In the summer of 2018, Hydro Aluminum International SA (Hydro) entered into an agreement with Nippon Light Metal Co (NLM) for the sale of 40,893,680 mt of aluminium hydrate. The sale was entered into on CIF terms, which meant that Hydro provided and paid for transport and insurance. Industriforsikring AS (the plaintiff) was the cargo insurer.

In order to transport the goods from Vila do Condo, Brazil, to Shimizu, Japan, Hydro and Western Bulk Carriers AS (the defendant), entered into a charterparty on the BIMCO Hydrocharter form. The defendant decided to use the MV Spar Gemini to carry out the transport. The defendant had time chartered the vessel from Spar Shipping AS (Spar), who was the performing carrier.

The general average incident occurred on 21 June 2018. The ship lost control of its steering approximately 550 nm off the coast of Mexico, and as a result had to be towed to Manzanillo, Mexico. Investigations and repair work were carried out from June-September 2018. The ship then sailed on to Shimizu, and arrived on 5 October 2018. The last of the cargo was unloaded on 7 October 2018.

Spar declared general average on 5 July 2018. The plaintiff issued a guarantee for the general average liability of cargo interests on 10 July 2018. The general average adjustment was finalised on 11 September 2019. The total settlement was USD 823,411.93, of which USD 490,846.40 was allocated to cargo interests. The plaintiff paid the latter general average contribution on 11 October 2019, and filed a recourse claim against the defendant on 21 January 2020.

Held: Judgment for the plaintiff for USD 490,846.40, plus interest.

It follows from s 347 of the Maritime Code that the consignee (NLM) may claim compensation from the contracting carrier (the defendant) for damage to or loss of goods in accordance with the rules on carrier liability in ss 274-285 and 287-289 of the Maritime Code. Upon payment of NLM's general average contribution, the plaintiff was subrogated into NLM's claim for compensation.

The main rule on carrier liability is stated in s 275 para 1 of the Maritime Code:

The carrier is liable for loss as a result of goods being lost or damaged while in the carrier's custody on board or ashore, unless the carrier proves that the loss is not due to fault or neglect by the carrier itself or someone the carrier is responsible for.

It is clear that the defendant, as the contracting carrier, was responsible for any errors or negligence on the part of the sub-carrier, Spar: see s 285 para 1 of the Maritime Code.

The plaintiff holds the defendant liable for damages on the basis of s 289 of the Maritime Code, which provides that the rules on carrier liability for loss of or damage to goods in ss 274-288 of the Maritime Code also apply correspondingly to the recipient's right to refuse to pay general average contributions, and the carrier's obligation to indemnify any general average contribution that the recipient has paid.

The liability pursuant to s 275 para 1 of the Maritime Code is a fault liability with a reversed burden of proof, where it is the carrier's responsibility to prove that the loss was not due to fault or negligence on the part of the carrier itself, or someone that the carrier was responsible for. This can be described as a responsibility that lies somewhere between ordinary fault liability and objective (strict) liability. The rule may mean that the carrier is held liable without regard to fault, because it is not able to present evidence of what actually happened. In order for the defendant to be released from liability, it must both prove what was the cause of the accident, and that the accident was not due to the defendant's or Spar's negligence. As mentioned, the ship lost control of its steering. The parties agree that the accident was due to a fatigue fracture in the rudder. However, the parties disagree on the cause of the fracture.

Something more than a normal weighting of probabilities must be required for the carrier to be released from liability. Such a rule is reasonable in view of the fact that the cargo owner has little or no opportunity to control the contracting carrier, or the actual carrier for which the contracting carrier is responsible. The cargo has been in the carrier's custody, and it is the carrier who has had access to relevant information. Based on the evidence, the defendant has not proved that it was corrosion that caused the accident. The corrosion theory assumes that there was a leak in the sealing compound that functions as a protection against the ingress of seawater and corrosion on the rudder. There were no observations of such a leak, and the condition of the sealing compound was not investigated after the accident.

The defendant states that the plaintiff has launched an undocumented theory that the entire rudder stock was broken at some point before the accident, and that this can be linked to an accelerating increase in clearance between the rudder and the surrounding rudder stock. The defendant's allegations are based on a flawed premise. The burden of proof in the case lies with the carrier. It is the defendant who must prove what was the cause of the accident. Fleet Management, the ship's technical manager, was the first to point out this problem: 'The clearance was within the acceptable limits of class. However, as the clearance was on the higher side, this may have caused premature failure of the pintle bush bearing and further material failure of the rudder stock.' The defendant has not proven another reason why the rudder failed.

In order for the defendant to be released from liability, it must prove that the accident was not due to the fault or neglect of Spar. The question is whether Spar can be blamed for the failure of the rudder. In this connection, it must be considered whether, prior to the accident, there were any indications that the bearing should have been examined further and replaced.

