The Cape Bonny, a tanker, was carrying oil from Argentina to China. The bill of lading incorporated the Hague-Visby Rules and the York Antwerp Rules. On this voyage, the engine broke down and the vessel was immobilised and adrift at sea on 14 July 2011. At this time, she was seeking to avoid the tropical storm or typhoon MA-ON. The vessel ordered a tug to tow the vessel through a towage and salvage broker. There were three choices of tugs to order, namely Salvage Challenger at a hire of USD40,000 per day, De Da at USD 55,000 per day and Koyo Maru at USD56,656 (or possibly USD57,656) per day. The vessel chose Koyo Maru, seemingly because Koyo Maru could reach faster than the other two, among others. An attempt to put the vessel in a Japanese port of refuge failed as the port authorities were reluctant to allow a laden disabled vessel to enter in. A Chinese port authority, namely Tianjin, allowed the vessel to berth, but the receivers of the cargo refused to receive the cargo at that port. Time was not in favour of the owners to attempt by a court order forcing the receivers to receive the cargo at the Chinese berth. Accordingly, the vessel was towed to Yosu in South Kora and arrived there on 1 August 2021 to transfer the cargo onto another vessel The Cape Bata by STS operation to deliver the cargo at the destination port. Here, the vessel was towed by four harbour tugs to the outer anchorage for the STS operation, which was undertaken on 2 and 3 August 2011. After the STS operation the South Korean authorities were reluctant to allow the vessel to enter the port, hence the vessel was towed by Koyo Maru out to sea in view of the approach of another typhoon MUIFA. After the intervention of the local Pilotage Association, the vessel, now in ballast, was allowed to enter the port. The vessel accordingly was towed back to the outer anchorage by Koyo Maru on 9 August 2011, when Koyo Maru was dismissed. Then the vessel was assisted by four harbour tugs to a layby berth to have the repairs done.

In the meantime, on 28 July 2011, the owners declared general average and the cargo insurers furnished a general average guarantee to facilitate the cargo to be delivered to the cargo interests without a cash deposit. On 13 March 2013, the average adjusters assessed the cargo’s contribution to be about USD2.5 million, which was later amended to about USD2.1 million.

The insurers refused to pay. The owners sued the insurers. The defence of the insurers was that the vessel was unseaworthy at the commencement of the voyage and the owners failed to exercise due diligence to ensure seaworthiness, hence breach of Art III(1) obligation. If this was true, that will relieve the cargo interests, and thus the insurers, from the liability to pay general average contributions, by Rule D of the York Antwerp Rules.

Teare J was satisfied that (i) the vessel was unseaworthy at the commencement of the voyage, (ii) the owners failed to exercise due diligence and (iii) that was the cause of the breakdown. Accordingly, his lordship held that the Rule D was triggered, and the insurers were relieved from the liability to pay general average contributions. The basis of this decision was that the cause of the breakdown was the damage to the main bearing no. 1 caused by foreign particles in the lubricating oil, which should have been removed but not removed. A crankweb deflection reading taken in May 2011 (prior to the current voyage), compared with a reading taken in Nov 2010, showed too large a difference. This would alert a prudent engineer of an abnormal wear of the main bearing no. 1 to undertake necessary remedial action. But this was not done, hence the owners failed in their duty to exercise due diligence to ensure seaworthiness at the commencement of the voyage.

If the general average contribution contributions were payable, which was not the case here, there was a dispute as to the quantum. As a matter of academic interest, Teare J dealt with the question of quantum. His lordship found that, by Rule Paramount, Rule A and Rule E of the York Antwerp Rules, the legal burden of proving that the expenditure was reasonable is on the owners. In the circumstances of the case, his lordship found that it was reasonable for the owners to choose Koyo Maru although it was the most expensive option. His lordship considered that mere immobilisation by engine breakdown, even if the weather is fine, is a danger that needs to be dealt with without delay. More, in this case, the danger was plain due to the risk of MA-ON typhoon. It was found that it was reasonable for the owners to retain the tug, as they did, until the South Korean authorities gave permission to enter the port and the vessel was towed to the outer anchorage on 9 August 2011. It was found equally reasonable for the owners to divert to Yosu to perform STS operation given that the Japanese authorities have refused entry and the receivers have refused the Chinese berth.