The ship La Pampa grounded off Gladstone on the Queensland coast in March 2002, carrying over 160,000 mt of coal. The plaintiffs, United Salvage Pty Ltd (United), Gladstone Tug Services Pty Ltd (GTS), and Queensland Tug & Salvage Co Pty Ltd (QTS) were involved in salvaging the vessel and eventually bringing it inside the deep sea anchorage area near the Fairway Buoy. GTS owned the tug Tom Tough, and QTS owned the tugs Wistari and Kuttabul. All three tugs answered La Pampa's distress call on the morning of 27 March 2002 and were employed in the complex salvage operation that followed.

A writ was issued against the ship on 28 March 2002 by United and GTS in respect of a maritime lien for unpaid salvage services, pursuant to s 4(3)(g) of the Admiralty Act 1988 (Cth). La Pampa was arrested in accordance with the writ, but released soon after upon providing security. QTS joined these proceedings in December 2002 as the third plaintiff.

The plaintiffs claimed that they were owed AUD 4.4-6.6 million for their salvage efforts, which the defendants answered by offering a reward of AUD 750,000 with interest and costs, and later reduced this further to AUD 500,000. Of the amount the plaintiffs claimed, AUD 35,000 was for expenses incurred.

The decisive questions in these proceedings were: first, what was an appropriate salvage reward for the plaintiffs; and second, who were the parties actually involved in the salvage operation, and what role did they play? More specifically, it was necessary to determine if GTS and QTS were acting on United's behalf, and if Societe Anonyme Louis Dreyfus et Compagnie (the third defendant) (Societe Anonyme) was La Pampa's beneficial owner when the vessel was salvaged.

Held: The salvage reward for the plaintiffs should be fixed at AUD 850,000.

The salvage reward owed to the plaintiffs was to be determined with reference to the Salvage Convention 1989, of which arts 6-8, 12-19, 21-22, 26, and 30 have force of law in Australia through s 315 of the Navigation Act 1912 (Cth). As the plaintiffs in this case undeniably produced a useful result through their efforts, they were owed a reward under art 12. The criteria for fixing that reward are contained in art 13. Article 14 (allowing for special compensation in cases where a vessel cannot be saved) did not apply, but nonetheless affected the interpretation of art 13.

Policy considerations regarding salvage are built into art 13, including the notion that salvors should be encouraged to assist vessels in distress (art 13.1). The salvors' reward cannot, however, exceed the value of the saved property, including the vessel. In their statement of issues, the salvors posed the question to the Court whether La Pampa would have been inundated by civil liability claims from third parties if they had not intervened. These may have arisen for the following reasons: the Port of Gladstone had to be closed while La Pampa was in distress, La Pampa had blocked the Auckland Channel, the vessel could have caused considerable environmental damage if wrecked, and it would have posed a hazard to other ships if wrecked. The first two considerations especially may have led to third parties' economic loss. The Court was left to consider if La Pampa's potential exposure to claims by third parties could constitute a relevant consideration when calculating the quantity of a salvage reward.

This question was not included as a factor in art 13.1 of the Salvage Convention 1989. Yet the list in art 13.1 was not necessarily exhaustive. The Court was referred by the defendants to the travaux préparatoires of the Salvage Convention 1989 and the Salvage Convention 1910. As supplementary material to the Salvage Convention 1989, the travaux préparatoires are able to be taken into account when interpreting that Convention under art 32 of the Vienna Convention on the Law of Treaties 1969. The Court also referred to the history of the Salvage Convention 1989 generally, and noted that its drafting was in part a response to disasters like the Torrey Canyon, where the salvors were unable to save the vessel and thus did not receive a reward. Article 14 plainly rose out of those considerations. The Convention was also drafted carefully so as to balance the interests of the different relevant parties.

The idea of including liability salvage as a factor in calculating salvage rewards was raised during the drafting process, but was not included in the final version of the Convention text. However, in the Nielsen Report it was stated that the law of salvage was not set out in its entirety in the draft Salvage Convention 1989. Since the Salvage Convention 1989 came into effect, academics have continued to debate whether liability salvage should be a relevant factor in calculating rewards, with many commentators concluding it has no relevance or would be too complex to include.

