THE JUDGMENT APPEALED FROM
10 After reviewing the language of the 1989 Convention, some travaux preparatoires, principally the Nielsen Report approved by the Executive Counsel of the International Maritime Organisation and the few decided cases which had adverted to the question, his Honour made the following observations:
'53 In consideration of this issue, there are no bright lines, controlling considerations or set formulas in fixing an appropriate award for salvage services. As outlined above, a global figure must be determined having regard to the factors in Article 13. The weight to be assigned to each factor is dependent on the circumstances. In one sense, the higher the monetary reward given, the greater is the incentive to undertake salvage operations. The fact that the Court should apply a liberal and generous assessment to the fixing the reward with this aim in mind does not entitle the Court to award an unreasonable or extravagant amount.'
11 Before his Honour proceeded to examine, separately and in order, each of the criterion enumerated in Art 13(1), he dealt with the salvors' contention that a factor, not there listed, could be taken into account. Part of the salvors' case was that the amount of salvage reward should reflect the liability to third parties, to which the owners of the vessel had been exposed. The prevention, or reduction, of that liability was to be treated as a benefit to them. His Honour considered that Art 13, properly construed, did not import any obligation upon the Court to investigate the extent to which third party liability had been avoided. Nevertheless, he concluded that consideration of the vessel's exposure to liability was not excluded by the Convention. It might be appropriate, in particular circumstances, to take it into account as enhancing a reward; in other cases it may not be of significant weight. In neither event did it warrant detailed investigation, consideration of detailed evidence or definitive conclusion concerning liability. His Honour went on:
'58 It may be said that such an approach introduces an additional element of unpredictability in fixing a reward, but it must be kept in mind that the whole exercise is not one of arithmetic precision. It is an exercise of evaluation, judgment, and the balancing of broad considerations. In this particular case, having regard to the circumstances to which I refer below, the prospective exposure to liability of the vessel is a matter to which I have given little weight as a general enhancing factor in fixing the reward. I now turn to consider the specific considerations.'
12 No issue is taken on the appeal as to his Honour's findings as to the factors referred to in Art 13(1)(c), (e), (g), (h), (i) and (j). His Honour found that the salvage operation had been completely successful; that the salvors' skill and effort was of a high order and that they had acted promptly. There was no dispute about the salvors' state of readiness, nor the efficiency of their equipment. These were factors to which his Honour gave significant weight. His Honour took account of the fact that two of the tugs were salvage-capable and of the costs associated with the provision of such equipment, together with the fact that one of the salvors was a professional salvage operator. His Honour did not consider that there was significant risk of loss of life or injury to the tug crews.
13 The salved value of the vessel was agreed by the parties to be AUD37 914 691.94. His Honour observed that cases had warned about assigning excessive weight to the salved value of the vessel and property, referring to the decision of Stephen J in Fisher v The 'Oceanic Grandeur' (1972) 127 CLR 312 at 342 and to The 'Amerique' (1874) LR 6 PC 468, where the Privy Council stated the 'rule' to be that the value of the property salved must not be allowed to raise the quantum to an amount altogether out of proportion to the services actually rendered.
14 The salvors submitted to his Honour that it was appropriate to fix the award by reference to the value of the vessel. They suggested the application of a percentage - 10 percent, as a minimum, and as high as 15 or 20 percent. In the latter case the reward would exceed AUD6 million. His Honour was referred to awards made in other cases, but his Honour discounted their usefulness. In his Honour's view the range and discrepancy between value and percentage in the cases demonstrated the highly fact-specific nature of each case. Whilst a uniform percentage might provide certainty of outcome, the listing of the factors in the Article indicated an intention that may be taken into account and given such weight as the circumstances of a particular case required. Article 13 expressly stated that the criteria are not ranked in any order of importance and there was therefore no justification for concluding that the salved value, or a percentage of it, is to be a controlling consideration, his Honour said. It was of some importance that Art 13(3) specifically capped the reward at the salved value of the vessel and property. The approach suggested by the salvors had the disadvantage that a proportionate equitable award may not be fixed in a particular case. In his Honour's view where higher awards, expressed as a percentage of the salved property, have been considered appropriate, the surrounding conditions and circumstances of the salvage operations have been relatively extreme. Nevertheless his Honour said that he treated the agreed value of the salved property as an 'important consideration'.
