Svitzer Salvage BV v Z Energy Limited

[2012] NZHC 1650

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2012-485-452 [2012] NZHC 1650

IN THE MATTER OF     An admiralty action in personam

BETWEEN  SVITZER SALVAGE BV Plaintiff

ANDZ ENERGY LIMITED First Defendant

ANDSEAFUELS LIMITED Second Defendant

Hearing:         19 June 2012

(Heard at Wellington)

Counsel:         LJ Taylor & JB Orpin - Counsel for the Plaintiff

RJ Gordon - Counsel for First Defendant
P. Barratt - Counsel for Second Defendant

Judgment:      20 July 2012

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment of Associate Judge Gendall is delivered by the Registrar on 20 July

2012 at 3.30 pm under r 11.5 of the High Court Rules.

Solicitors:           Izard Weston, Solicitors, PO Box 5348, Wellington

Minter Ellison Rudd Watts, Solicitors, PO Box 2793, Wellington

Jones Fee, Solicitors, PO Box 1801, Auckland

SVITZER SALVAGE BV V Z ENERGY LIMITED HC WN CIV-2012-485-452 [20 July 2012]

Introduction

[1]      At  approximately  2.20  am  on  5  October  2011  a  236  metre  fully  laden container ship, the M.V. Rena (the Rena) travelling at a speed of around 17 knots, ran aground on Astrolabe Reef, off the Port of Tauranga in the Bay of Plenty, New Zealand. Amongst many issues created by this devastating maritime disaster was the significant environmental and pollution risk arising from discharge into the sea of heavy fuel oil and other lubricants on board the Rena.

[2]      The grounding was declared by the Maritime New Zealand Marine Pollution

Response Service to be a Tier 3 Emergency on 5 October 2011.

[3]      The fallout from this disaster has been substantial on a number of levels.  One small part of this fallout relates to the present claim which directly involves another vessel the Awanuia, a purpose built bunker tanker owned by the second defendant, Seafuels Limited (Seafuels).

[4]      The plaintiff, Svitzer Salvage BV (Svitzer), is a company incorporated in the Netherlands.   On 6 October 2011 Svitzer was appointed as salvor of the wrecked ship Rena.  On the same day the Rena was declared by the Director of Maritime New Zealand to be a hazardous vessel pursuant to s 248 Maritime Transport Act 1994.  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 Limited (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 contract with 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 contract set aside and its terms effectively recast.

[5]      There  are two  applications  before the  Court.    In  the  first  application,  Z Energy seeks to be removed as a party to the proceedings.  In the second application,

Seafuels seeks to strike out the pleaded causes of action against it and alternatively, summary judgment in its favour.

Factual Background

[6]      Svitzer first approached Seafuels on 6 October 2011 about chartering the Awanuia.  Initially, Seafuels declined the request as the Awanuia was already in full use under a long term charterparty agreement with Z Energy.   Later on 6 October

2011,  however,  Svitzer  and  Z  Energy agreed  to  break  the  existing  charterparty contract and allow the Awanuia to be used for the removal of oil from the Rena.

[7]      On 7 October 2011, Seafuels confirmed that the Awanuia would be chartered to Svitzer on a short term basis as requested.  This was estimated to be for a period of 7 days from delivery at Auckland to redelivery with details of the Charterparty contract, including charter rates and costs for breaking the charter with Z Energy, to be finalised.   That same day, the Awanuia left for Tauranga.   The following day, Seafuels drafted the proposed charter agreement (the Charterparty) and sent it to Svitzer.   Its material terms included the following agreed charter hire rates and additional terms (specified at Box 20 of the Charterparty):

20.       Charter hire (state rate and currency) (Cl 12(a), (d) and (e))

1.          Daily Rate: NZD145,000 per day + GST (inclusive of crew, fuel) FOR BREAKING Seafuels & Z Energy Charter following applies:

2.          Lump sum – Charter break per 7 days and until back on Hire to Z Energy –

Seafuels – NZD135,000 prorata after 7 days + GST.

