In 1972 the Potoi Chau, on a voyage from various ports in the Far East with cargo to the Middle East and India, encountered a cyclone and ran aground off the north east coast of Somalia. On 30 October 1972, salvage operations commenced. On 4 November 1972, jettisoning of cargo to lighten the vessel commenced. By 20 November 1972 a total of approximately 2,300 tons of cargo had been jettisoned. The vessel was refloated and proceeded to Aden for repairs. All cargoes were discharged except for a small quantity bound for Mumbai, Jeddah and Hodeidah.

Salvage arbitration took place and a sum was awarded to the salvors by a general salvage award published on 22 January 1976. Hong Kong Islands Shipping Co Ltd (the appellant) was the manager of the vessel. Hong Kong Atlantic Shipping Co Ltd (Atlantic) was the owner. Defendants 12-85 were the owners of the parcels of cargo on board, who were insured with defendants 1-11, all of whom were insurance companies. The bills of lading issued to the cargo owners contained a term that 'General Average shall be adjusted stated and settled according to the York-Antwerp Rules 1950.'

In order to secure release of their cargo without payment of cash deposits, defendants 12-85 signed average agreements with the appellant agreeing to pay the proportion of general average chargeable to their respective consignments and defendants 1-11 guaranteed by letters of guarantee that general average contribution would be paid upon completion of the average statement by the adjusters.

The action was instituted by the appellant and sought to join Atlantic as second plaintiff. The Registrar made an order ex parte allowing the joinder. On appeal, Commissioner Mayo set aside that order on the ground that the claim of the proposed second plaintiff was out of time and that, if there were any discretion to extend the time, that discretion should not be exercised in its favour.

The appellant appealed.

Held: Appeal allowed to the extent of giving leave to join the second plaintiff subject to the condition that its action is limited to claims against defendants 1-11 under the letters of guarantee.

The main question is, at what date did time begin to run for the purposes of limitation? There are four possible dates:

1. The date of the general average loss;
2. the date of safe arrival of the ship;
3. the dates of the general average bonds and guarantees; and
4. the date of publication of the general average adjuster’s statement.

Of these dates, only the last was within six years of the date of the application for joinder of the proposed second plaintiff.

At common law, the cause of action for general average contribution arises at the time of the casualty, subject to defeasance if the vessel does not reach safety, and nothing in the York-Antwerp Rules postpones that cause of action. The York-Antwerp Rules 1950 start with a rule of interpretation which provides that: 'In the adjustment of general average the following lettered and numbered rules shall apply to the exclusion of any Law and Practice inconsistent there with. Except as provided by the numbered rules general average shall be adjusted according to the lettered rules.'

One would expect the rules to apply primarily to questions of quantification of rights and liabilities rather than to their accrual - to provide an agreed basis on which the average adjuster is to work. Rule A defines a general average act. Rule B reads: 'General average sacrifices and expenses shall be borne by the different contributing interests on the basis hereinafter provided.'

Again, this rule suggests that what the compilers of the Rules are concerned with is the giving of guidance to the adjuster as to their method of procedure in quantifying liabilities.

The most one can say about the Rules is that they envisage that an adjustment shall be made in accordance with their provisions by an average adjuster. It would appear from the account of their history and development as given in Chapter 10 of Lowndes and Rudolf’s work on The Law of General Average and the York-Antwerp Rules that, although the original purpose of the meetings was to obtain international agreement on such questions as what exact losses must be regarded as general average, and how such losses should be calculated and borne, by mutual legislation in the countries concerned, it was realized by 1873 that:

the most effectual mode of procedure will be by a general agreement on the part of shipowners, merchants and underwriters to insert in bills of lading and charterparties the words 'general average, if any payable according to the York and Antwerp Rules' and in policies of insurance to add to the foreign general clause the words 'or York and Antwerp Rules' so that the clause will run thus 'general average payable as per foreign adjustment (or custom) or York and Antwerp Rules, if so made up'.

As a result of this 1878 resolution the intention to proceed by mutual legislation in the countries concerned was dropped. In the various meetings which followed it was realised that the object to secure uniformity of practice could be attained by inserting in bills of lading, charterparties, and insurance policies words or paragraphs incorporating Rules commonly current at their date. The York-Antwerp Rules would therefore apply only if the parties to such agreements agreed that they should, and the phrases incorporating them must therefore be construed as contractual terms.

Since the Rules themselves do not provide either that an adjustment made by a professional average adjuster shall be final, or that an adjustment shall be a precondition to payment, and since they are silent as to limitation there is considerable difficulty in concluding that it follows from their incorporation that no cause of action to recover a general average contribution until an adjustment statement has been completed.

The better view is that the cause of action accrues at the time of sacrifice or expenditure. However, it is necessary to look at the wording of the letters of guarantee to see if they constituted a fresh contract and caused time to run, not from the date of the sacrifice, but from the date of publication of the adjustment. On this basis, the liability of defendants 1-11 arose at the earliest when the adjustment was published.