The Law and Practice of General Average and Salvage in Carriage of Goods by Sea

The owner of the Dali, the massive cargo ship that lost power and knocked down the Key Bridge on March 26, killing six men, has declared “general average,” according to Darrell Wilson, a spokesperson for the ship's owner, Grace Ocean Private Ltd.1 The incident has cost Baltimore the loss of a key bridge and massive disruption to the United States (“US”) Supply Chain. For the cargo on board, the cargo owners face a prospect of massive additional costs as a consequence of the declaration of general average.2 Another seminal incident was the grounding of the large container vessel Ever Given within the Suez Canal while transiting the Suez Canal on March 23, 2021, lodging herself against both banks of the waterway. The blockage caused vessels backed up in the Mediterranean to the north and the Red Sea to the south.3 Before the incident the vessel sailed from the Malaysian port of Tanjung Pelepas. Not only did the incident expose the fragility of the shipping routes, it also demonstrated the principles of the law of salvage, in relation to the salvor's claim in freeing the vessel. Similarly, the cargo owners had to pay higher additional costs because of the salvage. There are some principles of maritime law which have no equivalent under normal contract law or land or air carriage. Situations like general average and salvage may arise during the maritime adventure and parties involved e.g. shipowner, cargo owner and charterer will need to be aware as when situations of general average or salvage occur, they impact parties and their property. * Partner and Head of Shipping, Admiralty and Arbitration Practice in Azmi &Associates. 1 “Dali's owner declares 'general average' in Key Bridge disaster. What does that mean?” Baltimore Sun April 18, 2024, available at https://www.baltimoresun.com/2024/04/17/ key-bridge-dali-general-average/ (accessed June 20, 2024). 2 See “Dali cargo owners face massive costs if general average is declared” Loadstar, available at https://theloadstar.com/dali-cargo-owners-face-massive-costs-if-generalaverage-is-declared/. (accessed June 20, 2024). 3 See the articles “Ever Given – What Happens Now?”, Maritime Executive, available at https://www.maritime-executive.com/editorials/ever-given-what-happens-now and “Ever Given: Legal and Insurance Implications”, Maritime Executive, available at https://maritime-executive.com/editorials/ever-given-legal-and-insurance-implications (accessed April 22, 2024). 214 The Law Review 2024 [2024] LR Do cargo owners need to contribute to general average charges if the incident was the fault of the Dali? The short answer is yes, because of the New Jason Clause which invariably found the contract of carriage with owners of the Dali. The default position under US law is that an owner is not entitled to the contribution from cargo when the event is caused by the owner's or his agent's fault or neglect. This is so even if the US Carriage of Goods by Sea Act (“COGSA”) applies to the voyage and the neglect or fault constitutes a defence under COGSA.4 The incorporation of a New Jason Clause in the contract of carriage changes this default rule. This article explores the law and practice of general average and salvage. Amongst the highlights covered is the Federal Court decision of Fordeco Sdn Bhd v PK Fertilizers Sdn Bhd5 where Nallini Pathmanathan FCJ set out the general principles of both general average and salvage. General average General average is part of the law of the sea founded on equity. It formed part of the Rhodian law, was based on earlier custom and existed many centuries before the existence of marine insurance. Rhodian law provided that when cargo was thrown overboard to lighten a vessel, that which had been given for all had to be replaced by the contribution of all.6 The most often cited legal definition of “general average” is “all loss which arises in consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and cargo losses within general average, and must be borne proportionately by all who are interested”.7 General average is a general rule of maritime law, independent of the contract of affreightment, although the rights and liabilities of the parties may be limited or varied by the terms of that contract.8 The obligation to contribute to general average exists between the parties to the adventure, whether they are insured or not. The circumstances of a party being insured can have no influence on the adjustment of general average, the rules of which are entirely independent of insurance.9 4 Like Hague and Hague-Visby, the US COGSA exonerates the ship and carrier from liability for loss or damage resulting from an error in navigation or management of the ship or from unseaworthiness when the owner/carrier has exercised due diligence to make the vessel seaworthy. COGSA § 4, reprinted in 46 USC § 30701. 5 [2019] 4 AMR 837; [2019] MLJU 596, FC. 6 See e.g. Strang, Steel & Co v A Scott & Co (1889) 14 App Cas 601; 6 Asp MLC 419, PC, per Lord Watson. 7 Birkley v Presgrave (1801) 1 East 220 at 228, per Lawrence J. 8 The Brigella [1893] P 189; 7 Asp MLC 403. For an early case on general average, see Syed Hassan v Khoo Soon Tjio (1889) 4 Ky 528. 9 Ibid. The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 215 Definition of general average A general average loss is a loss caused by or directly consequential on a general average act, and it includes a general average expenditure10 as well as a general average sacrifice.11 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.12 General average General average was defined by the Malaysian Federal Court in the case of Fordeco Sdn Bhd v PK Fertilizers Sdn Bhd: 13 How is general average defined? “There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure”. [This is the definition which has remained unchanged since 1924 where it was formulated for the New York-Antwerp Rules (see Lowndes and Rudolf, The Law of General Average and The York–Antwerp Rules, 13th edn, published by Sweet & Maxwell 2008). In the 1801 case of Birkley v Presgrave 1 East 220, sanction under the common law was given to the principle of general average: “… All loss which arises in consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and cargo comes within general average and must be borne proportionably by all who are interested.” This definition has been treated as the highest authority. Put another way, as a matter of principle, general average applies where the common adventure is put at risk and an interest of it is sacrificed, or an extraordinary expenditure is incurred in order to preserve that property and other interests in the maritime adventure. The expenditure or sacrifice is the general average act and must be voluntary and reasonable. The result of such a declaration is an entitlement to a general average contribution by the person whose property has been sacrificed or the expenditure, against from the other interests that are saved (see Modern Maritime Law and Risk Management by Alexandra Mandaraka-Sheppard, 2nd edn, published by Informa 2009). 10 As to general average expenditure, see Marine Insurance Act 1906 (UK), s 64(1). 11 Marine Insurance Act 1906 (UK), s 66(1). For a case on the application of the Marine Insurance Act 1906 (UK), see The “Melanie” United Oriental Assurance Sdn Bhd Kuantan v WM Mazzarol [1984] 1 MLJ 260, FC. 12 Marine Insurance Act 1906 (UK), s 66(2). 13 See n 1 above. 