3.          Lump sum – Charter break per 7 days – Z Energy NZD150,000 prorata after 7 days + GST.

4.          Lump sum – reimbursements (with evidence) of Z Energy increased cost of working capped at NZD100,000 per 7 days + GST.

5.          Title passes for all fuel oil transferred to Awanuia ex MV Rena to Z Energy on loading Awaunia.

[8]      This  it  is  said  made  the  overall  charter  rate  for  the  Awanuia  between

NZ$187,000.00 and NZ$200,000.00 plus GST per day (given that the original 7 day

charter term, was extended at Switzer’s request some twelve times on the same terms and conditions, with the return of the Awanuia from this hire not occurring therefore until around 18 November 2011).   Nevertheless, by email dated 9 October 2011, Svitzer had accepted the terms of the Charterparty, although it stated it was doing so under protest.  In particular, Svitzer noted at the time:

We believe that the terms and conditions proposed are outrageous but based on the situation at hand and the pressure from all parties involved, we see no other option than to accept.

And, notwithstanding all of this, as I understand the position, over the 43 day period of  the Awanuia’s  hireage  the  total  amount  charged  and  invoiced  to  Svitzer  by Seafuels under the Charterparty contract was $8,882,435.72 (including GST) plus

$6,209.57 for miscellaneous items and damage repair and $55,589.38 for Z Energy’s additional costs.  Of these amounts, some $2,966,145.50 remains unpaid by Svitzer. In a counterclaim filed by Seafuels in this proceeding on 30 April 2012, a claim is made against Svitzer for this unpaid amount.

[9]      Svitzer now makes two claims in its statement of claim filed on 29 February

2012.  The first is that the Charterparty contract was entered into under duress, and should be voidable.   The second and alternative claim is that, in any event, an international salvage convention incorporated into New Zealand as part of the Maritime Transport Act 1994, allows the Court to annul or modify the terms of the Charterparty (as a “salvage contract”) amongst other things to reflect a more reasonable rate of remuneration for the vessel.

Application for First Defendant Z Energy to be struck out as a Party

[10]     Turning now to the first application which is before the Court, in this Z Energy seeks orders to strike it out as a party to the proceeding.

[11]     The  Charterparty  at  issue  is  between  Svitzer  and  Seafuels.    Z  Energy contends that as it is not a party to that  agreement they have no role in these proceedings.  The causes of action seeking to set aside the Charterparty are against Seafuels alone.  Z Energy was not paid any money under this agreement that should

be “returned” and no other relief is sought against it.  It therefore says that it should be removed as a party.

[12]     As I have noted above, Z Energy agreed to break its existing Charterparty contract and allow the Awanuia to be released to assist in the Rena operation.  It says it did so as a good New Zealand corporate citizen, given the circumstances of this serious maritime disaster which had arisen at the time.  Z Energy contends, however, that understandably it did not wish to be left out of pocket as a consequence of it helping with the Rena disaster, given that this decision carried with it significant commercial disruption and financial cost to Z Energy (in terms of foregone profits from lost fuel sales and having to accommodate customers to whom it had existing supply commitments). Two contracts resulted from all of this:

(i)        The Charterparty agreement between Svitzer and Seafuels;

(ii)An agreement between Seafuels and Z Energy to release the Awanuia from  its  existing  Charterparty  to  Z  Energy  for  a  short  time  (the Release Agreement).   (As to its terms which are relevant here, see [16] below).

[13]     Although Z Energy is not a party to that first contract, its role is relevant in two respects.  First, part of the remuneration amounts payable by Svitzer are charter break fees to Z Energy and a lump sum reimbursement to Z Energy for increased costs due to the disruption.  Secondly, the Charterparty contained a clause requiring title to all fuel oil transferred to the Awanuia to pass to Z Energy.  Svitzer’s overall claim seeks to challenge and adjust some terms of the Charterparty agreement that it is said were inserted purely for the benefit of Z Energy.  And, the claim for relief seeks to recover some of the money that Seafuels received on behalf of Z Energy pursuant to those terms.

