The claimant, St Maximus Shipping Co Ltd, was the demise charterer and disponent owner of the Maersk Neuchatel. The defendant, AP Moller-Maersk A/S, was the time charterer of the vessel from the claimant. As to general average (GA) and GA security, the time charter provided as follows:

14.(c) General Average: General average shall be adjusted at the place as indicated in Box 33 according to the York-Antwerp Rules 1994 or any amendment thereto by an adjuster appointed by the owners. In the event of general average or salvage, the Charterers shall provide an acceptable temporary security covering all goods and containers to avoid delay and secure their release so that transit/delivery may continue. The owners agree that the Charterers temporary guarantee may be exchanged in due course for a full set of securities from the appropriate interested parties covering all goods and containers. The Charterers agree to co-operate with the Owners and the Owners' appointed adjusters, to assist by supplying manifest and other information and, where required, to endeavour to secure the assistance of the Charterers' local agents in the collection of security, at the Owners' expense.

The vessel operated in the liner trade and called at various ports in South East Asia, South Africa, and West Africa under the Maersk Lines banner. The bills of lading for the containers and goods carried were issued by the liner operators (Maersk and Safmarine Container Lines (SCL)) and identified those operators as the contractual carriers. In July 2007, the vessel grounded near Tema, Ghana, with 1,139 containers onboard owned by various cargo interests for carriage to various destinations. GA was declared shortly thereafter.

The parties accepted that the vessel and its cargo were imperilled by the grounding, which was a GA event. The parties also accepted that the bottom damage suffered by the vessel due to the grounding was not recoverable in GA. The parties disputed the extent of damage and whether the rudder, propeller, and hull were damaged.

Repeated attempts were made to refloat the vessel. Following lightering operations, the vessel was refloated by the salvors, who had been appointed on Lloyds' Open Form terms. The parties accepted that during these attempts, the vessel suffered additional bottom damage, including damage to its rudder and propeller, and that the cost of repairing this sacrificial damage was recoverable in GA. The extent of this sacrificial damage was disputed.

At that time, the parties were aware that the vessel had suffered potentially serious bottom damage, and also that a dispute could arise on the extent of damage attributable to the grounding as distinct from the refloating attempts.

The claimant appointed average adjusters, who in turn provided the defendant with a draft letter of undertaking (LOU) for temporary security as per the time charter. The defendant decided to provide permanent security. The average adjusters revised the draft. Under cl 1 of the LOU, the defendant promised (among other things):

To pay the proper proportion of any General Average and / or Special Charges which may hereafter be ascertained to be due from the Cargo or the Shippers or Owners thereof under an Adjustment prepared by the appointed Average Adjusters in accordance with the Charterparty, dated 16th August 2004, and / or the Bills of Lading issued by [Maersk] or SCL.

Thereafter, the remaining containers were discharged from the vessel, which was subsequently repaired. The vessel was surveyed by representatives of the claimant, the defendant, and the average adjusters. According to the final adjustment published by the average adjusters in 2012, substantial sums were still due from cargo interests despite the defendant having made payments on account. The defendant disputed this, claiming that the proper amount legally due from and payable by cargo interests had been paid by March 2014. The claimant argued that the defendant was obligated to pay the full amount stated in the final adjustment, provided that the adjustment was prepared in accordance with the York-Antwerp Rules (Y-AR).

The Court had to decide four preliminary issues. First, whether the defendant was bound by the terms of LOU to pay the proportion of GA that is properly and legally ascertained to be due, in accordance with the Y-AR 1994, from the cargo (or the shippers or owners thereof) under the adjustment, with the defendant being bound by the determinations of the average adjusters made in the adjustment. Second, whether the claimant was estopped by representation from asserting that the defendant was bound as above by accepting the LOU under cover of an email sent by the defendant's solicitors containing additional statements. Third, if the answer to the first issue is yes, whether the LOU should be rectified to append to the end of cl 1 of the LOU the phrase 'and which is legally due from and payable by the Cargo or the Shippers or Owners thereof'. Fourth, whether the defendant was bound by the average adjusters' determination, including determination by the adjusters of their own fees.

The defendant argued that the parties were not bound by the adjuster's adjustment under English law. The question was whether the defendant contracted out of its right to challenge the adjustment. If there was doubt, this should be resolved in favour of the defendant. The defendant also argued that the adjustment was not a quasi-legal or arbitral process, and that average adjusters did not act as arbitrators or quasi-legal tribunals.

The defendant argued that 'proper proportion' in the cl 1 of the LOU obligated the defendant to pay a sum which was properly and legally due. The claimant argued that cl 1 obligated the defendant to pay such amount as might be 'ascertained to be due' as an unconditional and absolute undertaking.

The claimant argued that the position of cargo interests and the defendant must be distinguished. The liability to contribute in GA is owed by cargo interests. It accepted that the adjustment will not be determinative of that liability. However, the defendant was not the cargo owners. This was a case of independent contractual arrangements being made with a party which, whilst it might be interested in the adventure, had no interest in the cargo. The claimant argued that the defendant's position was analogous to that of an on-demand guarantor. A third party was making a promise to pay which was independent of the underlying legal rights and liabilities.

Nevertheless, the claimant accepted that if the adjustment required what turned out to be an overpayment under the LOU of cargo interests' actual legal liability, such overpayment could be recouped from them. That could be done by the defendant if the defendant had an assignment, or rights of (or analogous to) subrogation against the claimant. If the LOU required an underpayment, the claimant would be left with unsecured claims against cargo interests. Thus, although the defendant could be prejudiced if the defendant was required to 'pay first, argue later', the claimant argued that that was the commercial bargain.

Held: Judgment for the claimant.

As to the first issue, the defendant is bound by the adjustment and is obligated to pay the sum ascertained to be due in the adjustment, whether it is an overpayment or underpayment. The claimant's construction of cl 1 is preferred: The Jute Express [1991] 2 Lloyd's Rep 55 (The Jute Express). In the GA context, 'proper proportion' refers to the cargo interests' pro-rated GA liability, ie its appropriate proportion of the overall liability: The Jute Express 61.

The parties concluded a mutually beneficial bargain. A very considerable period of time might have spent on taking GA security from those interested in the containers and their cargoes. The defendant's provision of permanent security minimised the delay, and protected its reputation and liability as time charterer. The claimant had a single security instead of separate securities from various entities. This bargain is similar to other agreements made in the GA context: see eg the GA guarantee in Tharsis Sulphur & Copper Co Ltd v Loftus (1872-73) LR 8 CP 1, and the insurance policy guarantee in Attaleia Marine Co Ltd v Bimeh Iran (Iran Insurance Co) (The Zeus) [1993] 2 Lloyd's Rep 497. It is similar to an on-demand guarantee dependent on certification.

As to the second issue, the defendant failed to establish that any representation was made as alleged. The claimant is not estopped by representation from claiming that the defendant was bound to pay.

As to the third issue, the requirements for rectification were not met.

As to the fourth issue, the defendant is bound by the adjusters' determinations, including that of the adjusters' own fees. The adjusters had ascertained their proper fees as GA expenses under the adjustment. This follows from the conclusions on the first to third issues discussed above. By the time of trial, the parties accepted that the determination of sums due from cargo interests under the non-separation agreement had been carried out in accordance with the Y-AR 1994.