216 The Law Review 2024 [2024] LR Examples of general average acts include jettisoning part of the cargo or ship’s stores, cutting way masts or cables, engaging salvage services, paying money to secure the vessel’s release from detention, incurring damage to property belonging to third parties and consequent tortious liability, the expense of ship repairs, reconditioning cargo and other instances, far too numerous to justify a full recital. The subject matter of general average incudes all the interests of the common adventure, which are at risk. Such interests are physical, namely, the ship, the cargo, the bunkers, stores, and personal effects. General average is covered under marine cargo insurance, for example, Institute Cargo Clauses (“ICC”) (A) 1.1.82: 2. General Average Clause This insurance covers general average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from any cause except those excluded in Clauses 4, 5, 6 and 7 or elsewhere in this insurance. The definition as provided in the United Kingdom (“UK”) Marine Insurance Act 1906 is set out: 66. General average loss (1) A general average loss is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice. (2) 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. (3) Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution from the other parties interested, and such contribution is called a general average contribution. (4) Subject to any express provision in the policy, where the assured has incurred a general average expenditure, he may recover from the insurer in respect of the proportion of the loss which falls upon him; and, in the case of a general average sacrifice, he may recover from the insurer in respect of the whole loss without having enforced his right of contribution from the other parties liable to contribute. (5) Subject to any express provision in the policy, where the assured has paid, or is liable to pay, a general average contribution in respect of the subject insured, he may recover therefor from the insurer. The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 217 (6) In the absence of express stipulation, the insurer is not liable for any general average loss or contribution where the loss was not incurred for the purpose of avoiding, or in connection with the avoidance of, a peril insured against. (7) Where ship, freight, and cargo, or any two of those interests, are owned by the same assured, the liability of the insurer in respect of general average losses or contributions is to be determined as if those subjects were owned by different persons. Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution from the other parties interested;14 and such a contribution is called a general average contribution.15 Most charterparties have provisions providing for general average. For example, Asbatankvoy provision for general average: 20. (iii) GENERAL AVERAGE. General Average shall be adjusted, stated and settled according toYork/Antwerp Rules 1950 and, as to matters not provided for by those rules, according to the laws and usages at the port of NewYork or at the port of London, whichever place is specified in Part I of this Charter. If a General Average statement is required, it shall be prepared at such port or place in the United States or United Kingdom, whichever country is specified in Part I of this Charter, as may be selected by the Owner, unless otherwise mutually agreed, by an Adjuster appointed by the Owner and approved by the Charterer. Such Adjuster shall attend to the settlement and the collection of the General Average, subject to customary charges. General Average Agreements and/or security shall be furnished by Owner and/or Charterer, and/or Owner and/or Consignee of cargo, if requested. Any cash deposit being made as security to pay General Average and/or salvage shall be remitted to the Average Adjuster and shall be held by him at his risk in a special account in a duly authorized and licensed bank at the place where the General Average statement is prepared. 14 The expenditure thus incurred in consequence of extraordinary sacrifices made or expenditure incurred for the preservation of the several interests involved does not fall on the particular interest exclusively but must be borne in due proportion by all: Birkley v Presgrave(1801) 1 East 220 at 228, per Lawrence J. 15 Marine Insurance Act 1906 (UK), s 66(3). It has been suggested that the liability to pay a general average contribution is based upon an implied contract (Wright v Marwood (1881) 7 QBD 62 at 67; 4 Asp MLC 451 at 454, CA (Eng), per Bramwell LJ), but the better opinion is that it does not arise out of any contract but is derived from the rule of contribution in case of jettison, which has become part of the law of maritime, whence it has been incorporated into English law: Simonds v White (1824) 2 B & C 805 at 811, per Abbott CJ; Burton v English (1883) 12 QBD 218 at 220; 221, 5 Asp MLC 187 at 188, CA (Eng), per Brett LJ; Strang, Steel & Co v A Scott & Co (1889) 14 App Cas 601 at 607; 6 Asp MLC 419 at 421, PC, per Lord Watson. 218 The Law Review 2024 [2024] LR York-Antwerp Rules The York-Antwerp Rules 2004 are a voluntary international code of rules on the subject of general average which, in practice, are often incorporated into the contract of marine insurance and which differ in a number of respects from the common law rules.16 The York-Antwerp Rules are not, however, a complete code and may require to be supplemented by the provisions of the general law applicable to the contract.17 The key definitions of general average as defined in the Rules are: YORK-ANTWERP RULES 2004 RULE A There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure. General average sacrifices and expenditures shall be borne by the different contributing interests on the basis hereinafter provided. 16 The York-Antwerp Rules 1994 were adopted at the 35th Conference of the Comité Maritime International, held in Sydney, October 1994. The Rules were reviewed at conferences in Hamburg (1974), Paris (June 1990) and Sydney (1994). The amendments to these Rules were triggered by the International Convention on Salvage 1989 (London, April 28, 1989; Cm 1526). This Convention applies to matters pertaining to salvage services, and the drafters of the said Convention realised that this would have an impact on general average, as salvage awards are allowable in general average in accordance with Rule VI of the 1994 Rules. The pressure to change the York-Antwerp Rules 1994 increased since March 1999 when, following its adoption of a report made by one of its working groups, the International Union of Maritime Insurers (“IUMI”) made a formal request that the case for a further revision of the Rules should be placed on the agenda of the Comité Maritime International (“the CMI”). Since then, IUMI’s proposals have been the subject of detailed consideration by an international working group and discussion at CMI conferences. This resulted in the York-Antwerp Rules 2004 being adopted by the CMI at a conference in Vancouver on June 24, 2004. The Rules, which, if incorporated, prevail over inconsistent provisions of the law governing the contract of carriage, are composed of specific instances of general average (in the numbered rules) and more general classes of general average (in the lettered rules). In either case, expenditure attracting contribution must have been reasonably incurred: cf Corfu Navigation Co v Mobil Shipping Co Ltd, The Alpha [1991] 2 Lloyd’s Rep 515. See further Lowndes and Rudolf’s General Average and the York-Antwerp Rules, 12th edn. As to the incorporation of the York-Antwerp Rules 2004 into marine insurance policies see the standard forms of marine cargo and hull insurance under the Institute Time Clauses – Hulls and Institute Cargo Clauses. 