[14]     Z Energy says that these matters do not make it a necessary party to the proceeding, as no relief is sought directly from them.  As to the oil ownership issue, it says that it simply provided a solution for the disposal of oil when Svitzer had no arrangement in place.  Z Energy says it is not liable as suggested for conversion of

the oil taken, as, in November 2011, the owners of Rena agreed to sell the oil to Z Energy for $230,000.00 and that arrangement superseded the relevant terms of the Charterparty.

Legal Principles

[15]     Rule 4.56 of the High Court Rules in allowing parties to be struck out at any stage of the proceeding states in part:

(1)        A Judge may, at any stage of a proceeding, order that –

(a)        the  name of a  party be  struck out  as  a  plaintiff or  defendant because the party was improperly or mistakenly joined;

[16]     The discretion to strike a party out is one to be exercised cautiously and sparingly1.  The onus is on Z Energy to show that it was “improperly” joined to this proceedings.    “Improperly”  is  not  defined,  although  it  involves  looking  to  the motives of bringing a claim against that party and ascertaining whether or not they are genuine.2    In the present situation, the two main causes of action are primarily against Seafuels and involve the invalidity of the Charterparty that it entered into. The relief is sought against Seafuels and in this sense Svitzer has not pleaded any cause of action specifically against Z Energy.

[17]     Whether a party has been improperly joined to a proceeding, and therefore should be struck out, can be determined by reference to the principles for joinder of parties to a proceeding. Rule 4.1 of the High Court Rules states that parties can be joined “whose presence before the court is necessary to justly determine the issues arising” and “who ought to be bound by any judgment given”. In TMA Group of Companies Ltd v Coleman,3 an application to join a party against which no cause of action or relief was pleaded was refused. The Court noted there that counsel had been unable to find any case in which a defendant was joined in the absence of a

reasonably arguable cause of action or relief being pleaded.

1 AMP v Architectural Windows Ltd (1988) 1 PRNZ 655 and Watson & Son Limited v Active

Manuka Honey Assoc. Inc (No 2), HC, Hamilton, CIV-2008-419-1495, 29 September 2009, Heath J.

2 At [40].

3 HC Auckland CIV-2011-404-3208, 4 August 2011, at [11] – [12].

[18]     In Auckland Regional Services Trust v Lark4, the Court of Appeal stated that:

The general test is whether the proposed party will be directly affected by any order which may be made in the proceeding and the general rule is that it is for the plaintiff to decide who he or she will sue and for any person named as defendant to apply to strike out if he or she considers that there is no arguable cause of action.”

In Pegang Mining Co Limited v Choong San5 the Privy Council held that if a party’s rights or liabilities in respect of any other party to the proceeding will be directly affected by any order which may be made in the proceeding, that party can be properly joined.

[19]     In the present case, Svitzer submits that Z Energy’s rights and liabilities to Seafuels  will  be  affected  by  an  order  as  to  the  validity  or  otherwise  of  the Charterparty between Seafuels and Svitzer. It could affect Z Energy’s entitlement to the break fees and the lump sum reimbursements that may or may not be ultimately required to be paid by Svitzer pursuant to the terms of the Charterparty.

[20]     In response, Z Energy contends that, although the impugned Charterparty agreement provides a benefit to them, it could not sue to enforce that benefit, and therefore its legal rights are not directly affected by the validity or otherwise of the Charterparty.  The benefit Z Energy is to receive under the Charterparty is governed by the Release Agreement  which  is  a separate  contract  with  Seafuels  (noted  at [12](ii) above), under which Seafuels are obliged to pass on certain amounts of the Charterparty remuneration  to  Z Energy. That  Release Agreement  stated  that  the Awanuia could go off-hire on the condition that Seafuels:

(a)       Entered into a Charterparty with Svitzer which contained additional terms to compensate Z Energy; and

(b)      Used reasonable endeavours to procure Svitzer to pay those amounts;

and

(c)      Paid to Z Energy the remuneration received from Svitzer which the

Charterparty agreement allocates to Z Energy, when Seafuels received those amounts.

4 [1994] 2 ERNZ 135 (CA) at 138.

