MITSUI & CO LTD AND OTHERS V BETEILIGUNGSGESELLSCHAFT LPG TANKERFLOTTE MBH & CO KG AND ANOTHER (THE "LONGCHAMP")

[2017] UKSC 68, Supreme Court, Lord Neuberger, Lord Mance, Lord Clarke, Lord Sumption and Lord Hodge, 25 October 2017

General average - Substituted expenses - Piracy - Hijacked vessel held - Ransom demand followed by negotiations - Expenses incurred during negotiation period - Whether allowed in general average - York-Antwerp Rules 1974

In 2009 the defendant shipowners' chemical tanker MV Longchamp was hijacked by pirates in the Gulf of Aden and held in Somalia for about two months until a ransom was paid. The initial demand, made on 31 January 2009, was for about US$6 million and the amount ultimately agreed, on 22 March 2009, was US$1.85 million. The bills of lading stated that general average should be settled according to the York-Antwerp Rules 1974 (YAR). The ransom payment itself was settled under YAR Rule A. The dispute between the appellant shipowners and the respondent cargo owners concerned whether vessel operating expenses incurred during the period of negotiation were also allowable, under YAR Rules A and F. The expenses in question were crew's wages, high-risk bonus payments to crew, crew maintenance and bunkers consumed. The defendants' contention was that such expenses were claimable in general average, because they would not have been incurred if the first ransom demand had been met, and were therefore to be substituted for a higher ransom. The average adjuster as well as the judge held that the charges were allowable as substituted expenses. The Court of Appeal held that they were not. The owners appealed.