This case involved a dispute over the carriage of 1,120 slabs of tin shipped on the Orient Trader from Penang to Hamilton, Ontario. The plaintiff, Drew Brown Ltd, was the holder of two bills of lading issued by the shipowners (the second defendants). The bills of lading incorporated US law, including the Carriage of Goods by Sea Act 1936 (US) (COGSA) and provisions of the US Fire Statute, and contained clauses permitting deviation, transhipment, and exemption from liability for negligence or fire.

During the voyage, the vessel faced heavy weather which caused damage to a hatch beam. Upon reaching Toronto, the cargo was unloaded to be sent onward to Hamilton by road. During unloading, a fire broke out, damaging the tin. The plaintiff claimed damages, arguing that the vessel was unseaworthy, and that the deviation in delivery constituted a fundamental breach of contract, preventing the defendants from relying on exemption clauses or claiming general average. The defendants contended that the bills of lading protected them and that they could claim a general average contribution.

The Exchequer Court of Ontario initially found no unseaworthiness, held that the deviation did not go to the root of the contract, and allowed the defendants to rely on the fire exemptions and claim general average.

On appeal, the Supreme Court (Ritchie, Pigeon and Laskin JJ; Hall and Spence JJ dissenting) found that an unreasonable deviation occurred in sending the cargo to Hamilton by road (after the plaintiff had assented to the stop at Toronto), but the fire was not causally connected to this deviation. Accordingly, the defendants could still rely on the exemption clauses and claim a general average contribution. The plaintiff's appeal was allowed in part on the counterclaim, and the judgment confirmed the defendants' entitlement to general average, while the appeal regarding the fire damage was dismissed.

Held: The carrier committed an unreasonable deviation from the contracted voyage, which was not waived by the shipper. As a matter of law, such a deviation goes to the root of the contract of carriage and brings it to an end. Once the contract is terminated in this way, the carrier cannot rely on any exceptions, exemption clauses, choice of law provisions, or general average clauses contained in the bill of lading.

The judgment drew heavily on Joseph Thorley Ltd v Orchis Steamship Co Ltd and Hain Steamship Co Ltd v Tate & Lyle Ltd. As Fletcher Moulton LJ stated in Thorley, a deviation 'changes the character of the contemplated voyage so essentially' that the carrier cannot claim the benefit of contractual stipulations in its favour. Similarly, Scrutton LJ in Hain emphasised that once the 'joint adventure has been abandoned,' the carrier loses contractual protections unless it can prove that the same loss would have occurred without the deviation.

Although Hain ultimately turned on waiver, the Court relied on Lord Atkin’s statement that deviation is a breach 'of such a serious character' that the innocent party may treat the contract as no longer binding. Applying this principle, the Court rejected the respondents' attempt to rely on statutory fire exemptions and an applicable law clause, holding that the contract has been rescinded and, therefore, the applicable law clause was no longer effective.

With the contract at an end, the carrier's liability reverted to that of an insurer, subject only to narrow common law exceptions (Act of God, public enemy, inherent vice, or shipper's fault). None of these applied. Accordingly, the respondents were liable for the agreed cargo loss of USD 21,686.78.

On interest, the Court confirmed the distinct admiralty principle that interest forms an integral part of damages. Interest was awarded from 20 July 1965, the date when delivery should have occurred.

The respondents' counterclaim for general average failed. The Court held that deviation destroys the 'common adventure' necessary for a general average contribution.

Judgment was entered for the appellant with interest and costs throughout; the respondents' cross-appeal was dismissed without costs.