After the loading of a shipment of scrap iron, the M/V Kalliopi II left the port of Florida in the United States en route to Korea. However, shortly after the vessel left the loading port, the crew members found that its rudder was damaged and the vessel could not continue its voyage. With the assistance of two tugboats, the vessel returned to the loading port and the shipowner (the defendant) declared general average. After repairs were completed, the vessel continued its voyage and delivered the cargo to its destination. The insurer of the cargo (the plaintiff) sought a declaratory judgment requesting the Court to find that the incident was not a proper general average event on the ground that the incident did not place the M/V Kalliopi II or its cargo in 'peril'. In addition, the plaintiff argued that the contract between the parties contained a New Jason Clause, which required general average contribution even if the carrier was negligent unless the carrier was responsible for the damage under COGSA/the Hague Rules. The plaintiff argued that the defendant had no right to declare general average and seek contribution from cargo interests because of the negligence of the pilot.

In opposition, the defendant sought summary judgment in favour of its counterclaim for general average contribution in the amount of USD 108,744.02, as well as interest and costs from the time of the general average adjustment. The defendant contended that the incident qualified as a proper general average event under the York-Antwerp Rules 1974 because the vessel could not continue its voyage without repairs, and as such, the vessel and its cargo were in peril until such time as the repairs were made.

Held: The defendant's motion for summary judgment was granted.

In determining whether a general average act has occurred, Rule X of the York-Antwerp Rules 1974 provides that '(a) When a ship shall have entered a port or place of refuge, or shall have returned to her port or place of loading in consequence of accident, sacrifice or other extraordinary circumstances, which render that necessary for the common safety, the expenses of entering such port or place shall be admitted as general average; and when she shall have sailed thence with her original cargo, or a part of it, the corresponding expenses of leaving such port or place consequent upon such entry or return shall likewise be admitted as general average....'. In addition, Rule XI.b of the York-Antwerp Rules 1974 provides that 'When a ship shall have entered or been detained in any port or place in consequence of accident, sacrifice or other extraordinary circumstances which render that necessary for the common safety, or to enable damage to the ship caused by sacrifice or accident to be repaired, if the repairs were necessary for the safe prosecution of the voyage, the wages and maintenance of the master, officers and crew reasonably incurred during the extra period of detention in such port or place until the ship shall or should have been made ready to proceed upon her voyage, shall be admitted in general average...'.

The M/V Kalliopi II suffered damaged after it left the place of loading. Thus, it had to enter a 'port or place of refuge', namely, it had to return to the loading port due to the rudder damage. If M/V Kalliopi II's steering mechanism had not been repaired, it was highly improbable that the ship would have been able to complete its voyage safely. The vessel's perilous situation was further demonstrated by the ship's request for tug assistance to return to the berth. Therefore, the Court found that Rules X and XI of the York-Antwerp Rules 1974 were applicable to the instant case wherein the M/V Kalliopi II might not have been in 'imminent' peril, but it could not complete the 'safe prosecution' of its voyage if it had not returned to port for repairs, which created a situation of 'peril' such that the voyage could not be continued until necessary repairs were made. Thus, a general average event occurred in the present case.

Since there were no allegations of the carrier's failure to exercise due diligence to make the vessel seaworthy, the Court found that the defendant was not precluded by COGSA/the Hague Rules from general average contributions under the New Jason Clause.