Halifax Overseas Freighters Ltd (Halifax) time chartered its vessel Oak Hill to Federal Commerce & Navigation Co Ltd (Federal), who in turn chartered it to Eisernerz-GmbH (the respondent) under a voyage charter. Federal issued two bills of lading covering the respondent’s pig iron cargoes which incorporated the terms of the voyage charterparty. The two cargoes were loaded in separate holds at Sorel in Québec. The charterparty provided that pig iron cargoes of different qualities must be kept separate. Prior to loading the respondent's cargo, a cargo of hermatite belonging to other owners had been taken on board and separately stowed.

The Oak Hill subsequently stranded near Lauzon dry dock in the St Lawrence River. As a result of the stranding it became necessary to discharge the cargo pending repairs to the vessel. The Oak Hill was repaired and the cargo reloaded. In the course of reloading the respondent’s cargo, the two cargoes became intermingled and to a limited extent lost and destroyed. The Oak Hill proceeded to Genoa where it was discovered that the respondent's cargoes had been mixed in the various holds of the vessel and the hermatite was also mixed with the respondent's pig iron.

The respondent brought an action for damages. Noël J held Federal and Halifax jointly and severally liable for the amount of CAD 107,621.26 in respect of the damage to the cargoes of pig iron. Federal and Halifax (the appellants) appealed.

Held: Appeal dismissed.

The master had a duty to provide a seaworthy ship and to exercise due diligence to make it so by cl 2 of the charterparty. If it had been shown that the stranding was caused by the unseaworthiness of the vessel through overloading or otherwise, the owners would have been responsible for any damage caused as a direct consequence of such unseaworthiness. In this case the stranding was solely caused by a serious error of navigation on the part of the pilot who was in charge of the vessel at the time and no causal connection has been shown between any unseaworthiness and the stranding.

The charterparty exempts the shipowner from liability for the 'neglect ... of the pilot in the navigation of the [vessel]'. However, the respondent's claim is not based on the negligence which caused the stranding but rather upon the allegation that the damage was sustained by the cargo through negligent handling whilst in the custody and care of the appellants during the unloading, handling and reloading.

The appellants' defence to this claim is that the discharge of the cargo was a general average act done for the benefit of ship and cargo alike and that any damage sustained while at the port of refuge occurred in the course of carrying out the general average procedure and should therefore be contributed to proportionately by all interests concerned. Paragraph 13 of the charterparty incorporates the York-Antwerp Rules 1950.

There is nothing in the Rules to relieve the master of the responsibility to see that cargo is properly handled and cared for during the carrying out of the general average procedure. The Rules are lettered A-G and numbered 1-12 and are preceded by a Rule of Interpretation as follows: 'In the adjustment of general average the following lettered and numbered rules shall apply to the exclusion of any law and practice inconsistent therewith. Except as provided by the numbered rules, general average shall be adjusted according to the lettered rules.'

The appellants specifically pleaded r 12 which states: 'Damage to or loss of cargo, fuel or stores caused in the act of handling, discharging, storing, reloading and stowing shall be made good as general average when and only when the cost of those measures respectively is admitted as general average.'

The appellants contended that the provisions of r 12 are to be construed as meaning that any damage to or loss of cargo occurring in the course of the general average procedure is to be made good as general average. The trial Judge invoked the provisions of r D of the Rules which reads: 'Rights to contribution in general average shall not be affected though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure; but this shall not prejudice any remedies which may be open against that party for such fault.' (Emphasis added.) The trial Judge construed this as meaning that the general average procedure has nothing to do with nor does it affect the rights of any parties to any remedy they may have against one of the parties for any fault committed and which has caused them damage.

With respect to the trial Judge, the effect of r D is to provide that general average is to be settled without reference to the question of whose fault gave rise to the general average act but that the remedies against the party responsible for that fault are nonetheless to be preserved. It was not have the effect of preserving remedies which may be open against one of the parties for 'any fault … which may have caused the damage'. It is not to be read as qualifying the language of r 12 in so far as that rule provides that damage to or loss of the cargo caused in the act of handling shall be made good as general average when and only when the cost of those measures respectively is admitted as general average.

Rule D is only effective to preserve remedies which may be open against one of the parties whose fault gave rise to the sacrifice. It does not follow that all damages to, or loss of, cargo are to be made good as general average.

The only losses or damages to be admitted as general average are those referred to in r C which reads: 'Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average.' The unloading of the cargo was the general average act and the handling and reloading at the port were all part of the general average procedure, but it is contended on behalf of the respondent that the damage caused to the pig iron cargoes was not a direct consequence of the general average act as it was caused by the negligence of the master and those who were employed by him to carry out the procedure.

The respondent’s claim is for damages for negligent performance of a contract of carriage and is not a claim in general average so the burden rests upon the appellants to prove that the loss sustained is a general average loss. This position is reinforced by the provisions of r E which reads: 'The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average.'

This burden cannot be discharged without proof that the loss and damage complained of were the 'direct consequence of the general average act'. The expenses incurred in handling the cargo at the port were a direct consequence of the general average act but the combined negligence of the master and of the surveyors and stevedores (acting as agents) which caused the damage was not attributable to the general average act. It constituted a separate and independent cause and the appellants have not shown that the damage complained of was 'the direct consequence of the general average act'.