5 (1969) 2 MLJ 52

[21]     Therefore, the separate contractual obligation on Seafuels to pay Z Energy a portion of the remuneration recovered was contingent on Seafuels receiving that equivalent amount from Svitzer under the Charterparty. Z Energy’s right to receive payment   crystallised   at   the   point   when   Seafuels   received   $1.1   million   in remuneration from Svitzer, even though the full amount of remuneration under the Charterparty was still outstanding. As a matter of fact, this payment has been made and it is said that Seafuels has now discharged its contractual obligation under the Release Agreement to Z Energy.

[22]     From that point of view, a decision on the validity of the Charterparty may not have any effect on Z Energy.  It is suggested that Z Energy may have no legal rights  or  liabilities  with  respect  to  Svitzer,  and  its  rights  and  obligations  with Seafuels   are   governed   by  the  Release  Agreement   which   has   already  been substantially performed.

[23]     Notwithstanding this, it is clear that, if the payment had not been made by Svitzer, Z Energy might still have rights to recover payment due to it as stated in the Charterparty  while  clause  3.2(b)(i)  of  the  Release Agreement  would  prevent  Z Energy  recovering  unpaid  amounts  from  Seafuels.    Section  4  of  the  Contracts (Privity) Act 1982 provides:

4    Deeds or contracts for the benefit of third parties

Where a promise contained in a deed or contract confers, or purports to confer, a benefit on a person, designated by name, description, or reference to a class, who is not a party to the deed or contract (whether or not the person is in existence at the time when the deed or contract is made), the promisor shall be under an obligation, enforceable at the suit of that person, to perform that promise.

[24]     The remuneration clauses in the Charterparty in my view clearly conferred a benefit on a third party, and although it may not be necessary in this situation, Z Energy could have sued Svitzer to enforce the benefit. Therefore, proceedings which decide the validity or otherwise of the Charterparty could be said to have some bearing on Z Energy’s right to receive benefits from the whole Rena operation. If ultimately the Charterparty was to be declared voidable, Z Energy’s entitlement to enforce that benefit might be altered.

[25]     Additionally,  Z  Energy’s  right  to  receive  payment  under  the  Release Agreement  with  Seafuels  in  my  judgment  might  very  well  be  affected  by  the outcome of the substantive proceedings. If the Charterparty was deemed to be voidable and new terms substituted by this Court, the level of remuneration that Z Energy would be entitled to receive from Seafuels might also be reduced. It is clear from the terms of the separate contract between Seafuels and Z Energy that all Z Energy is entitled to is a certain proportion of the compensation contained in Box 20 of the Charterparty.  And, the obligation to pass on that compensation to Z Energy appears to be conditional on the performance of Svitzer’s obligations under the Charterparty. If those terms are set aside or substituted then Z Energy’s legal rights would be directly affected. This is the case as I see it regardless of the fact that first, Z Energy’s right to receive payment crystallised when Svitzer paid Seafuels, and secondly, the Release Agreement may have been substantially performed.

[26]     In addition, Svitzer alleges here that:

(a)      It is entitled as against both Seafuels and Z Energy to restitution for funds paid pursuant to a void (or annulled) contract in respect of the money it has already paid Seafuels under the Charterparty.   In this way, it says its claim is one for unjust enrichment; and

(b)If the money is paid back, Svitzer accepts that Seafuels and Z Energy are entitled to be paid a reasonable sum for the hire of the Awanuia. That is, they are entitled to a quantum meruit; and

(c)      The effect of all the arrangements between the parties here is that Seafuels received from Svitzer certain payments made under the Charterparty ministerially on behalf of the Z Energy, and effectively as Z Energy’s agent.

Although ultimately those arguments against Z Energy based on unjust enrichment, quantum meruit, restitution and a possible agency arrangement may require amended pleadings and might also prove to be difficult to establish, in my view they still remain  as  reasonably  arguable  claims  here  against  Z  Energy.    It  must  follow

therefore that Z Energy’s rights could be directly affected by the ultimate outcome of this proceeding, and they need to remain properly joined as a defendant to this proceeding.

