24th Oct 2014
On 24 October 2014 Stephen Hofmeyr QC, sitting as a Deputy District Judge, handed down judgment in the matter of the “Longchamp” (Mitsui & Co Ltd & Others v Beteiligungsgesellschaft LPG Tankerflotte MbH & Co KG & Anor  EWHC 3445 (Comm).
This decision is the latest in a spate of cases over recent years concerning the payment of ransoms to Somali pirates. On this occasion the question was whether certain expenses, including bunkers and crew wages, incurred during the period of the vessel’s detention were allowable in general average under York-Antwerp Rules 1974.
The principal argument was that, even if the expenses did not qualify for direct admission pursuant to Rule A or any of the numbered rules of the York-Antwerp Rules, they nevertheless constituted substituted expenses for the purposes of Rule F since they had the effect of reducing the amount of ransom demanded as the period of detention wore on and the ransom was negotiated down.
In giving his judgment, Stephen Hofmeyr QC held that the expenses were properly admissible in general average.
As such, this is the first English authority to consider the true operation of Rule F and the principle of substituted expenses.
The case was successfully argued on behalf of the shipowners by Richard Sarll, who is also an Associate of the Association of Average Adjusters having passed his associateship examinations with distinction in 2012.
Permission was given to the unsuccessful marine cargo insurers to appeal to the Court of Appeal.
To view the judgment please click here.