Payment of General Average Contribution. —"The shipowner has, at common law, a lien on the cargo while in his possession, or in that of his servants as a carrier, not only for the freight, but also for the cargo's share of general average" (Lowndes, op. cit., p. 392). As, however, the shipowner is not in a position to demand payment of the exact amount due from the cargo at the time of delivery of the cargo, this lien is of practical value only to the extent of enabling the shipowner to enforce the giving of satisfactory security for eventual payment. The security usually required is either the signature of an agreement (known as an "average bond") to pay the proportion of general average as hereafter properly determined, or the payment of a reasonable cash deposit or very frequently both. The owner of goods sacri ficed has no corresponding lien on the ship, or the rest of the cargo, for general average contribution, though if the shipowner demands a cash deposit from the cargo owner, the latter is en titled to set off the amount of any claim to which he is rightly entitled as against the ship in respect of any of his goods sacri ficed or sold abroad (The Norway; in P.C., 1865, Br. & L. 410, It is the duty of the shipowner, moreover, to take the neces sary security from each cargo owner for the benefit of the owner of goods sacrificed (Crooks v. Allan, 1879; 5 Q.B.D. 38; 49 L.J., Q.B., 201), and if he fails in this duty he is liable in damages to the cargo owner (Nobels Explosives Co. v. Rea, 1897, 2 Com. Cas. 293).
It will have been observed from the above summary of the principles of general average that considerable differences exist between the law of England and of other countries. Not only this, but nearly every country differs in its view of what constitutes a general average sacrifice or loss and how it shall be borne, and the confusion which would have ensued had this state of things been allowed to persist would have been, and indeed was, ex tremely troublesome to the business community. There was al ways an uncertainty in the minds of underwriters and others as to what losses would or would not be allowed in general average, and on what values the ship, freight and cargo would be called upon to contribute. To remedy this confusion a movement to bring about international uniformity was commenced in 186o and as a result of many conferences a group of rules was agreed upon for embodiment by reference in bills of lading or charter parties. These eventually took the form known as the "York-Antwerp Rules," from the cities at which the conferences of 1864 (at York) and of 1877 (at Antwerp) were held. The York-Antwerp Rules of 1877 were revised at a conference at Liverpool in and continued in almost universal use for 34 years, when they were again revised at the Stockholm Conference of the International Law Association held in 1924. The York-Antwerp Rules 1924 are used to such an extent that reference to different and differing codes of law on the subject of general average is almost un necessary.
See G. R. Rudolf, Rules (1926), and the article INSURANCE, Marine. (G. R. R.)