This was an appeal from a decision in which Tamberlin J ruled that the appellants should be awarded AUD 850,000 for their efforts in salvaging La Pampa (see United Salvage Pty Ltd v Louis Dreyfus Armateurs SNC [2006] FCA 1141 (CMI736)). The first appellant, United Salvage Pty Ltd, was an international salvage operator, while the second appellant, Gladstone Tug Services Pty Ltd, owned the tug Tom Tough, and the third appellant, Queensland Tug & Salvage Co Pty Ltd, owned the tugs Wistari and Kuttabul. All tugs were involved in the original salvage operation, including Kuttabul, which was not a salvage-capable tug.

All three appellants disputed the award on the grounds that it was inadequate, and had been calculated based on factual errors and errors as to the criteria to be applied. In particular, they took issue with Tamberlin J's findings on the likelihood of global and local failure of La Pampa, believing that these findings had depressed the weight given to the skill and efforts of the salvors in preventing environmental damage and limiting the exposure of La Pampa and its owners to third party liability. In addition, the appellants argued that Tamberlin J had not given due weight to La Pampa's value, and argued that their award had not been fixed at a level that would provide genuine incentive to other salvors. They also argued that judgment ought to have been entered against the third respondent, Societe Anonyme Louis Dreyfus et Compagnie, as the beneficial owner of La Pampa, which had been denied previously.

Held: The appeal was dismissed and the appellants ordered to pay the respondents' costs. There was no noticeable error in the exercise of Tamberlin J's discretion when fixing the salvage award.

The Salvage Convention 1989 was relevant here. Articles 6-8, 12-19, 21-22, and 26-30 of that Convention have the force of law in Australia by virtue of s 315 of the Navigation Act 1912 (Cth). Under art 12, there must be a 'cure', or a useful result from the salvage operation, for the salvor/s to have a right to a reward. The criteria to be utilised in fixing that reward are detailed in art 13, and include such factors as the salved value of the property, the skill and effort involved in the operation, the degree of the danger to the property and to the salvors, the loss of time and money incurred by the salvors, and so on.

La Pampa had been carrying 160,927 mt of coal when it grounded, along with 2,993 mt of fuel oil, 163 mt of diesel oil, and 80 mt of lubricating oil. The salvage operation was complex and challenging.

In deciding what to award the salvors, Tamberlin J considered the language of the Salvage Convention, several relevant cases, and the travaux préparatoires for the Salvage Convention, including the Nielsen Report. Tamberlin J was of the opinion that the weight given to each factor in art 13 depended upon the circumstances, that there was no certain formula or answer that applied when calculating an award, and that a salvage award should ultimately provide an incentive for potential salvors.

The salvors had argued that the Court should take into account the salved vessel's liabilities to third parties, and whether the salvors' efforts had reduced this. Tamberlin J stated that there was no obligation on the Court to consider a factor not present in art 13 of the Salvage Convention, but that such a consideration was not strictly excluded by the Salvage Convention either. In particular cases, reduced third party liability could either be of little consequence or could enhance a reward, but nonetheless, it should not be investigated or debated at length.

In reaching a decision, the factors from art 13 that Tamberlin J did find to be relevant and that warranted discussion were arts 13.1.c, 13.1.e, 13.1.g, 13.1.h, 13.1.i, and 13.1.j. The appellants did not dispute this. His Honour did not wish to assign excessive weight to the actual salved value of the vessel and property, so as to avoid awarding an amount out of proportion to the quality and extent of the salvors' services.Tamberlin J rejected the submission that an award should be fixed according to a percentage of the vessel and property's value, although this would undoubtedly provide greater certainty. His Honour thought it more appropriate that the factors in art 13 be given their due weight from case to case, with none of the factors being of greater importance than the next. In cases where very high awards had been given, the context and conditions of the operation had been more extreme than in this case.

Article 13.1.b refers to the prevention of environmental damage by the salvors, such as oil spills, channel blockages, damage to nearby structures, and possibly the breakup of a vessel. Tamberlin J disregarded this section as the only environmental damage risked by La Pampa was hypothetical and remote, not actual or immediate. No contamination occurred nor there was any direct threat to the local environment. This finding was in line with art 1 of the Salvage Convention, which defines environmental damage to mean substantial physical damage to life, property, and resources.

Particularly relevant to this appeal was Tamberlin J's conclusion regarding art 13 of the Salvage Convention. His Honour considered that this article was directed to assessing danger to human life as well as the risk of loss, injury or damage in relation to the salved property. On that note, Tamberlin J did not believe there was any danger to anyone as posed by the grounding of La Pampa, although there were risks to La Pampa itself when its steering failed. The danger to the vessel and other property would have been far worse but for the three tugs' involvement. Tamberlin J went so far as to consider the hypothetical, not merely the actual, danger that La Pampa was in, encompassing the possibilities of local or global failure of the vessel. A naval architect gave evidence as to the plausibility of vessel failure, including the 'worst case' scenario, but was uncertain as to his own predictions on global failure, and the evidence was speculative. In the end Tamberlin J disregarded any real probability of global failure.