17 Goulandris Bros Ltd v B Goldman & Sons Ltd [1958] 1 QB 74 at 92; [1957] 3 All ER 100 at 106; [1957] 2 Lloyd’s Rep 207 at 214. The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 219 RULE B There is a common maritime adventure when one or more vessels are towing or pushing another vessel or vessels, provided that they are all involved in commercial activities and not in a salvage operation. When measures are taken to preserve the vessels and their cargoes, if any, from a common peril, these Rules shall apply. A vessel is not in common peril with another vessel or vessels if by simply disconnecting from the other vessel or vessels she is in safety; but if the disconnection is itself a general average act the common maritime adventure continues. RULE C Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average. The Rules are divided into “Lettered” and “Numbered” Rules.18 The Rule of Interpretation introduced by amendment in 1990 provides that in the adjustment of general average, the “Lettered” and “Numbered” Rules will apply to the exclusion of any law or practice inconsistent with the said Rules. Except as provided by the “Numbered” Rules (containing specific examples of the application of the principles of general average), general average will be adjusted according to the “Lettered” Rules (stating the principles themselves). The 2004 Rules have brought about substantial changes from the 1994 Rules. The main changes brought about by the York-Antwerp Rules 2004 are: (1) Salvage remuneration (Rule VI A): Salvage payments and other salvage-related costs will no longer be included in general average adjustment. However, salvage remuneration will continue to be included in cases where one party has paid all or any of the proportion of salvage on behalf of another party. (2) Expenses at The Port of Refuge (Rule XI): Wages and expenses for the master, officers and crew will no longer be covered by general average while the vessel is detained at a port or place of refuge. (3) Temporary Repairs (Rule XIV B): The recovery in general average of costs for temporary repairs to a ship of accidental damage at a port of loading, call or refuge has been limited according to the new rule, it will first be determined whether savings have been generated for shipowners by effecting repairs at the ports mentioned. Repairs will be 18 There are seven Lettered Rules (A-G), 22 Numbered Rules (I–XXII), a Rule of Interpretation and a Rule Paramount. The Rule Paramount was included as part of the 1994 amendments. This rule states: “In no case shall there be any allowance for sacrifice or expenditure unless reasonably incurred”. 220 The Law Review 2024 [2024] LR allowed in general average only to the extent that the estimated cost of permanent repair at those ports exceeds the sum of the temporary repairs plus permanent repairs actually carried out. (4) Provision of Funds (Rule XX) and Interest on Losses (Rule XXI): A 2% commission for the provision of funds will no longer be included. Furthermore, instead of the previous, fixed interest rate of 7%, the CMI will annually determine an interest rate which will be published on its website at www.comitemaritime.org. (5) Time Bar (Rule XXIII): A time bar has been added to the new rules. The right to claim for a general average contribution will become timebarred one year after the general average adjustment was completed or six years after the date of termination of the common maritime adventure, whichever comes first. Adjustment of general average Unless the contract otherwise provides,19 the adjustment of the amount to be contributed by the respective interests is determined by the law of the place where the adjustment is to be made,20 that is to say, at the place where under the contract the voyage is to terminate.21 The adjustment may take place at a port of refuge if the voyage is abandoned there by agreement or by necessity,22 but not otherwise.23 General average expenditure Extraordinary expenditure24 incurred by the shipowner for the safety of the adventure may be recovered by him as a general average sacrifice,25 but he 19 Dalglish v Davidson (1824) 5 Dow & Ry KB 6; Stewart v West India and Pacific SS Co (1873) LR 8 QB 362; 2 Asp MLC 32, Ex Ch. It is usual for the contract to provide expressly that adjustment is to be made in accordance with the York-Antwerp Rules 2004. 20 As to the practice on adjustment see the Rules of Practice of the Association of Average Adjusters, see also the York-Antwerp Rules 2004. 21 Simonds v White (1824)2B&C 805; Hill v Wilson (1879) 4 CPD 329; 4 Asp MLC 198. 22 Fletcher v Alexander (1868) LR 3 CP 375; Mavro v Ocean Marine Insurance Co (1875) LR 10 CP 414; 2 Asp MLC 590, Ex Ch. As to the position under the York-Antwerp Rules, which provide that contribution is to be made on the actual values of the property at the termination of the adventure, seeChellew v Royal Commission on Sugar Supply [1922] 1 KB 12; 15 Asp MLC 393, CA (Eng). 23 Hill v Wilson (1879) 4 CPD 329; 4 Asp MLC 198. 24 The expenditure must have been abnormal in kind or degree and must have been incurred on an abnormal occasion for the preservation of the property: Société Nouvelle d’Armement v Spillers and Bakers Ltd [1917] 1 KB 865 at 871; 14 Asp MLC 16 at 18, per Sankey J (where it was held that the hire of a tug for an unusually long portion of the voyage in order to minimise the danger of attack from enemy submarines did not satisfy those conditions). 25 Kemp v Halliday (1865) 6 B & S 723 at 746, per Blackburn J (affd (1866) LR 1 QB 520, Ex Ch); Ocean SS Co v Anderson (1883) 13 QBD 651 at 662; 5 Asp MLC 202 at 203, CA (Eng), per Brett LJ (revsd) (1884) 10 App Cas 107; 5 Asp MLC 401, HL; Rose v Bank of Australasia [1894] AC 687; 7 Asp MLC 445, HL. Quaere whether a shipowner who has provided an unseaworthy The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 221 cannot recover all extraordinary expenses incurred for the purpose of continuing the voyage.26 Thus, the expense of discharging the cargo and placing it into lighters or landing it is a general average expenditure;27 but expenses incurred after the removal of the cargo, for example in connection with the refloating of the ship, are incurred to save the ship, and are not, as a general rule, for the preservation of the cargo; they must, therefore, be borne by the shipowner alone. There may, however, be cases in which such expenses would fall under general average, as, for example, where the cargo would be lost unless it is carried on to its destination by the same ship, there being no other means of transport or disposal available,28 or where the discharging of the cargo and refloating of the ship form one continuous operation.29 Similarly, payment made to salvors employed by the shipowner may form the subject of general average if the safety of the whole adventure is involved.30 Persons liable to contribute to general average All persons whose interest in the adventure is benefited by a general average sacrifice or by a general average expenditure are liable to make a general average contribution.31 These persons are: (1) the shipowner,32 who is liable in respect of the ship and also in respect of the freight;33 ship can claim for general average contribution: see the Singapore Court of Appeal decision of Sunlight Mercantile Pte Ltd v Ever Lucky Shipping Co Ltd [2004] 1 SLR 171. 26 Walthew v Mavrojani (1870) LR 5 Exch 116, Ex Ch; cf Da Costa v Newnham (1788) 2 Term Rep 407. 27 Job v Langton (1856)6E&B 779; cf Rose v Bank of Australasia [1894] AC 687; 7 Asp MLC 445, HL, doubting Schuster v Fletcher (1878) 3 QBD 418; 3 Asp MLC 577. 28 Job v Langton (1856) 6 E & B 779 at 793, per Lord Campbell CJ; Walthew v Mavrojani (1870) LR 5 Exch 116 at 126, Ex Ch, per Montague Smith J. 29 Moran v Jones(1857)7E&B 523, doubted in Svendsen v Wallace Bros(1884) 13 QBD 69; 5 Asp MLC 232, CA (Eng), and in Royal Mail Steam Packet Co v English Bank of Rio de Janeiro (1887) 19 QBD 362. 30 Birkley v Presgrave (1801) 1 East 220; Kemp v Halliday (1865)6B&S 723; Anderson v Ocean SS Co (1884) 10 App Cas 107; 5 Asp MLC 401, HL, varying Ocean SS Co v Anderson (1883) 13 QBD 651; 5 Asp MLC 202, CA (Eng). 31 Fletcher v Alexander (1868) LR 3 CP 375 at 382, per Bovill CJ. This applies unless the liability is excluded by special contract: Jackson v Charnock (1800) 8 Term Rep 509. There is no liability to contribute in respect of victuals, or in respect of passenger’s personal luggage, as opposed to goods: Brown v Stapyleton (1827) 4 Bing 119. 