The BSLE Sunrise was operating under a time charter from Jebal Ali, Dubai, to Antwerp, Belgium. The cargo on board included offshore pipes shipped under three bills of lading on the Congenbill form which provided for general average to be adjusted in accordance with the York-Antwerp Rules 1974. The vessel ran aground off Valencia. The owner, Navalmar UK Ltd, incurred expenditure in attempting to re-float the vessel and carrying out temporary repairs before resuming the voyage.

The owner declared general average (GA). Iteco Oilfield Supply France and Iteco Oilfield Supply GmbH (the cargo interests) issued GA bonds in the Lloyd's Average Form which stated: 'In consideration of the delivery to us or our order, on payment of the freight due, of the goods noted above we agree to pay the proper proportion of any ... general average … which may hereafter be ascertained to be properly and legally due from the goods or the shippers or owners thereof'. The defendant insurers issued GA guarantees in materially similar terms. These provided:

In consideration of the delivery in due course of the goods specified below to the consignees thereof without collection of a deposit, we the undersigned insurers, hereby undertake to pay to the ship owners … on behalf of the various parties to the adventure as their interest may appear any contributions to General Average … which may hereafter be ascertained to be properly due in respect of the said goods.

We further agree:

(a) to make prompt payment(s) on account of such contributions as may be reasonably and properly due in respect of the said goods as soon as the same may be certified by the … Average Adjusters … .

The owner appointed GA adjusters who made an adjustment. The cargo interests and defendant insurers maintained that the casualty occurred because the owner failed to exercise due diligence before and/or at the commencement of the voyage to ensure that the vessel was seaworthy and/or properly to equip and/or supply the vessel in breach of art 3.1 of the Hague-Visby Rules which were incorporated by reference into the bills of lading. It was common ground between the parties that if the casualty occurred because of a breach by the owner of art 3.1, no GA was due from the cargo interests by operation of Rule D of the York-Antwerp Rules 1974. The preliminary issue for determination was whether the same defence was available to the defendant insurers in relation to their liability under the GA guarantees.

Held: Preliminary issue decided in favour of the defendants.

The assumption on which the trial of this preliminary issue proceeds is that a 'rule D defence is available to the [cargo interests]'. It follows that the effect of the owner's case is that it is entitled to make a full and unqualified recovery under the GA guarantees notwithstanding that the cargo interests have a defence available under the GA bonds and notwithstanding that the GA guarantees were provided in order to secure the obligations under the GA bonds in accordance with usual industry practice. Whilst it is possible for the parties to achieve this result by the express terms of their agreement, if the owner's contention in this case is correct it is unclear why the GA bonds were sought or provided. They would be unnecessary. Further, it is difficult to see what commercial interest the insurers would have in conferring on the owner a greater benefit than the owner would have had against the cargo interests either by virtue of its possessory lien or the GA bonds.

The meaning of the word 'due' when applied to a monetary obligation is that it is legally owing or payable. No sum becomes legally due or payable 'on behalf of the various parties to the adventure as their interest may appear' by way of contribution to GA unless and until it has been decided whether the Rule D defence succeeds or fails. The payment that is to be made is to be made on behalf of the cargo interests concerned. That suggests clearly that what the insurer was agreeing to pay was what the parties to the adventure would otherwise have had to pay themselves. No GA obligation arises where the cargo interests establish a Rule D defence; there is no proper basis on which the owner could demand security from cargo interests on terms that exclude such a defence and no commercial or other reason why an insurer of the cargo interest concerned would agree to provide such security. Further, the language of the GA guarantee provides that what is payable is the sum that is ascertained to be properly due in respect of the said goods. The inclusion of the word 'properly' serves to put the point beyond doubt.