In this case, the Court sided with Brice in his Maritime Law of Salvage (1999). Brice's view is that, while the Salvage Convention 1989 does not discuss liability salvage, States may (independently) consider it in a general sense when assessing the value of a salvage operation. In an ordinary salvage case, there is no need to go into depth about what a vessel's liabilities might have been. The Court here did not think it was obliged to consider if La Pampa avoided vast civil liability claims because of the salvors' efforts.

However, the Salvage Convention did not exclude liability salvage from consideration. The Court could take it into account if it was appropriate to do so, and this would allow for a salvor's reward to be raised without having to go into great depth on what liabilities were avoided. This could be done once the Court had already gone through the other factors in art 13.1 to decide the general figure.

For the present case, the express factors included in art 13.1 should be the focus when assessing the plaintiffs' reward, as third party liability was not a specific, independent factor.

The value of the property salvaged by the plaintiffs was agreed to be AUD 37,914,691.94. The actual value of salvaged property is a consideration when fixing a salvor's reward under art 13.1.a of the Salvage Convention 1989. The plaintiffs arrived at their claimed amount of AUD 6 million by calculating what was 15-20 per cent of the salved property's value. This was not an absurd amount to receive. However, the reward in every salvage case comes down to the surrounding circumstances, applicable law and the nature of the operation, so there is no easy formula that can be applied across the board. If there was, this could create more certainty for potential salvors. However, it could equally lead to inequitable results in exceptional cases. The 'shopping list' of considerations in art 13.1 of the Salvage Convention 1989 allows for only the most relevant factors to be taken into account, depending on each case's facts. The value of the salved property in this case was an important consideration.

Article 13.1.b is about the skill and efforts of salvors in preventing environmental harm, meaning substantial physical damage to human health or to marine life and resources. For this factor to be considered, there must have been some actual risk that the salvors minimised or prevented through their skill and efforts, not which they only aimed to avoid. In this case, had the salvors not been present, pollution could have easily resulted from the escape of La Pampa's fuel, lubricating oil and ballast water, as well as the cargo of coal onboard. The ship could have blocked the Auckland Channel, damaged structures in and around the Port of Gladstone, or - if the ship had completely broken up - scattered wreckage around the area, which would cause further environmental damage. This damage must have been more than merely remote or threatened damage. This section is not about the costs that a vessel might have incurred if the environmental harm had happened, but is about the potential for significant environmental harm itself. Liability from third parties does not fall for consideration. After assessing the circumstances of the case, the Court concluded that there was no significant incident directly threatening the environment that could have resulted in substantial physical damage. No environmental pollution actually occurred, and the chances of such a thing happening were remote. The most likely causes of pollution, from the various oils and engine waste on La Pampa, were not stored near the parts of the ship that were impacted when it grounded, nor did the ship seem in any risk of breaking up. There was no danger of substantial physical damage to human health, marine life or resources so art 13.1.b was not a relevant factor.

Article 13.1.c is about the measure of success the salvors obtained, success meaning how little physical loss and damage was caused to the salved property in the end. Since the operation in this case was a complete success, art 13.1.c is a relevant factor.

Article 13.1.d is concerned with the nature and degree of the danger, specifically the danger to the salved property and the people in it. This interpretation is supported by the fact that arts 13.1.a-e make it clear that the end goal is the protection of vessels and other property. Unlike provisions such as art 13.1.b that focus on the environment and the damage caused to it, art 13.1.d is about possible danger to life and property, making it evident that the section is not concerned with environmental harm. Although no one's life was ever actually endangered during the salvage operation, the vessel was at great risk when its steering failed and it grounded off Gladstone, and the salvors themselves were in some danger during the operation as a result of factors such as the tidal currents, the narrow channel, weather conditions and the snapping of tow lines. If the salvors had not intervened, La Pampa and its crew would have been in greater danger. In regard to this point, the plaintiffs argued, based on various witness testimonies, that La Pampa had been in great danger and was even prone to potential total failure, that had been avoided solely because of the salvors' efforts. The Court was of the opinion that there was no such risk of total failure. Nor was it possible to do more than speculate on the damage that would have occurred if La Pampa re-grounded or swung across the Auckland Channel and impacted on the southern bank. Overall, there was a danger that La Pampa would have been damaged further if the salvors were not present. There was also a danger that the ship may have regrounded. These prospects meant that art 13.1.d should be given some weight, but that total or local failure was highly unlikely.