32 The shipowner is liable even though the cause of the sacrifice is an excepted peril: Schmidt v Royal Mail SS Co (1876) 4 Asp MLC 217n, followed in Greenshields, Cowie & Co v Stephens & Sons Ltd [1908] AC 431; 11 Asp MLC 167, HL. 33 Moran v Jones (1857) 7E&B 523; Strang, Steel & Co v A Scott & Co (1889) 14 App Cas 601; 6 Asp MLC 419, PC. Where the ship is chartered out and home, the homeward freight may be liable to contribute towards a general average loss on the outward voyage: Williams v 222 The Law Review 2024 [2024] LR (2) the charterer, if any, who is liable in respect of his interest in the bill of lading freight34 (in this case the shipowner’s liability as regards the freight is restricted to the chartered freight35 and, if the charterparty is by demise, the charterer is also liable in respect of the ship);36 (3) the owner of the cargo, who is liable in respect of the cargo;37 and (4) any other person who may be liable under some express term in the contract of carriage. Thus, the bill of lading may preserve the shipper’s liability,38 or it may provide for payment of a general average contribution by the consignee.39 A consignee is not, as such, liable, even if he has taken delivery of the cargo;40 but he may make himself liable, as under a new contract, by taking delivery with notice that the cargo is held by the shipowner subject to his lien for general average contribution;41 or he may be liable as owner of the cargo,42 or as signatory to a Lloyd’s average bond.43 In the UK Supreme Court decision of Herculito Maritime Ltd & Ors v Gunvor International BV & Ors (MT Polar), 44 in 2010, the MT Polar was seized by Somali pirates in the Gulf of Aden. The vessel was held hostage for 10 months before being released following a ransom payment of US$7.7 million. Following declaration of general average by the vessel's owners, cargo interests (who held the bills of lading) denied that they were under any liability to contribute nearly $6 million in respect of the ransom. It was London Assurance Co (1813)1M&S 318, followed in Carisbrook SS Co v London and Provincial Marine and General Insurance Co [1902] 2 KB 681; 9 Asp MLC 332, CA (Eng); Moran v Jones (above). 34 He is also liable in respect of any chartered freight paid in advance: Frayes v Worms (1865) 19 CBNS 159. 35 Moran v Jones (1857)7E&B 523. 36 This follows from the fact that he is the owner for the time being of the ship: see [460.120]. See the following cases on charterparties by demise: The “Loon Chong”; The “Loon Chong” Owners v Eng Hong Trading Co Sdn Bhd [1982] 1 MLJ 212, FC (Mal); The “Thorlina”; The “Thorlina”, Owners v Keppel Shipyard Ltd [1986] 2 MLJ 7 HC (Mal) [1984–1985] SLR 283, CA (Sing); The MV “Yamato Maru”; MV “Yamato Maru” Owners v Spie Sri Suria Sdn Bhd [1977] 2 MLJ 41; Wah Tat Bank Ltd v Chan Cheng Kum [1967] 2 MLJ 263; [1965–1968] SLR 260, FC (Sing); on appeal [1971] 1 MLJ 177; [1969–1971] SLR 22, PC. 37 Scaife v Tobin (1832) 3 B & Ad 523; Strang, Steel & Co v A Scott & Co (1889) 14 App Cas 601; 6 Asp MLC 419, PC. The captors of cargo against which a claim for general average contribution exists take the cargo subject to liability for the contribution: The Sorfareren (1915) 13 Asp MLC 223; affirmed on another point (1917) 14 Asp MLC 195, PC. 38 Walford de Baedemaecker & Co v Galindez Bros (1897) 2 Com Cas 137. 39 See, for example, the clause known as the “New Jason Clause”, which derives from The Jason (1912) 225 US 32. 40 Scaife v Tobin (1832) 3 B & Ad 523. 41 Ibid. 42 Ibid at 529, per Lord Tenterden CJ. 43 Thomson v Micks Lambert & Co (1933) 39 Com Cas 40. 44 [2024] UKSC 2. The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 223 argued, by cargo interests, that on the true construction of the bills of lading the owners only remedy was to recover the ransom under additional insurance which had been taken out to cover war risks, and in particular the Gulf of Aden, pursuant to the terms of the voyage charterparty, the premium having been paid by the charterer. The matter was referred to arbitration, with the tribunal finding in cargo interests favour. The matter was referred to the High Court, which agreed with the tribunal on certain issues but not on others, with the result that cargo interests would have to contribute to general average, in respect of which an appeal was allowed. The Court of Appeal reached largely the same conclusion as the lower court, resulting in a further appeal by cargo interests to the Supreme Court. The Supreme Court upheld the decision of the Court of Appeal holding that a charterer’s agreement to pay the insurance premiums for war risk and kidnap and ransom risks does not create an insurance fund or code that absolves the charterer from liability to contribute in general average following piracy, except where the charterer and owner are joint insureds. The court also held that the incorporation of terms of a charterparty into a bill of lading is determined by the three-stage test, that is: Firstly, to examine the scope of the incorporation clause in the bill of lading to see if it is wide enough to incorporate the relevant terms of the charterparty. A general incorporation clause will import only the terms as to shipment, carriage, delivery, and payment of freight. Secondly, to examine the relevant terms of the charterparty to see if they make sense in the context of the bill of lading. Some degree of manipulation is permissible in the case of terms as to (i) shipment, (ii) carriage, and (iii) delivery, but not as to other matters (including arbitration) in the absence of clear intention. Lastly, check if the prima facie incorporated terms of the charterparty are consistent with the terms of the bill of lading. Salvage The Malaysian Federal Court set out the law of salvage in the case of Fordeco Sdn Bhd v PK Fertilizers Sdn Bhd. 45 In delivering the decision of the court, Nallini Pathmanathan FCJ explained: The law on salvage Salvage has been defined as a service which confers a benefit by saving or helping to save a recognised subject of salvage when in danger from which it cannot be extricated unaided, if and so far as the rendering of such service is voluntary in the sense of being attributable neither to a pre-existing obligation, nor solely for the interests of the salvor (see Kennedy & Rose, Law of Salvage, 6th edn, published by Sweet & Maxwell 2002). Having said that, two points require clarification. The first is that this does not lay down a complete definition of salvage. The term should not be limited by a 45 See n 1 above. 224 The Law Review 2024 [2024] LR definition. Second, this definition describes salvage as it subsisted in earlier times. In more modern times, salvage is rendered more commonly by salvors under contract. Malaysia has not ratified the Salvage Convention 1989. Therefore, the common law is applicable by the admiralty court in determining salvage claims which fall within its jurisdiction (see the Senior Courts Act 1981 (UK), s 20(2)(j) by virtue of s 24 of the Courts of Judicature Act 1964). When then is a contract termed one of salvage rather than one for the towage and carriage of goods? There are four elements that are characteristic of a contract of salvage, as opposed to a contract for the provision of towage, pilotage, or the carriage of goods: (i) there should be recognised subject matter; (ii) the object of salvage should be in danger at sea; (iii) the salvors must be volunteers; and (iv) there must be success by either preserving or contributing to preserving the property in danger. A vessel would comprise recognised subject matter, as would cargo. Of importance is that there must be some real danger as a consequence of which the property comprising the subject of salvage is exposed to damage or destruction. An apprehension of danger is sufficient. Danger In The Phantom [1866] LR 1 A& E 58 at 60, it was held by Dr Lushington that: “….it is not necessary that there should be absolute danger in order to constitute salvage service; It is sufficient if there is a state of difficulty and reasonable apprehension.” And in The Charlotte (1848) 3 W Rob 68, it was said: “… According to the principles which are recognised in this court in questions of this description, all services rendered at sea to a vessel in danger or distress are salvage services. It is not necessary, I conceive that the distress should be actual or immediate, or that the danger should be imminent and absolute; it will be sufficient if, at the time the assistance is rendered, the ship has encountered any damage or misfortune which might possibly expose her to destruction if the services were not rendered.” Even a future or contingent danger may qualify, as borne out by The Troilus [1951] AC 820. There the ship was carrying cargo