Gillespie Bros Pty Ltd (the respondent) shipped flour at Sydney, Australia, on the SS Mangola under five bills of lading dated December 1941 and issued by Burns Philp & Co Ltd (the appellant) after the declaration of war with Japan. The vessel belonged to the appellant and carried miscellaneous goods for about 100 consignors from Sydney to Singapore. The bills provided for delivery to consignees at Singapore or for transhipment there. The bills stated that freight was payable in advance, and it was so paid. Following naval instructions given during the voyage, the vessel proceeded in a convoy to Batavia [Jakarta, Indonesia] instead of Singapore and reached Batavia on 8 February 1942. Whilst en route to Batavia, the vessel's steering gear was damaged after it was rammed by another vessel in the convoy. Singapore fell to Japanese forces on 15 February 1942, and Batavia was bombed twice while the vessel was lying there. Although the bills permitted cargo discharge at Batavia, discharge was impossible due to lack of permission and shore labour. It was impossible for the vessel to contact consignors in Sydney to take instructions. With the rapidly deteriorating military situation, the vessel was requested by naval directions to leave Batavia a few days later. The vessel abandoned the voyage and returned to Australia to avoid capture or destruction by the advancing Japanese military. The appellant claimed a lien over the cargo for additional freight (ie back freight) from Batavia to Australia. To recover its cargo, the respondent paid back freight under protest and subsequently sued the appellant to recover that payment. The appellant's defence was that the master of the vessel was the respondent's agent of necessity, and had the authority and obligation to protect the flour, which was done by bringing it back to Australia: Cargo ex Argos (1873) LR 5 PC 134 (Argos). The bills provided that general average (GA) should be adjusted according to the York-Antwerp Rules 1924 (Y-AR 1924).

The trial Judge gave judgment for the respondent because the master did not act as the respondent's agent, but had only obeyed naval instructions. Although the appellant was not entitled to back freight, the trial Judge suggested that the appellant might be entitled to something in respect of a GA contribution: Gillespie Bros Pty Ltd v Burns Philp & Co Ltd (1946) 79 Ll L Rep 393, 400. On appeal, a majority of the Full Court of the Supreme Court affirmed the trial judge: Gillespie Bros Pty Ltd v Burns Philp & Co Ltd (1946) 47 SR (NSW) 122. Jordan CJ and Street J held that the bills expressly covered the emergency which arose at Batavia, giving no right to charge back freight. Davidson J dissented, arguing that the bills had no application to the return voyage; instead Argos applied. It was held that no GA contribution was payable. The appellant appealed to the High Court.

The appellant argued that if, for any reason other than the master's own fault, a master is prevented from discharging goods at their stipulated port of destination, the master may return them to the port from which they were consigned, and the consignor thereupon becomes liable to pay back freight for the return voyage, unless the goods are not worth the additional freight: Argos.

The respondent argued that Argos was inapplicable. Clause 9 of the bills contained an express provision for back freight in certain circumstances, so back freight cannot be earned in other circumstances not mentioned in the bills. The bills expressly provided for the circumstances which had occurred at Batavia. Those provisions gave no right to back freight. The respondent argued that war risks are not emergencies within the meaning of the GA doctrine.

The parties agreed that this was not a case of GA. The appellant did not make a case on GA. There was no extraordinary peril or sacrifice in the common interest either on the contractual voyage ending at Batavia or on the return voyage back to Australia.

There were two issues. The first was whether the terms of the bills resolved the back freight dispute. If not, the second was whether general maritime law supported the back freight claim.

Held: Appeal dismissed.

As to the first issue, the terms of the bills do not resolve the dispute. Save for Latham CJ's dissent, the appellant's claim for back freight was unanimously rejected on the second issue. The majority held that Argos was distinguishable.

In Dixon J's view, general maritime law does not support the proposition that if, after the frustration by an excepted cause of the outward voyage for which the affreightment was made, the ship returns with its cargo to the port of loading, the ship is entitled to freight in respect of the homeward carriage: The Teutonia (1871) LR 3 Adm & Eccl 394, 421. The master is under a duty to take care of the goods and preserve them, not merely during the ordinary incidents of the voyage but where, by reason of the exceptions of the bill of lading, there is no original liability: Notara v Henderson (1872) LR 7 QB 225 (Notara) 233, 235. The real question is whether this gives a right of remuneration to the shipowner where no detriment is specifically incurred or an act specifically done with reference to the particular goods in the exercise of the supposed authority arising from necessity, but the ship and the cargo are dealt with as one venture; in other words, where there is no particular average loss.