15 In relation to the topic dealt with by Art 13(1)(b), the salvors' skill and efforts in preventing damage to the environment, his Honour noted that the possible risks included the release of oil, blockage of the channel, damage to adjoining structures and, at worst, break-up of the vessel with its consequences. His Honour however considered that the provision was not concerned with possible, remote or hypothetical damage. It was defined in Art 1 of the 1989 Convention to mean substantial physical damage to human health, marine life or resources in coastal or inland waters or adjacent areas caused by pollution, contamination, fire, explosion or similar major incidents. In considering the events of 27 March 2002, his Honour found that there was no major incident which seriously affected, or posed a direct threat to, the environment. There was no notable escape of pollutants or any contamination which required measures to be taken. The grounding of the La Pampa and consequential salvage operations might be referred to as incidents, but they were not major incidents which affected or threatened the environment in the way spoken of in the Article. Having regard to the position in which the oil was stored, well away from where there was any prospect of rupture or failure, his Honour found that there was only a remote possibility of a failure which could have led to contamination or pollution. His Honour said (at [80]):
'In my view, there was virtually no real - as opposed to remote - possibility that oil or ballast water in any significant quantity could escape as a result of the grounding, and therefore I have not assigned any significant weight to this consideration. Nor do I consider that there was any real risk of breakage of the vessel so that the environment would be adversely affected.'
16 His Honour's latter finding reflects the view he reached upon the salvors' case concerning the danger that the La Pampa faced, that of global failure. His Honour's findings, in connexion with Art 13(1)(d), assume importance upon the appeal.
17 Article 13(1)(d), in his Honour's view, is directed to assessing the danger to human life and the risk of loss, injury or damage in relation to the salved property. His Honour did not consider that the evidence suggested that the events on the day in question presented any significant danger to life or person. Nevertheless, the vessel itself became vulnerable to danger when its steering gear failed. This led to its grounding and its inability to manoeuvre safely. This presented difficulties for the salvors, his Honour acknowledged. Any danger to the vessel and property would have been significantly greater had the tugs not come to the vessel's assistance. His Honour observed that, once the tugs arrived, their efforts in combination with those of the Pilot, the Master and the harbour authority contained the risk and avoided damage.
18 The case put forward for the salvors was that regard should also be had to the potential danger that the vessel faced had tug assistance not been available. The dangers spoken of were of global or local failure to the vessel until it was safely removed from the point where it had grounded. Danger was said to continue until the vessel anchored at deep sea anchorage. His Honour accepted that, although Art 13(1)(d) would appear to be limited to a consideration of the actual danger that the vessel experienced during the operation, it was nevertheless appropriate to consider the hypothetical situation.
19 The 'global failure' spoken of at trial was not quite as catastrophic as the submissions for the salvors on the appeal at some points suggested. It did not involve complete disintegration of the vessel. His Honour described it as involving the possible buckling of the deck and the breaking of the two bottom skins near the middle of the ship. The greatest prospect of it occurring, as put forward by the salvors, assumed that the La Pampa, without tugs, would have remained pinned bythe bow on the high tide, swung across the channel and hit the south bank with her stern. If she had then remained aground, by stern and bow, she would have been subject to bending forces as she was held up on the fall of the tide. The 'local failure' would have been that occasioned to the rudder, propeller and local hull failure near the stern upon contact with, and slippage upon, the bank in the event that the vessel had not been held up.
20 His Honour observed that there was 'considerable speculation' as to the likelihood of the bending moment necessary to produce global damage being reached. The salvors' case on global failure was seen by his Honour to depend largely upon the evidence of a naval architect, Mr Squire. The respondents had pointed out, and his Honour noted, that Mr Squire's conclusion was that the hull had not been likely to fail due to sagging and that, although there was a risk of failure, it was a small one. Mr Squire had given his evidence based upon three scenarios. On only one scenario (Case 2) was the hull said to be at high risk of failure (the 'worst case scenario'). On the other two scenarios there was either no realistic prospect of the collapse of the hull as a whole or its probability was low. On Mr Squire's own evidence the worst case scenario was less likely than either of the other two.
21 His Honour went on to deal with the assumptions upon which the worst-case scenario was based, largely by reference to the evidence of Dr Binks, whose evidence he plainly accepted.
'99. Moreover, the worst-case scenario presented by Mr Squire (Case 2) made the unsubstantiated assumption that the vessel grounds fore and aft at the very top of the tide. As pointed out by Dr Binks, a naval architect called for the defendants, Case 2 is based on several problematic assumptions. Firstly, this scenario assumes that there is no sinkage or slippage of the ship's bow on the north bank or of the ship's stern when grounded on the south bank. Secondly, it is assumed that that the ship's stern swings to such an extent that a length of over 40 metres (measured from the aft perpendicular) makes contact with the south bank of the channel. He does not accept these assumptions, and considers that they are speculative. In addition, Mr Squire points out the difference between Case 2 (high probability of failure) and Case 3 (a very low probability of hull failure) is that in Case 3, instead of the vessel going aground fore and aft at the very top of the tide, she grounds at a lower point or sinks into the sea-bed by a distance of 0.68 metres. This is a relatively small difference. If the distance is less than that, the degree of risk falls between Case 2 and Case 3. Mr Squire accepted that the vessel must ground part of the way up the sides of the channel, and that whether she would drop with the tide would depend on the material and the steepness at the point of contact. The defendants note that there is no definitive evidence as to the shape of the south bank and that the evidence concerning the material of the south bank is limited. It was also stressed that Mr Squire acknowledged considerable uncertainty about his prediction in relation to global failure.'