from Australia to Liverpool when she fractured her tail shaft and dropped her propeller in the Indian Ocean. The vessel was towed to Aden where she anchored. This undisputedly, amounted to salvage services. But in Aden there were no The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 225 facilities for repairs nor for storage of the cargo. She was then towed to the UK given that repairs and storage would have incurred considerable delay and expense. One of the issues that arose in Fordeco Sdn Bhd v PK Fertilizers Sdn Bhd46 was when does the master or owner have authority to enter into a salvage contract binding on the cargo owner. The court held that he can do so under the principles of agency of necessity. Where a cargo owner is notified by the vessel owner of a salvage operation and does not object to the same, whether the cargo owner is bound by or deemed to have agreed to the terms and conditions of the salvage operation as agreed to by the vessel owner? This query relates to the authority of the vessel owner (usually through its agent, the master) to bind the owners of the cargo carried on board the vessel. As Malaysia has not ratified the 1989 Salvage Convention, the issue falls to be determined under common law under the principles of agency, and more particularly, agency of necessity. In the instant case neither the vessel owners nor the master had express authority to bind the cargo owner. The facts disclose that the cargo owner was notified sometime after the vessel ran aground. On February 6, 2006 the cargo owner’s representative wrote to the vessel owner’s representative, stating that they were surprised that their cargo was being discharged and despatched on the high seas and demanded to be present during any cargo operations. There was no other correspondence. The cargo owners were not present when the vessel was lightened by the discharge of part of the cargo onto the barges. Their agents, the surveyors were present at the point of unloading in Lahad Datu, when the cargo was brought to safety. That is the point at which the salvage operation ceased. Under the principles of agency, in the absence of express authority, the master is not ordinarily the agent of the owners of cargo laden on board his ship, and in general, has no authority to make contracts on behalf of the owners of the cargo. However, the doctrine of the agent of necessity was widely used in practice, arising from the master’s duty to safeguard the interests in goods in his possession during an emergency. Such authority of necessity entitled him to bind the cargo owners to the terms of the salvage contract (see Kennedy & Rose’s textbook, Law of Salvage, above). In agency one of the key characteristics of an agent is to affect the legal position of the principal as regards third parties. In a salvage situation such as the instant case, the master of the ship acts as agent of the owners of the properties that require rescue. That would include the cargo. The master authorises the salvage contract with a view to salvaging the vessel and the cargo. Therefore the issue for consideration is whether the salvage contract so created binds the owners of the cargo. 46 See n 1 above. 226 The Law Review 2024 [2024] LR Agent of necessity Agency of necessity arises by operation of law in certain circumstances where the person, here the master, is faced with an emergency in which the property or interests of another person are in imminent jeopardy and it becomes necessary in order to preserve the property to act for that person without his express authority. The rationale supporting the existence of authority on behalf of the master or vessel owner to contract on behalf of the cargo owner in situations of emergency or necessity was considered in The Gaetano and Maria (1882) 7 PD 137 by Brett J. He stated that it arises from the necessity of things; from the obligation of the shipowner and the master to carry the goods from one place to its destination. In the course of such a journey, it may well be inevitable that the master may have no credit and have no means, and for the safety of all concerned and for the purposes of achieving the ultimate goal of delivery of the goods, that he be authorised to hypothecate not only the vessel but also the cargo. In other words he was authorised to deal with the cargo in the ultimate interests of all the parties. The power of the master did not arise from the bill of lading nor the charter party because it could be invoked even where neither agreement existed. It arose, it was held, from the contract of maritime carriage by the shipment of goods on board a ship for the purpose of being carried from one place to another and it comes into play from the point in time when the goods are put on board for such a purpose. This issue came up for consideration in the case of Industrie Chimiche Italia Centrale And Cerealfin SA v Alexander G Tsavliris & Sons Maritime Co, Panchristo Shipping Co SA And Bula Shipping Corporation (The “Choko Star”) [1987] 1 Lloyd's Rep 508. A demise chartered vessel was carrying a cargo of soya beans from Argentina. It ran aground in the river Parana. The master entered into a Lloyd’s Open Form 1980 contract with European salvors to refloat the vessel, very much like the instant case. Security was provided and the salvors’ claim against the shipowners was settled by agreement. The cargo owners objected that the master had no authority to engage the salvors on their behalf and went into arbitration under protest. The issue of the master’s authority to contract on behalf of the cargo owners went to trial. It is relevant to note that it was reasonably practicable to communicate with the cargo owners. Sheen J held that the contract of carriage gave the master implied authority to contract with salvors, when he was acting in circumstances of emergency or necessity. Such authority could not be overridden by the cargo owners. This first instance judgement in The Choko Star was reversed by the Court of Appeal (1990) 1 Lloyd’s Rep 516) which took a strict view of the application of the principles of agency. The master, it was held, had no implied authority to do so. However, there was a compromise in that it was acknowledged that the master would have such authority on the basis of The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 227 agency of necessity where the requirements of the doctrine of necessity were satisfied. The four elements required for such an agency to arise were stated in The Choko Star [1990] 1 Lloyd's Rep 516 (per Lord Justice Slade at p 525): (i) It is necessary to take salvage assistance, and; (ii) It is not reasonably practicable to communicate with the cargo-owners or to obtain their instructions; and (iii) The master or vessel owner act bona fide in the interests of the cargo; and (iv) It is reasonable for the master or vessel owner to enter into the particular contract. This test was adopted and applied in The Pa Mar (“The Pa Mar”). In The Unique Mariner[1978] 1 Lloyd's Rep 438 the court upheld the implied authority of the master to accept salvage services without communicating with the cargo owner for instructions, on the grounds that it was his duty to take measures necessary for the safety of his ship. His implied authority would have extended to allow for this. Another issue that came up for decision in Fordeco Sdn Bhd v PK Fertilizers Sdn Bhd47 was the test to be adopted in determining whether the salvors were negligent in carrying out the salvage. This was examined in detail by the Federal Court: For many years the English courts held that the negligence of salvors who responded to a vessel in distress in the high seas at risk to themselves should be judged leniently. The courts were then generally reluctant to award damages against salvors as their services were provided voluntarily. There was in place a policy whereby salvors by nature of the provision of their services were treated more leniently than carriers in a normal carriage of goods situation where the applicable standards of care in negligence and bailment would prevail. This became a matter of public policy. However this reluctance to award damages or even allow for such a claim changed over time and in the twentieth century the English courts became more open to the award of damages to the owner of salved property for a salvor’s negligence. In Anglo-Saxon Petroleum Co Ltd v The Admiralty (The Delphinula), the English Court of Appeal held that if the salvor is guilty of misconduct, the reduction in value of the salved property would be taken into account in assessing the award due to the salvor. Not only that, an independent counterclaim or cross-claim for damages could be made against the salvor. 