This case arose out of the grounding of the MV Rena on Astrolabe Reef, off the Port of Tauranga in the Bay of Plenty, New Zealand. The plaintiff, Svitzer Salvage BV (Svitzer), is a company incorporated in the Netherlands. On 6 October 2011 Svitzer was appointed as salvor of the Rena. In its efforts to minimise the oil and fuel leaking into the sea from the Rena, Svitzer sought to hire another vessel, a bunker tanker, to remove the fuel and oil and dispose of it elsewhere. It is said that the only suitable vessel was the Awanuia. At the time, the Awanuia was on a long term exclusive charter to the first defendant, Z Energy Ltd (Z Energy), which used it in the Auckland Harbour primarily for bunkering of ships docked there. With Z Energy's permission, Svitzer entered into a short term charterparty with Seafuels Ltd (Seafuels) for the use of the Awanuia, upon terms which Svitzer now considers to be exorbitant and unfair. It now seeks to have that charterparty set aside and its terms effectively recast.

There were two applications before the Court. In the first application, Z Energy sought to be removed as a party to the proceedings. In the second application, Seafuels sought to strike out the pleaded causes of action against it, or alternatively sought summary judgment in its favour.

Held: Z Energy's application to be struck out as a party is dismissed. Seafuels' application for summary judgment or strikeout is also dismissed.

As to the first application, the Judge held that Z Energy's presence was necessary to justly determine all the issues in these proceedings. If the Court did decide ultimately that it was appropriate to adjust the amount of remuneration payable under the charterparty, it would have to consider the portions of that remuneration designed to compensate Z Energy. In deciding on what is a reasonable figure, the Court might well be required to determine the costs and expected losses that Z Energy faced in allowing the Awanuia to go off hire. In that sense also, Z Energy should remain a party to adduce evidence that the compensation payable to it under the charterparty is reasonable or otherwise.

As to the second application, Seafuels applied for defendant’s summary judgment or strikeout of the claims brought against it by Svitzer. Those claims were essentially that:

(a) Svitzer entered into the charterparty under duress, and as a result it should be declared voidable and set aside;
(b) Under the Salvage Convention 1989, the charterparty should be set aside or modified as it contains unreasonable terms and requires an excessive price for the services provided.

The Judge held that each element of duress is necessarily a factual enquiry, and in the present case, issues of timing, the reasonable alternatives open to Svitzer in terms of whether it could have resisted the alleged commercial pressure, and the perceived willingness of Seafuels to negotiate the charterparty terms will require a proper and detailed consideration of all the evidence. These issues here cannot be determined on the basis of the pleadings alone.

Svitzer’s second cause of action relied on the Court’s ability to reopen contracts in admiralty and under the International Convention on Salvage 1989 (the Convention), which is incorporated into New Zealand law as part of the Maritime Transport Act 1994. The Convention deals with uniform international rules for salvage operations for vessels of various kinds. Article 7 of the Convention allows a contract or terms of a contract relating to salvage operations to be annulled or modified if the contract has been entered into under undue influence or the influence of danger, and as a result its terms are inequitable; or if the payment under the contract is in an excessive degree too large or too small for the services actually rendered. Svitzer said that both of these elements are made out in this case and therefore the Court should modify the terms of the charterparty contract to reflect what would be a more reasonable rate of remuneration.

In its application to strike out this cause of action, Seafuels claimed that it has no prospect of success as the Convention applies only to salvage contracts, and as the charterparty is not a salvage contract it falls outside the scope of any cause of action or remedies under the Convention. Article 6 of the Convention restricts the scope of the Convention, and the remedies available under it 'to any salvage operations save to the extent that a contract otherwise provides expressly or by implication'. A salvage operation is defined in art 1 as 'any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever'. Seafuels claimed that the charterparty does not concern a salvage operation, as the contract was simply one for the charter of a vessel for the purpose of removing fuel and avoiding environmental harm rather than assisting a vessel in danger. Seafuels maintained that it cannot be considered a salvage contract as it is between a salvor and an independent third party as opposed to a salvor and salvee. Seafuels contended that treating contracts with independent third parties as salvage contracts would lead to absurd consequences. It said that this would lead to situations where shipowners who simply hired out vessels for undisclosed purposes could find themselves unwittingly subject to the Convention. In the alternative, Seafuels contended that, even if the charterparty is a salvage contract, the requirements of art 7 allowing the Court to modify its terms are not met here.

In response, Svitzer argued that the operation of removing oil from the Rena was an integral part of the whole salvage operation and the charterparty should be considered a salvage contract for the purposes of the Convention. In terms of the art 6 definition, Svitzer maintained that the removal of the oil from the Rena was an activity undertaken to assist a vessel or other property in danger. The services in preventing oil leaking from the wreckage and causing environmental damage assisted the vessel in avoiding the salvee’s liability for such damage. As the charterparty was entered into for that purpose, Svitzer argued that it must be seen as a salvage contract entered into as part of the salvage operation and thus covered directly by the Convention. On these aspects, Svitzer in support of its contentions, referred to commentary on the Convention in Kennedy and Rose The Law of Salvage. There it was said at [10.169] that art 7 applies to a range of contracts between salvors and third parties:

Unlike the Brussels Convention 1910, Article 7, which applied to agreements as to assistance or salvage entered into at the moment and under the influence of danger, the Salvage Convention 1989, Article 7 simply applies to contracts, without more. This does not mean that Article 7 provides a general power to annul or modify any type of contract, for the Convention applies to salvage operations. It does mean, however, that a contract which is not made specifically for salvage purposes, such as a towage contract, but which prima facie applies to salvage operations will be subject to Article 7. Moreover, Article 7 may apply to sub-contracts made between salvors and third parties and to contracts between salvors and their employees.

In the alternative, Svitzer claimed that in any event the Convention is wide enough to encompass all contracts that are related to salvage operations, including those with third parties, even if they are not strictly seen as contracts for salvage. Under both submissions advanced for Svitzer it was contended that the requirements of art 7 are fulfilled, as the charterparty contract either under art 7.a was entered into under the influence of danger and its terms are inequitable, or alternatively under art 7.b in that the agreed remuneration under the contract was excessive.

Given the little New Zealand jurisprudence on the Convention to date, and the contested nature of the charterparty, it would be unsuitable to strike out this cause of action at this early stage. On the basis that the purpose of the contract was to assist in removing potentially hazardous material from the Rena in particular to prevent further environmental damage from its grounding, the charterparty may very well be seen ultimately as a salvage contract being part of the overall salvage operation and thus subject to the Convention. The question that would then follow, whether the Court should exercise its discretion under art 7 to modify the terms of the charterparty, involves intense and complex factual matters requiring a full hearing and testing of the evidence. It is not appropriate therefore to strike out this second cause of action.

[For the subsequent interlocutory proceedings, see Svitzer Salvage BV v Z Energy Ltd (CMI39).]