The Spar Gemini was in class with Nippon Kaiji Kyokai (NKK). Ships classified by NKK and other companies that are members of the International Association of Classification Societies (IACS), are subject to a fixed examination and inspection programme that must be complied with in order to maintain the ship's class. Every ship must undergo a class survey (special survey) every five years, which includes an examination of the ship's rudder system while the ship is in dock. Between these dock surveys every five years, intermediate inspections are carried out, which include an inspection of the ship's external subsea parts, including measurement of the clearances in the rudder bearings.

Fulfilment of class requirements will not automatically suffice to establish discharge from liability after an average. If the relevant clearance, eg, had been measured at 6 mm, the ship would meet current class requirements. Even if the vessel falls into an area where, according to the guidelines, further investigations should be carried out for possible replacement of the rudder stock, the ship can still sail on, even if no such investigations were carried out during the dry dock survey. If an accident later occurred that was caused by conditions that should have been uncovered if further investigations had been carried out during the survey, the shipping company could be held responsible for this.

The question here is whether the accelerating increase in the clearance between the rudder and the rudder stock was a circumstance that indicated that the shipping company should have carried out further investigations to assess replacement while the ship was on dock in November 2016. The increase in the first period (2007-2012) was only 0.2 mm, while the increase in the second period (2012-2016) was 1.8 mm. As the plaintiff has pointed out, the increase in the last period was nine times as large as in the first period. If the increase continued to develop in the same way until the next class dock survey, it is clear that the clearance (9 x 1.8 mm + 4 mm) would have far exceeded the maximum limit of 6.36 mm. This indicates that the latest measurement should not be considered in isolation. It is within the shipping company's duty of care to monitor how the clearance has developed, including how large the increase has been in relation to previous inspections. This applies even if the shipping company has met the current class requirements, and has not received any order from the classification society. It is the shipping company that is responsible for the ship's condition, including that it is in sound condition until the next class survey. When the increase in clearance in the last period is nine times as large as in the first period, this should have caught the attention of the shipping company. These were indications that something might be about to happen. The rudder system is a vital part of the ship where errors can have major consequences. The shipping company was culpable for not investigating the rudder stock issue. The defendant has thus not proved that the average was not due to errors or negligence on the part of Spar.

The defendant has, in the alternative, argued that the plaintiff's claim for compensation for paid general average contributions is time-barred as a result of s 501 para 1 no 7 of the Maritime Code which provides:

The limitation period for the following claims is: ...

7) for a claim for compensation for loss of or damage to or relating to goods, or for incorrect or incomplete information in a bill of lading, one year from the date on which the goods should have been handed over or were handed over.

The defendant states that this provision covers all claims in connection with the transport of goods, including claims for compensation for paid general average contributions. The last part of the cargo was handed over on 7 October 2018, and the plaintiff issued its summons on 6 March 2020.

This argument cannot be upheld. The question of whether the claim is time-barred depends on whether it is the general limitation period of three years in s 502 of the Maritime Code that applies, or the special limitation period of one year in s 501 para 1 no 7. The Maritime Code's system is that the three-year deadline applies, unless the claim is covered by the special limitation periods laid down in s 501 para 1 nos 1-11. Claims for compensation for paid general average contributions are not directly mentioned in s 501 para 1 no 7 of the Maritime Code. The wording suggests that the provision is primarily aimed at loss of or damage to goods. The question is whether the subsequent term 'relating to goods' is to be understood as meaning that the provision covers more than just cargo damage.

The defendant points out that s 289 of the Maritime Code entails an extension of cargo damage liability under Norwegian law to also include loss items as paid general average contributions. The defendant further argues that compensation for delay pursuant to s 278 of the Maritime Code has been interpreted as falling within the term 'relating to goods' in s 501 para1 no 7: see LB-2013-78197 (CMI1760). It therefore contends that compensation for paid general average contribution is also covered by the term, as the provisions of ss 278 and 289 of the Maritime Code both extend the transport responsibility in s 275 to include other items as well.

A claim for compensation for delay cannot be equated with, or assessed in the same way as, a claim for compensation for paid general average contributions. Section 501 para 1 no 7 is based on art 3.6 of the Hague-Visby Rules. It appears from the preparatory work that the term 'relating to goods' was chosen by the legislature to cover loss caused by delay in accordance with the Hague-Visby Rules that were to be incorporated into Norwegian law: see Ot prp nr 28 (1972-1973) p 33. Section 289 of the Maritime Code, on the other hand, is drafted in accordance with art 24.2 of the Hamburg Rules, which states:

With the exception of article 20, the provisions of this Convention relating to the liability of the carrier for loss of or damage to the goods also determine whether the consignee may refuse contribution in general average and the liability of the carrier to indemnify the consignee in respect of any such contribution made or any salvage paid.