47 See n 1 above. 228 The Law Review 2024 [2024] LR In The Alenquer [1955] 1 Lloyd's Rep 101, no salvage award was made but the damage claim had to be paid in full by the salvor. Notwithstanding this the learned judge placed reliance on the general policy in relation to salvors as stated in Kennedy & Rose’s textbook Law of Salvage (above) where the learned authors explained that the court, in considering whether a salvor has shown such negligence as ought to affect the assessment of his award, or is guilty of an error of judgment, should take a lenient view and consider favourably circumstances which exonerate the salvor such as a request for help, the suddenness of the emergency or the inability to find other assistance. The leading case on point is The Tojo Maru [1972] AC 242 where the House of Lords affirmed that a claim in damages will lie against salvors for their negligence by way of a counterclaim independently of merely taking into account their negligence in assessing the remuneration payable to them. The facts are that the Tojo Maru collided with an Italian ship in the Persian Gulf. The Tojo Maru entered into a salvage agreement under the Lloyd’s Open Form, “no cure no pay” basis, with the respondent salvors. During the collision a large crack appeared on the hull of the ship. This crack had to be covered by way of a large plate to be bolted to the hull. This in turn had to be done by firing bolts to the hull. An adjoining tank however had to be made gas-free first for safety reasons. The chief diver of the salvor, contrary to instructions he had received, fired a bolt through the shell plating of the vessel. This resulted in an explosion which caused extensive damage and a fire on the vessel. Additional assistance was obtained to put out the fire. The vessel was repaired and when declared seaworthy was towed to Singapore and Kobe to be repaired. In these circumstances the salvors claimed an award in salvage arbitration and the vessel owners counterclaimed for damages suffered due to the salvor’s negligence. The arbitrator found that the salvors were negligent and the owners were entitled to recover damages. The issue of whether the owners were entitled to a counterclaim and whether the salvors could limit their liability was referred to appeal. The High Court agreed with the arbitrator that the owners were entitled to counterclaim. The Court of Appeal disagreed, stating that the normal common law principles on negligence were not applicable but that of the maritime law of salvage. The concern was that the application of strict common law principles would discourage salvors from undertaking difficult salvage operations. This précis does little to convey the significant legal propositions that were argued in meticulous detail and ought to be read in full. The House of Lords however reversed the decision of the Court of Appeal on the issue of whether the owners were entitled to counterclaim damages. They held that the owners were entitled to counterclaim. The leading judgments (of Lord Reid and Lord Diplock) relied on the established principles of negligence of professionals at common law, rejecting any special rule on the basis of “more good than harm” as had been established in maritime law. The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 229 It is important to note that the salvors did not dispute the finding by the arbitrator of negligence on their part. The essential points that may be gleaned from the judgment of Lord Reid are that: (a) courts look leniently to negligence of salvors which causes damage to the property in danger during salvage operations and will judge their efforts as a whole; (b) a claim for damages will lie where a vessel is lost due to a salvor’s negligence. This must depend on the facts of each individual case; and (c) the same standards of care are applicable in adjudging the conduct of professional salvors, as those applicable to other professionals, save that public policy issues applicable to maritime salvage carried out in an emergency will be taken into account by the court. On the facts of the Tojo Maru, there was no emergency and the damage was caused several weeks later, during the repair of the salved property. A few points of note are that it was acknowledged and accepted that public policy even now encourages professional salvors to maintain salvage vessels in a wide variety of situations. It was further accepted that just as courts are very slow to hold that errors of judgment in emergencies amount to negligence, so too are courts slow to impute negligence to salvors. The point in issue before the court was whether the salvors, who had accepted that they were negligent, could nonetheless maintain that the vessel owners had no cause of action against them in damages. This contention was premised on the rule of “more good than harm” occasioned by salvors, and that as a matter of public policy, they should not be held liable for harm arising from their having acted so as to rescue a vessel in peril. It is also of relevance to note that in most cases where damages are sought against salvors in negligence, the damage occurs to the salved vessel, rather than cargo interests. Another case of relevance is The St Blane (1974) 1 LLR 557 at 560 where Brandon J made an observation about the general approach that the court ought to adopt when faced with charges of negligence against persons who render or try to render assistance at sea: “… As to this it is well established that the court takes a lenient view of the conduct of salvors and would-be salvors, and is slow to find that those who try their best, in good faith, to save life or property in peril at sea, make mistakes or errors of judgment in doing so, have been guilty of negligence ... This principle of the lenient approach to mistakes is an important one. It derives from the basic policy of the law relating to salvage services, which is always to encourage, rather than discourage the rendering of such services.” 230 The Law Review 2024 [2024] LR Apart from the Tojo Maru which similarly supports this principle of public policy, this approach has been adopted in Singapore (see The Law on Carriage of Goods by Sea by Tan Lee Meng, 3rd edn, Academy Publishing 2018). In the instant case, the defendant, Fordeco, was not a professional salvage services provider. It was called upon to provide barges to rescue a vessel grounded on coral rocks in the high seas by lightening the load on the vessel. That was undertaken successfully, as a consequence of which the vessel and the bulk of the cargo was salved, unharmed. A small portion of the bulk cargo was damaged. However this arose as part of the inherent operation of salvage. It was not an independent and distinguishable damage arising outside of the salvage operation. This warrants the court considering the entirety of the salvage operation in determining whether liability lies against the salvor, Fordeco, for negligence in relation to a small part of the cargo which was damaged by rain and sea spray. The learned judge did not consider the matter in this light, notwithstanding that the factual matrix was before him. He treated the discharge operations, which were to enable the re-floatation of the vessel, as a normal carriage of goods situation, where the common law principles of negligence and the principles in bailment would apply. This was a clear error of fact and law. If his Lordship had considered the entirety of the facts and the law in full, he would have concluded that as the damage