Dixon J referred to the following passage in James S Henderson and Sanford D Cole, Carver's Carriage of Goods by Sea (8th edn, Stevens & Sons 1938) (Carver) s 296:

The cargo owner is only bound to repay expenses which have been incurred specially for the benefit of his goods. Expenditure on behalf of the adventure generally, as for example, in putting into a port of refuge, can only be charged to him as a matter for general average contribution.

Dixon J found that the back-freight claim is an attempt to extend the law of GA or to obtain a new right of recovery on principles belonging to GA in a case which those principles have never been considered to cover. A distinction must exist between, on the one hand, the master's authority in case of emergent necessity to saddle the cargo or cargo owner with the cost of exertions specifically made in the interest of the goods; and, on the other hand, the legal situation arising when, to escape a hazard common to ship and cargo, the master adopts measures involving an unusual or unexpected loss sacrifice or expenditure on the part of the shipowner. The distinction corresponds to the distinction between particular and general averages.

Christy v Row (1808) 1 Taunt 300, 127 ER 849 and Argos are distinguishable. Both are authorities only upon the rights arising from a course pursued by the master as agent for the owners of the cargo and not on behalf of all concerned. In contrast, the decision to depart from Batavia was directed to the vessel and cargo as an entity, to 'the adventure', in the sense of the interests afloat in the vessel considered as a unit under the master's command. In such a case, the question whether something voluntarily done in an emergency at the expense of one of those interests for the benefit of all is to be the subject of reimbursement or contribution is a matter to be determined by the law of GA. Were it otherwise, an unjust result might ensue. If the shipowner recovered back freight, it would be most profitable, bringing the vessel to safety at the expense of the cargo owners. It might have been advantageous for the vessel to be loaded so that the vessel can maintain its trim and speed.

As to GA, the parties agreed that the voyage from Batavia did not give the appellant any right to a GA contribution from cargo as there was no voluntary sacrifice or extraordinary expenditure. There was no GA sacrifice, and no intentionally abnormal use of the vessel. The voyage was undertaken during war when a naval war was contemplated. Because of danger from an excepted peril which had rendered the vessel's voyage impossible, the vessel abandoned it and returned to its port of loading. That is not a GA act.

Dixon J separately noted that the view that it is not the party to the contract of carriage but the cargo owner for the time being who is liable to reimburse the shipowner for expenses incurred for the benefit of the goods has been criticised as at variance with the contractual basis of the shipper's right: Carver s 296, citing by way of comparison Scaife v Tobin (1832) 3 B & Ad 522, 110 ER 189.

McTiernan J agreed with Dixon J.

Starke J rejected the appellant's back freight claim for reasons similar to Dixon J's. Starke J noted that had the ship been attacked at sea and to escape returned to Australia with its cargo; the extra costs thus incurred must have fallen where they fell for such costs could not be made good as a GA loss: Taylor v Curtis (1816) 6 Taunt 608, 128 ER 1172 (Taylor). The expense of bringing vessel and cargo safely back was not incurred specially on account of the cargo. It was a risk of the shipowners, just as the prepaid freight was a risk of the consignors.

In Starke J's view, parties correctly refrained from claiming GA or particular average: Y-AR 1924 r A. If a ship and its powers be only used in the ordinary way in which a ship and its powers are to be used, it cannot be brought within the doctrine of GA (The Bona [1895] P 125 (CA) 130, 139 (The Bona); Y-AR 1924 rr 6, 7). Although Taylor has been much questioned (Edward L de Hart and George Rupert Rudolf, The Law of General Average (6th edn, Stevens & Sons 1922) 118–119), it was cited without dissent in The Bona. Athel Line Ltd v Liverpool and London War Risks Insurance Association Ltd [1944] KB 87 (Athel Line) is irrelevant because there is no GA claim here.