It is explicitly stated in art 24.2 that the limitation period in art 20 of the Hamburg Rules does not apply. The statute of limitations in arts 20.1 and 20.2 of the Hamburg Rules further reads as follows:

1. Any action relating to carriage of goods under this Convention is time-barred if judicial or arbitral proceedings have not been instituted within a period of two years.

2. The limitation period commences on the day on which the carrier has delivered the goods or part thereof or, in cases where no goods have been delivered, on the last day on which the goods should have been delivered.

However, the limitation period of two years, which runs from the time when the goods were delivered, or should have been delivered, does not apply to claims for compensation for paid general average contributions under art 24.2.

The fact that s 289 of the Maritime Code was drafted in accordance with art 24.2 of the Hamburg Rules also indicates that the special limitation period in s 501 para 1 no 7 of the Maritime Code does not apply. The preparatory work does not contains statements that would indicate that the legislature intended that a special limitation period should apply for claims for compensation for paid general average contributions pursuant to s 289 of the Maritime Code. Practical considerations also indicate that the special limitation period cannot be applied to the relevant claim. The extent of cargo damage and delay will be known when the goods are delivered, and it is therefore natural that a special limitation period is set for such claims, which runs from the time of delivery. Claims for compensation for paid general average contributions, on the other hand, are different. The person who is responsible for paying a general average contribution for cargo interests will not be able to fulfil this until general average has been determined. Prior to this, the person in question does not have the opportunity to make a claim for compensation for paid general average contributions. It therefore makes little sense for such claims to have a special limitation period of one year from the time the goods were delivered. The plaintiff has also pointed out that a general average adjustment will often not be completed within one year. In the Court's view, there is a presumption against the legislature having intended that claims for compensation for paid general average contributions should be time-barred before the person in question has had a real opportunity to make such claims. The right to claim compensation under s 289 of the Maritime Code would in that case be illusory.

Special rules on general average are laid down in s 501 para 1 nos 9 and 10 of the Maritime Code. It follows from the latter provision that the limitation period for claims for contributions to general averages is one year from the date of adjustment. The consideration of harmony and consistency in the legislation then indicates that there must be a longer limitation period for claims triggered by a subsequent event, namely the payment of a claim for a general average contribution. Thus, the general limitation period of three years in s 502 of the Maritime Code applies. The plaintiff's claim is not time-barred.

Finally, the defendant argued in the alternative that the plaintiff cannot claim compensation for a loss that has arisen from a voluntary or incorrect payment. It pointed out that the plaintiff made the payment to Spar, even though it believed it was not obligated to pay. If the cause of a general average situation was fault or negligence on the part of the carrier, the plaintiff had a defence, as referred to in the York-Antwerp Rules 1994, Rule D. No loss would have occurred to the plaintiff if it had not paid the general average contribution on behalf of NLM.

This argument cannot be upheld either. The plaintiff's claim must be assessed in accordance with s 289 of the Maritime Code, which provides:

The rules on the carrier's liability for loss of or damage to goods in §§ 274-288 apply correspondingly to the recipient's right to refuse to pay a general average contribution and to the carrier's obligation to indemnify a general average contribution or salvage remuneration paid by the recipient.

Based on the wording, the recipient has both a corresponding right to refuse to pay a general average contribution, and the right to claim compensation for a general average contribution that has been paid. The wording does not provide any evidence that compensation is excluded if the recipient could have refused to pay a general average contribution. The provision must also be seen in connection with the cargo owner having little opportunity to control the carrier, and that it is the carrier who has access to the relevant information. It is therefore not unnatural that the cargo owner also has the right to claim compensation for paid general average contributions, including after the cargo owner has gained access to more information.

The preparatory work further argues that the recipient has such a right of election. Reference is made to NOU 1993: 36, and the remarks on s 289 on p 42:

The draft § 289 is drafted in accordance with the Hamburg rules art. 24 no. 2. The carrier will thus be liable for compensation unless he proves that the general average situation is due to circumstances for which he is not responsible according to the rules in the draft §§ 275 et seq. to the carrier or to other goods owners. Similarly, the recipient can demand compensation for salvage remuneration paid directly to salvors, but he is of course also entitled to first demand payment of salvage remuneration reimbursed at the general average settlement (York-Antwerp Rules art. VI) and then demand compensation from the carrier for the uncovered part. The latter procedure will be most advantageous if the salvage remuneration exceeds the liability limit in the draft § 280. Finally, the recipient may also refuse to pay a general average contribution to the carrier if the carrier is responsible for the circumstances that led to the general average situation. If the contribution required is higher than the liability limit according to the draft section 280 or the claim for compensation is time-barred, this will be the natural procedure for the recipient.

The preparatory work thus does not provide any evidence that compensation is to be excluded if the recipient could have refused to pay a general average contribution. Rather, it substantiates that the recipient has a right to election.