to a small part of the entire cargo resulted from an essentially successful salvage operation, the salvor, Fordeco was not, in the circumstances, negligent. Neither had it breached its duty of care as a bailee, as its primary function was to rescue the imperilled vessel and the cargo on it, which was performed successfully. If the Hathaway had not proceeded to the site where the vessel was stranded to assist it, the vessel might have been grounded for a far lengthier period. This in turn could have had severe repercussions on the entirety of the bulk cargo, rather than a small part of it. This too, the learned judge failed to consider. We would therefore concur with learned counsel for the appellant that the learned judge erred in law in applying the standard of care applicable in ordinary bailment cases. The predicament the vessel was in was a far cry from the hire of a barge for the transportation of cargo to a destination. By virtue of the reasoning in The Tojo Maru and The St Blane (1974) 1 LLR 557, we would answer question 2 in the affirmative. However it is reiterated that each case must be premised on its particular facts. If the acts of negligence are separable or independent and distinguishable from the salvage operation it might well be the case that the ordinary principles of negligence would apply. In other words, the first issue that has to be determined is whether the totality of the circumstances amounted to a salvage operation and whether the damage was sustained as an integral part of the salvage. The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 231 It is useful to reiterate the policy underlying the concept of salvage. Salvage is a mixed concept of private law and public policy. In The Industry (1835) 3 Hagg 203 at 204 the public policy underlying salvage and salvage reward was considered (per Sir John Nicholl): “… there are various facts for consideration – the state of the weather, the degree of damage and danger as to ship and cargo, the risk and peril of the salvors, the time employed, the value of the property; and when all these things are considered there is still another principle – to encourage enterprise, reward exertion, and to be liberal in all that is due to the general interests of commerce, and the general benefit of owners and underwriters, even though the reward may fall upon an individual owner with some severity.” Therefore where negligence is alleged in the context of an emergency salvage situation, the courts are slow to impute negligence to the salvor who has acted reasonably and in the interests of the parties who were in peril, particularly if the salvor’s efforts have been successful, as is the case here. In other words, the standard of care is different from that in a normal carriage of goods situation where the principles of bailment and negligence would be applied strictly. Ever Given and the Suez Canal On March 23, 2021, the large container vessel the Ever Given, ran aground while transiting the Suez Canal, lodging herself against both banks of the waterway. The blockage caused vessels to back up in the Mediterranean to the north and the Red Sea to the south. It is estimated that the costs to global trade was about $400 million per hour based on the approximate value of goods that are moved through the Suez every day, according to shipping data and news company Lloyd’s List.48 The owners of the Ever Given declared general average. The most often cited legal definition of “general average” is “all loss which arises in consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and cargo losses within general average, and must be borne proportionately by all who are interested.” This means that the costs of refloating and salvaging the ship are passed on to the cargo owners on board in a rateable proportion depending on the value of each cargo owner’s cargo. Until the contribution for general average is settled, the cargo owners cannot take delivery of their cargo, even if it is delivered at the destination. The shipowner can exercise the right to detain the cargo under a general average lien until the cargo owners commit to pay the individual general average contribution.49 48 See n 3 above. 49 Ibid. 232 The Law Review 2024 [2024] LR The claims of the salvors for the refloating of the vessel and freeing it from the Suez Canal were eventually brought to the English courts and were decided by the Court of Appeal in the case of SMIT Salvage BV & Ors v Luster Maritime SA & Anor (Ever Given – Salvage Claim). 50 The critical issue in the appeal before the Court of Appeal was the contractual relationship between the owners of the vessel (“the appellants”) and the salvors (“the respondents”). At first instance in the Admiralty Court, Baker J concluded that there was no legally binding services contract between the appellants and respondents for refloating services. He found that instead, the respondents were entitled to bring a claim for salvage under the terms of the International Convention on Salvage 1989 and/or at common law. The Admiralty Court's decision The question before the court at first instance was whether a contract had been concluded. A contract is a legally enforceable agreement. For there to be a contract, there must be: (a) an offer; (b) acceptance; (c) consideration, (d) the intention to create legal terms; and (e) certainty of terms. The court has said: The basic requirements of a contract are that: (i) the parties have reached an agreement, which (ii) is intended to be legally binding, (iii) is supported by consideration, and (iv) is sufficiently certain and complete to be enforceable … In general, the agreement necessary for a contract is reached either by the parties signing a document containing agreed terms or by one party making an offer which the other accepts. Acceptance may be by words or conduct. Critically, in examining the evidence, Baker J stated: An intention to be bound cannot be found where it is not the only reasonable connotation of the parties’ exchanges and conduct, taken as a whole. Exchanges and conduct not consistent only with an intention to be bound are ambiguous, and a contract can only be found in and constructed from unambiguous communication. Finally, and expressed colloquially, it is insufficient for parties to “agree to agree” on the terms and conditions. The parties must “agree” on what it is that they have agreed upon. The law does not recognise, in such a context, a “contract to enter into a contract.” 50 [2024] EWCA Civ 260, see also the Hill Dickinson Case Commentary at https://www.hill dickinson.com/insights/articles/court-appeal-agrees-no-binding-salvage-contract-concl uded (accessed April 22, 2024). The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 233 If it were the case that no services contract had been agreed upon, the question would be: Did the assistance fall within the scope of salvage services? The court quoted from the practitioner text, Brice on Maritime Law of Salvage: 51 In English law a right to salvage arises when a person, acting as a volunteer (that is without any pre-existing contractual or other duty so to act) preserves or contributes to preserving at sea any vessel, cargo, freight or other recognized object of salvage from danger. It is well-settled law that “… at sea …” includes tidal river or canal waters., Therefore the Suez Canal falls within the definition. The key here is the word “volunteer”. If the appellants and the respondents had concluded a legally binding services contract, then the respondents were not volunteers and could not claim a salvage reward, and they could only seek payment based on the terms of the agreed contract. The International Convention on Salvage 1989, (the Convention), to which the UK is a contracting party and which is consequently part of English domestic law, reflects Brice’s definition, expanding the assistance part of the definition slightly to: Salvage operation means any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever. With respect to danger, the court has held that there must be danger or apprehension of danger. In this context, it would be sufficient that the vessel would not have come free without the provided services. In the Admiralty Court, Baker J was satisfied that, whilst the parties had reached an agreement on the remuneration terms for a contract, they were still negotiating the contract terms by which they were willing to be bound, when the vessel was refloated on March 29, 2021. Based on the foregoing, the court found that no contract for services had been concluded, leaving the respondents free to pursue a claim for salvage.52 Issues in the Court of Appeal The appellants appealed, arguing that there was a refloating contract in place which would preclude any claim for salvage remuneration by the 51 5th edn (London: Sweet & Maxwell, 2012). 