Pilot Oceanways Corp (the plaintiff) claimed for remuneration for the salvage of the MV Star Sea which had suffered a fire on board. On 30 May 1990, the tug Balboa, owned by the plaintiff, proceeded to extinguish the fire and then towed the vessel from Punta Mala to the port of Taboguilla, both places in Panama. The plaintiff made a preliminary assessment of the value of the salved vessel at USD 700,000 and claimed remuneration based on 50 per cent of this value. Sergio Gonzalez, Fredy Jose Coronado Bernal and Jairo Cortez (the crew), all crew members of the tug Balboa, also appeared in the proceedings and claimed remuneration for their salvage operations in the amount of USD 250,000. The Maritime Court applied the provisions related to salvage contained in arts 1490-1501 of the Code of Commerce (CCom), which mirror arts 1-11 and 14 of the Convention for the Unification of Certain Rules of Law respecting Assistance and Salvage at Sea 1910 (the Salvage Convention 1910).

The defendant argued that the services rendered by the tug Balboa were executed under a contract of towage entered into by its owner, Kappa Maritime, and Panama Air Marine Safety & Supply Inc (PAMAR). It alleged that, if the tug Balboa rendered any exceptional services that cannot be considered part of the towage contract, as stated in art 1493 CCom (art 4 of the Salvage Convention 1910), they did not have any useful result.

The Maritime Court stated that, although there was a contract of towage, in reality, the tug became involved in about 40 hours of firefighting actions, including pumping water and its crew members boarding the burning ship to try to extinguish the fire. Such a situation of danger went beyond mere towage services and constituted a salvage operation. Regarding the success of the operation, the Court assessed that the fire was controlled, at least partially, by the actions taken by the tug’s crew. If the result was limited, it was due to the complexity of the situation and the lack of preparedness of the tug and its crew for this kind of operations. However, the Court recognised that there was an undeniable effort from the crew members that produced the salvage of part of the vessel and the bunkers on board. The Court analysed the factors contained in art 1497 CCom (art 8 of the Salvage Convention 1910) to determine the quantum of the remuneration, paying particular attention to the efforts of the salvors, the time expended, the expenses incurred and the risks of liability assumed. On the value of the salved property, although the insurer assigned it a scrap value of USD 375,000, the Court took as its reference the amount of USD 400,000 provided as security for the release of the ship from arrest. The defendant was ordered to pay 25 per cent of that value as remuneration for salvage, divided into USD 70,000 for the plaintiff and USD 30,000 for the crew. All the parties appealed the decision.

Held: The Supreme Court of Justice (SCJ), acting as Court of Maritime Appeals, modified the decision, increasing the amount of the remuneration. The defendant argued in the appeal that the plaintiff could not legitimately claim remuneration because there was a contract with PAMAR. The SCJ rejected this argument, stating that the shipowner was entitled to claim remuneration for salvage as this is to be inferred from art 1495 CCom (art 6 of the Salvage Convention 1910). On the reduced result of the salvage, the SCJ said that the legislation (art 1491 CCom, art 2 of the Salvage Convention 1910), as well as the doctrinal writing recognises the concept of a ‘useful result’ as a requisite for maritime salvage. A total success is not necessary to recognise maritime salvage. It is sufficient that a part or portion of the endangered property is salved. The value of the salved property has an impact on the assessment of the remuneration but not to determine whether or not there is salvage. There must be also a causal link between the salved property and the salvors, which, in this case, was duly proven.

The plaintiff also claimed expenses incurred in the salvage, but without submitting any proper evidence of them. The SCJ held that, if there is no evidence of such expenses, a judge must consider them merely as another factor in fixing salvage remuneration. There is a right to collect such expenses in full, in addition to salvage remuneration, but only if the salvor submits proper evidence.

As to the value of the salved property, the SCJ stated that it must be based on the value given by the insurer because this is a more accurate value as it was assigned by experts. To that amount must be added the value of the bunkers on board, which was assessed at USD 224,000. Hence, the total value of the salved property was USD 599,000. The SCJ considered the 25 per cent assigned as the salvage award by the lower court to be fair, considering the reduced result of the salvage. The SCJ divided the award between the plaintiff and the crew in the same proportion stated by the lower court.