Case details

Mitsui & Co Ltd and others (Respondents) v Beteiligungsgesellschaft LPG Tankerflotte MBH & Co KG and another (Appellants)

Case ID: UKSC 2016/0164

Case summary

Issues

Where a ship is hijacked by pirates, and the initial ransom sum demanded is not paid, but a period of negotiation is entered into resulting in a lower ransom sum being agreed and paid:

  1. Whether the expenses incurred during the negotiation period can be deemed to be general average expenses under Rule F of the York-Antwerp Rules (and therefore borne by all parties rather than the owners alone), on the basis that they are expenses incurred as an alternative to paying a general average expense (i.e. a higher ransom sum).
  2. Whether payment of the initially demanded ransom sum would have been 'reasonable' and therefore a general average expense under Rule A of the York-Antwerp Rules.

Facts

The appellants' ship was boarded by pirates in the Gulf of Aden, who commanded it to redirect to Somalia and demanded ransom of $6m. A 51-day period of negotiation with the vessel's owners and managers led to a sum of $1.85m being agreed and paid. It was common ground that the ransom paid was a reasonably incurred expense for the purpose of common safety, and so amounted to a 'general average expense' under Rule A of the York-Antwerp Rules 1974. This meant it was an expense shared between all parties involved in the voyage, rather than falling entirely for the owners' account. The average adjuster appointed by the owners found that the vessel's operating expenses incurred during the 51-day period of negotiation were also allowable as deemed general average expenses. This was under Rule F, on the basis that they were incurred as an alternative to incurring a general average expense – in this case the expense of paying upfront the greater ransom amount initially demanded. The cargo owners and their insurers (the respondents to this appeal) challenged that determination in court. The judge dismissed their claim. The Court of Appeal reversed that decision on the basis that the negotiation period expenses did not fall under Rule F. Although paying the ransom amount initially demanded would have been a general average expense under Rule A, the negotiation period expenses were not incurred as an alternative, or in substitution for that putative expense.

Judgment appealed

[2016] EWCA Civ 708

Parties

Appellants
  1. Beteiligungsgesellschaft LPG Tankerflotte MBH & Co KG
  2. LPG Carriers Ltd
Respondents
  1. Mitsui & Co Ltd
  2. Thai Plastic and Chemicals Public Company Limited
  3. Stephen Redmond
  4. RSA Insurance Group PLC

Appeal

Justices

Lord Neuberger, Lord Mance, Lord Clarke, Lord Sumption, Lord Hodge

Hearing start date

17 Jul 2017

Hearing finish date

18 Jul 2017

Watch hearing
17 Jul 2017 Morning session Afternoon session
18 Jul 2017 Morning session Afternoon session