22 In the passage which follows, and upon which the salvors rely on the appeal, his Honour said:
'100. On the expert evidence, I am not satisfied that in the present case there was any real probability of global failure, or indeed any danger of global failure. Dr Binks says, and I accept, that it is unlikely that the vessel would have become grounded with her bow on the north bank and her stern on the south bank because one would expect this scenario to have been prevented by the actions of the crew. He also considered that the general blockage scenario as presented in Case 2 could arise in the event that no action was taken by the crew, but he disagreed with the assumptions made by Mr Squire to justify the view that there was a significant prospect of global failure. There was simply not enough material to warrant the adoption of this conclusion based on these assumptions.'
23 His Honour then turned to the issue of 'local damage'. The prospect of such damage, on the grounding of the vessel, depended in large part upon evidence given by the geologist, Dr Phipps, as to the hardness of the material which the rear of the vessel might strike. His Honour considered that the evidence was of limited assistance. There were considerable variations between the borehole samples upon which it was based. There was considerable doubt as to the precise location where the grounding, and any impact with the bottom or sides of the channel, could have occurred. The core samples did not allow a reliable opinion to be formed. The size of the samples and the distances between them compounded the uncertainty. The data was, in his Honour's view, inadequate to make any reliable estimate as to the possible damage caused by the vessel grounding or swinging across the channel and impinging upon the southern bank. His Honour said that any view would be 'speculative at best'.
24 His Honour did not accept the evidence of Dr Phipps, that the vessel grounded on bedrock on the northern side of the channel. That opinion was drawn from the existence of scour marks on the vessel and Dr Phipps was not qualified to interpret the cause of damage, his Honour found. His Honour accepted the evidence of Dr Binks, based upon calculations of material within the range disclosed by the boreholes. Only one of the boreholes showed hard material and there would not have been a significant difference in the impact to the vessel if it had struck material of a type at either end of the range. Dr Binks had not accepted the assumptions Dr Phipps had made. Moreover, his Honour observed, Dr Binks considered that, with action by the crew, it was most unlikely that the vessel would have struck the south bank.
25 In relation to the topic as a whole, his Honour said:
'108. My conclusion in relation to this consideration is that there was danger to the vessel of suffering further damage if the tugs had not intervened. It is possible, but not probable, that in such circumstances the vessel could have blocked the Auckland Channel. It is not possible to determine for what period this could have lasted. There was also a danger that the "La Pampa" could have re-grounded and suffered further damage. I do not consider there was a danger to life. The vessel may have been unable to manoeuvre out of the port and may possibly have come into contact with the Boyne Wharf. Therefore, I have given weight to these matters but I do not accept the failure scenario posed by the plaintiffs and its witnesses. I prefer the evidence of Dr Binks to that of Mr Squire and the other witnesses where they are in conflict.'
26 The remaining factor which his Honour dealt with, and one on which the salvors take issue, is that referred to in Art 13(1)(f) - the time and expenses involved in the operation and the weight to be given to it. The respondents had stressed the importance of using the actual costs and expenses as a starting point and one against which the appropriateness of an award might be assessed. His Honour said that the submission had some merit. He considered, however, that the Court's task was to evaluate all of the prescribed criteria in Art 13. Much would depend upon the circumstances of the case. In some cases the actual costs and expenses of the salvor may be a minor factor in light of the adverse circumstances faced and the efforts required. In the present case, although the actual expenses were relatively small, his Honour considered that, on balance, 'a reward very substantially above that figure should be awarded'.
27 In his conclusion, as to the quantum of the salvage reward, his Honour said that he took account of the aim of the 1989 Convention, of encouraging salvage operations. He said that he had adopted a liberal view in fixing the award.
28 There was another issue raised before his Honour which is relevant to the appeal. It concerned the third respondent, Societe Anonyme Louis Dreyfus et Compagnie. The salvors contended that the evidence enabled judgment to be entered against that party, on the basis that it was beneficial owner of the La Pampa. It was recorded as such in the Lloyd's Register records, and had received the hire of the demise charter and the proceeds of sale of the vessel in 2003.
29 His Honour found that, whilst the register could not be ignored, it is an information service and its certificates cannot be regarded as conclusive. An agreement dated 7 June 1995 showed that the third respondent had received funds because of an internal agreement within the Louis Dreyfus Group, of the nature of a cash management agreement. The agreement provided that the third respondent would manage the group cash flow and operate as an agent for the other companies in the group. This was of assistance to that respondent in rebutting a presumption of ownership, his Honour found. Other documents, concerning dealings with the vessel, supported a conclusion that the third respondent did not have a beneficial ownership in the vessel, in particular documents in existence at March and April 2003. His Honour did not enter judgment against the third respondent.