52 Brandon J, an English Admiralty Court judge, in The Aldora [1975] 1 Lloyd’s Rep 617, stating the test for a claim in salvage: (a) firstly, the ship is in danger by reason of circumstances which could not reasonably have been contemplated by the parties when the engagement to pilot or tow was made; (b) secondly, risks are run, or duties performed which could not reasonably be regarded as being within the scope of such engagements; and (c) thirdly, the salvage situation remains in being so long as those factors continue to exist to some extent at least. 234 The Law Review 2024 [2024] LR respondents. In a unanimous decision, the Court of Appeal dismissed the appeal. On March 23, 2021, while part of the morning northbound convoy in the Suez Canal, Ever Given ran aground, blocking the canal at one of its narrowest points. The respondents assisted in refloating the vessel and brought a claim for salvage. The appellants argued that the parties had concluded a contract for services in respect of the refloating, and the payment for services should be based on the terms of that contract. The respondents argued that there was no binding services contract and that payment should be based on the criteria for fixing salvage remuneration. A critical point about salvage remuneration is that the law applies a financial uplift to encourage the provision of salvage services. Consequently, a salvor can expect to receive more in the context of salvage remuneration than pursuant to a negotiated services agreement for the same operation. The appellants concentrated their appeal on three ultimatums given by the salvors on the morning of March 26, 2021, the first by phone and then two by email as follows: As discussed we need to have an agreement with Owners by 12:00 Dutch time today. Otherwise we will have to take a firm position and stand down our operations to protect our interest. and With the world watching us and presently having our hands tied behind our backs failing the requested confirmation of either a commercial agreement or LOF we may be left with little choice [but to stand down] as relayed by Jody. The first verbal ultimatum is reported to be in a similar vein to the two written ultimatums. Approximately one hour after the email containing the third ultimatum was sent, the parties agreed terms on several fronts, including remuneration. However, agreement had not been reached on several significant issues such as the scope of services to be provided, the standard of care which the respondents would be obliged to undertake, and the payment terms. Following agreement in respect of remuneration, the respondents took various steps in furtherance of the efforts to refloat the vessel, including the chartering of two tugs, at considerable expense. The appellants argued that the conduct of the respondents, which now involved expanding their activities and no longer issuing ultimatums, demonstrated that the respondents were satisfied that a contract had been concluded, providing them with the security they needed to progress their work to refloat the vessel. The Law and Practice of General Average and [2024] LR Salvage in Carriage of Goods by Sea 235 In response, counsel for the respondents highlighted the expressed preference of the respondents for “no-cure no-pay” Lloyd’s Open Form (LOF) terms in early correspondence, submitting that the respondents’ approach was consistent and highlighting that it was typical for a salvor to mobilise on speculation, prior to an agreement being concluded. Furthermore, the respondents contended that the correspondence evidenced the terms for a detailed contract, which once agreed to, would leave nothing further to be addressed, implying that the respondents’ intention to be bound would only be crystallised following an unambiguous acceptance of those terms. The respondents further submitted that correspondence between the parties in which the appellants referenced, “ironing out the terms” of the services agreement was evidence of the appellants’ contemplation that further terms, beyond remuneration, were yet to be agreed. Following the appellants’ counteroffer in respect of a refloatation bonus, it was the position of the respondents that while agreement of remuneration was a necessary step towards the conclusion of a contract it could not be viewed, and was not intended to be, the culmination of negotiations. The respondents argued that the ultimatums did not bear the weight attributed to them by the appellants, as the pressure to conclude a binding contract was on the appellants, not the respondents. The Court of Appeal’s decision In dismissing the appeal, the Court of Appeal held (unanimously) that the appellants had fallen considerably short of their burden to evidence that the parties’ exchanges demonstrated an unequivocal intention to enter into a binding contract. The court was satisfied that, notwithstanding the content of the various ultimatums, the respondents did not at any time indicate that they would be satisfied to be bound after dealing with remuneration only, it being clear that they had in mind to address several other terms as well. The Court of Appeal accepted that, whilst there was urgency to conclude a contract, which dissipated after agreement was reached on remuneration, this in no way indicated that the respondents considered negotiations to be complete. Furthermore, the Court of Appeal agreed that the decision to fix additional tugs after remuneration was agreed was not made because of contractual certainty, but in response to the failure of the refloating attempt of March 26, 2021, which put the respondents in a strong commercial position, giving them a reasonable expectation of a salvage award if the parties did not conclude a contract. 236 The Law Review 2024 [2024] LR General average and salvage liens In general average and salvage situations, the carrier has a right to lien the cargo unless the cargo owner pays the proportion of the general average and salvage expense. Often this is not yet calculated when the cargo arrives at its destination. This will have to await the general average or salvage adjustment. In such scenarios the carrier will demand a guarantee from the cargo owner before releasing the goods, covering the possible exposure for the amount. As the carrier often is not aware of the financial standing of the cargo owner, it will normally require an additional undertaking or bond from the cargo insurers. Where the cargo is insured under the usual ICC Clauses, both the provision of the bond and the final amount of general average and salvage are covered under the insurance policy. Where there is no insurance coverage, the carrier is not obliged to accept a guarantee from the consignee goods owner. They may demand either a cash deposit or a bank guarantee to secure the contribution rights. Until the contribution for general average or salvage is settled, the cargo owners cannot take delivery of their cargo, even if it has been delivered at the destination. The shipowner can exercise their right to detain the cargo under a general average lien until the cargo owners commit to paying the individual general average contribution. In practice, the cargo owners will not need to pay before collecting their cargoes. They need to provide a general average bond from their cargo insurers, or if they do not have any insurance, a bank guarantee to cover their contribution.