Tamberlin J did accept the possibility that La Pampa could have blocked the Auckland Channel, or regrounded, and that there had been danger of further damage occurring if the tugs did not intervene.

Also important was Tamberlin J's consideration of art 13.1.f of the Salvage Convention, which regards the time and expenses involved in a salvage operation. The salvors' expenses in these circumstances were minimal, but in considering the whole case and all relevant factors, a reward substantially above that figure was to be awarded.

The nature of salvage awards is that they are highly discretionary, depending on the diverse and complex circumstances of each case and what each respective judge considers fair and equitable, and Courts are limited to the extent they can allow appeals of such awards. Here, the Court stated that this discretionary nature had not been altered by the introduction of factors in art 13 of the Salvage Convention, as judges can decide for themselves which factors hold the most weight depending on the circumstances. Courts cannot interfere with an award unless it can be shown that the judge who decided on it acted upon an incorrect principle, or misunderstood the facts. Lacking this, there must be some large difference in the opinion of the primary judge and of the appellate court, to bring the latter to conclude that the award was manifestly wrong or unjust.

Risk of global or local failure

The appellants argued that Tamberlin J should not have denied the possibility of global or local failure of La Pampa. In particular, the appellants believed there was a risk of global failure that was not fanciful, and Tamberlin J did not give due weight to the degree of that risk. In the Court's opinion, this argument was ill-founded, as it assumed that Tamberlin J did not understand or act upon the salvors' stated position as to the degree of risk. The argument also misunderstood the risks that Tamberlin J had put forward as possible, and failed to contemplate that his Honour's understanding of 'danger' referred to something above a remote risk. His Honour had considered the possibility of global failure at the same time as he considered environmental damage generally, and had found that the salvors only identified a remote possibility of global failure, and not any concrete, real prospect. There was neither any real probability of global failure nor any danger of global failure.

The appellants also argued that Tamberlin J understated the importance of the continuing dangers to La Pampa while it proceeded down the channel to anchorage, the possible damage to wharfs or other structures, the danger from the breaking of the tow lines, the risk of port blockage, and whether the vessel came close to hitting the bottom of the channel. However, the Court found that Tamberlin J considered all of these matters and the weight they each carried. Essentially, the appellants' complaint was that his Honour might have assigned weight to each consideration differently had he taken a different view of the facts, which was not a debatable issue.

Risk of damage to the environment

Because of the locations on La Pampa where fuel and other oil were stored, Tamberlin J did not find that the damage to the vessel created an environmental damage risk. They were not stored close to any area at risk of failure.

Potential liability to third parties

In the appellants' view, third party liability could potentially have arisen from the La Pampa blocking the port, polluting the environment, and losing (or delaying the delivery of) cargo. The appellants believed their efforts had avoided these risks. Tamberlin J did admit to the risk of the first two scenarios, but these were still far too remote.

Relevance of costs and expenses of salvage

The appellants took issue with Tamberlin J's decision to begin with the actual costs and expenses they had incurred during the salvage operation. They argued that this limited their subsequent reward and did not take relevant policy considerations into account, namely the policy of encouraging potential salvors by offering proportionate rewards. Article 13.1.f of the Salvage Convention explicitly requires judges assessing salvage rewards to take into consideration the time it took, alongside the salvors' expenses and losses.

The appellants' submission did not make sense in the context of this case as Tamberlin J had actually declined to use the salvors' costs and expenses as a starting point. While his Honour appreciated the merit of the idea, as originally proposed by the respondents in the previous decision, he wished to take all the criteria of art 13 into account, of which salvors' expenses is only one aspect. The appellants here had evidently misunderstood Tamberlin J's reasons.

Value of the salved fund

The Court in this case agreed with Tamberlin J's finding, based on the case law in consideration, to treat the total value of the salved property as just one factor, and not to use it as a benchmark so that the value of the salvors' contribution was not overstated and overcompensated. There was no immediate danger of total loss or the like so as to compel a larger reward. The circumstances of the salvage operation in this case suited the reward. The salvors could not prove here that the circumstances were other than as Tamberlin J determined them to be.

Encouragement of reward

It was apparent that Tamberlin J was aware of the principle of incentivising salvors, and taking a liberal approach to fixing such awards, which he did.

Beneficial ownership of La Pampa

The salvors' argument was that the third respondent, Societe Anonyme Louis Dreyfus et Compagnie, was the beneficial owner of the La Pampa, despite a contrary finding in the earlier case. If this could be proven, action could be taken against the third respondent for an additional salvage reward. There was limited evidence as the connection between the third respondent and La Pampa, and no witnesses were called for cross-examination regarding this documentary evidence. The salvors contended that the Lloyd's Register showed the third respondent as the beneficial owner of La Pampa at the relevant time.

The Court concluded that the Lloyd's Register was an information service, and without an explanation about the source of its information, and considering the disclaimer attached to the register stating it accepted no liability for inaccuracy, the evidence was not compelling. The Court concluded that, at best, the relationship was equivocal between the third respondent and La Pampa. There was insufficient evidence to bring a claim against Societe Anonyme Louis Dreyfus et Compagnie.