Article 13.1.e is about the amount of skill and effort demonstrated by the salvors. The Court reviewed the entire process of the salvage operation, the tugs' communication, the difficulties involved and whether the salvors demonstrated considerable skill and effort. The conclusion was reached that the salvors showed skill and effort of a high order, and so art 13.1.e should be given more weight.

Article 13.1.f concerns the time used and the expenses incurred by salvors. In this case, the salvors quantified their own losses at AUD 35,000, reduced to AUD 30,000 after accounting for overestimated fuel expenses. Their expenses included fuel, the replacement tow lines, and minor damage to the Kuttabul during the operation. The salvors additionally claimed AUD 102,389 for tug hire. The Court concluded that the amount of tug hire was a factor in assessing the salvors' lost time and expenses. In this case, the salvors should be given a reward well above their actual expenses to account for the skill they showed in salvaging La Pampa, although it was not an especially valuable ship.

Article 13.1.g is about the risks to the salvors and their equipment (as compared to art 13.1.d, which is about the danger to the salved ship and its crew). The Court again reviewed the events of the salvage operation, and considered that there were several instances where the tugs were at particular risk from La Pampa's uncontrolled movements and sudden speed, breaking tow lines and potential collisions. The Court was of the view that there was, in fact, a substantial element of risk to the tugs. The main considerations were that the tugs were working with a large vessel in a narrow channel and within a narrow timeframe, with shifting tides. Article 13.1.g should be taken into account, especially in regard to the risks to the salvors' equipment. There was, however, no genuine risk to the tug crews of death or injury.

Article 13.1.h concerns the promptness of the services rendered by the salvors. It was not in debate that the salvors acted quickly and efficiently, therefore art 13.1.h should be an important factor in fixing the salvors' reward. The rapid response of salvors to potential maritime disasters should be encouraged and rewarded.

Article 13.1.i regards the availability and use of vessels or other equipment intended for salvage operations. It is vital that tugs which are 'salvage capable' are readily available for deployment. GTS and QTS, and their respective tugs, were professional salvors. It was also relevant that United operated a nationwide business.

Article 13.1.j is about the state of readiness and the efficiency of the salvors' equipment, and the value of it. The Court agreed with the plaintiffs that they should be compensated as a group, and their resources were provided as a group. United was the only national professional salvor in Australia, and therefore the only company able to provide salvage services along the entirety of the Australian coastline. Each of the plaintiffs used proper salvage equipment and this was readily available. Article 13.1.j should be given considerable weight in determining the plaintiffs' reward since the availability of salvors, and the readiness and efficiency of their equipment, is vital to successful salvage operations and should be incentivised.

The Court finally turned to whether Societe Anonyme, as La Pampa's beneficial owner, should have judgment entered against it. Although Societe Anonyme was recorded on the Lloyd's Register records as the beneficial owner, the Register is not always conclusive. Moreover, evidence showed that Societe Anonyme had a sort of cash management agreement with the Louis Dreyfus Group, acting as an agent for the companies in this Group, and that it received funds from the Group for this reason, not because it beneficially owned La Pampa. There was no evidence that Societe Anonyme was the beneficial owner on 27-28 March 2002 when the grounding occurred, and judgment must therefore not be entered against it.

Having considered all the above factors from art 13.1 of the Salvage Convention 1989, having given the appropriate subsections their due weight, and in consideration of the surrounding circumstances, the Court concluded that the salvors should receive AUD 850,000 for their efforts.

[For the unsuccessful appeal to the Full Court of the Federal Court, see United Salvage Pty Ltd v Louis Dreyfus Armateurs SNC [2007] FCAFC 115 (CMI1158).]