Starke J observed that where a shipowner is prevented by damage to ship or cargo from reaching the port of destination, the master must act for the best if the master cannot consult the cargo owner, and deal with the cargo in the owner's interest at the owner's expense (cf Notara v Henderson). But that is not this case.

Rich J did not consider whether the bills precluded the back freight claim, because Rich J found that the appellant was not entitled to any additional renumeration for having brought the cargo and vessel back. Argos does not assist the appellant and is destructive of its case. Argos lays down no general principle establishing or regulating rights to back freight. Unlike the merchant in Argos who was not ready to take delivery, the respondent was not at fault. The vessel's voyage from Batavia back to Australia was not undertaken for the purpose of preserving cargo which, through default of the consignor, or inherent vice, or for some other reason special to the cargo, was in jeopardy, but was a precipitate flight from enemy capture of a vessel, which is not shown to have had any alternative to keeping the cargo on board.

Latham CJ dissented. Argos resolves the dispute in favour of the appellant. Argos is not made inapplicable by Athel Line because Athel Line is distinguishable. In Athel Line, a vessel which started a voyage in time of war in a naval convoy turned back under naval orders and accordingly additional expenditure was incurred. A claim for GA was made under Y-AR 1924 r A. But this rule did not apply in a case where there was 'blind and unreasoning obedience' (Athel Line 94) of a subordinate to the lawful orders of a superior authority. The rule envisaged (Athel Line 94) 'the exercise by someone of his reasoning powers and discretion applied to a particular problem with freedom of choice to decide to act in one out of two or more possible ways'.

Thus, mere obedience to naval orders is not an exercise of the master's authority so as to amount to a GA act: Athel Line, cp Carver s 374a. But the present case is different. First, no question of GA contribution arises. The back freight claim is a claim for payment for services rendered and is different from a claim for a GA contribution, which is based upon sharing among a number of persons the burden of a loss suffered in the common interest. Second, the master did not act in a blind and unreasoning manner.

Latham CJ stated that the law of GA would apply if, after a justifiable abandonment of the voyage under the contract of carriage, circumstances of emergency arose which involved a voluntary sacrifice of some of the cargo in the common interest.

Latham CJ rejected the respondent's argument that Argos meant that where the vessel would in any event have made the backward voyage there can be no claim against cargo owners in any circumstances for back freight because the cost of bringing the vessel back would have been incurred independently of any consideration of the interests of the cargo owners. Further, Argos does not restrict the shipowner to recoupment of out-of-pocket expenses incurred in bringing the goods back.

Latham CJ rejected the respondent's argument that the master did not act as an agent of necessity. The master, in acting as he did, was acting in the interests of the vessel and cargo.

When an emergency threatening the loss of cargo occurs, and no term of the contract is applicable to the circumstances, the master is under a duty to act in the interest of the cargo owner and therefore to take active steps to preserve the cargo. The duty is to act reasonably and prudently in the interests of the cargo owner in an emergency which threatens the loss or destruction of the cargo, even though the contract is silent.

One element to be considered in determining whether the master has adopted a prudent and reasonable course is whether it was practicable to communicate with owners of the cargo to obtain their views. But the responsibility for action must rest upon the master because the master may receive varying instructions, which cannot all possibly be carried out. If, in such an emergency, the master acts prudently and reasonably in bringing the cargo to a port in the country whence it was despatched, then Argos shows that the shipowner is entitled to claim remuneration. This rule is part of 'the law of the ocean' (a phrase used in Burton & Co v English (1883) 12 QBD 218 (CA) 220, 221, 223 in relation to GA): it is based upon necessity and is not part of the law of contract.

If GA is inapplicable for the reason stated (namely that the bringing back of the goods of a particular cargo owner cannot be described as involving extraordinary expenditure or sacrifice of a particular interest made in the common interest) then the result is that, either the shipowner is bound to bring the goods back for nothing, or the cargo owner must pay for the services rendered. Argos adopts the latter.

Separately, Starke and Dixon JJ, and Latham CJ rejected the respondent's argument that the master should have communicated with the consignors and sought instructions to obtain authority to act on behalf of the cargo owners.