[27]     Additionally, legal title to the fuel on the Awanuia was said to be transferred to Z Energy by virtue of the Charterparty. Z Energy then purported to purchase that fuel from its original owners through a later and separate sale and purchase agreement.  It may be that ultimately that clause in the Charterparty proves therefore to be no longer operative.  As I see the position, its validity or otherwise is unlikely to change Z Energy’s current legal rights in respect of the fuel. However, Svitzer does allege that this clause in the Charterparty amounted to conversion, and therefore a ruling on its validity might have some possible effect on Z Energy’s liability for conversion during the intervening period, that is before Z Energy entered into the supervening agreement for the purchase of the fuel.

[28]     For all the reasons outlined above, therefore, I find that Z Energy’s presence is necessary here to justly determine all the issues in these proceedings. If the Court does decide ultimately that it is appropriate to adjust the amount of remuneration payable under the Charterparty, it will 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, in my view, Z Energy should remain a party to adduce evidence that the compensation payable to it under the Charterparty is reasonable or otherwise.   The application before the Court by Z Energy to strike it out as a party here is therefore dismissed.

[29]     Finally, before me Z Energy applied  also to strike out paragraphs 11(v),

12(iv) and 23(iii) of the statement of claim.  The content of those paragraphs is as follows:

(a)      Para  11(v)  pleads  that  one  term  of  the  proposed  terms  of  the Charterparty was that “title for all fuel oil transferred to Awanuia ex Rena to pass to Z Energy on loading on board Awanuia”.

(b)Para 12(iv) alleges that one of the factors that made the proposed terms of the Charterparty excessive and unreasonable was that “the requirement that the fuel oil, which was owned by the charterers of the Rena, be transferred to Z Energy was unlawful and would, if implemented, have resulted in conversion of the fuel oil and a further benefit to Z Energy from its processing and subsequent sale.”

(c)      Para   23(iii)   alleges   that   it   would   be   unconscionable   for   the Charterparty to be enforced where, among other matters, “the provisions of the Charterparty relating to transfer of title in the oil from the Rena were unlawful”.

[30]    From submissions advanced before me it would appear that Z Energy’s objection to these paragraphs is based on its contention that the terms in the Charterparty concerning title to the oil on the Rena were subsequently modified.

[31]     But, in my view, that misses the point here.  As I see it, there is no basis for striking out these paragraphs because Z Energy has not shown that the factual pleadings are wrong or contrary to indisputable fact:

(a)      The essential pleading of fact is that when the proposed terms were tendered it was a term of the Charterparty that the oil pumped off the Rena pass to Z Energy.  That allegation has been admitted by Seafuels and is accepted by Z Energy.

(b)The only two other allegations in those paragraphs are allegations of law:   (i)   that the term relating to title to the oil “if implemented” would have amounted to conversion (para 12(iv)); and that the term relating to the title to the oil was unlawful (para 23(iii)).   Those allegations of law are matters for ultimate hearing.

[32]     Rather than alleging that the factual allegation is wrong, Z Energy seems to accept that factual allegation but alleges there are other factual matters which (it says) are relevant to Svitzer’s pleading which the Court should have regard to –

namely that the term relating to title was later modified.   Whether or not that is relevant in the context of Svitzer’s pleadings, in my view the proper thing for Z Energy to do here is to file a statement of defence, admit or deny the allegations as it sees fit, and plead the additional facts which it says are relevant.  By way of contrast, it appears that Seafuels has done just that at paragraph 12.2 of its statement of defence.

[33]     For all these reasons Z Energy’s application to strike out those paragraphs of

Svitzer’s statement of claim noted at [29] above must fail and is dismissed.

The Second Defendant Seafuels’ applications for strike out and summary judgment

[34]     Turning now to the second application before the Court, Seafuels applies for defendant’s  summary judgment  or  strikeout  of  the claims  brought  against  it  by Svitzer. Those claims are 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, the Charterparty should be set aside or modified as it contains unreasonable terms and requires an excessive price for the services provided.

Strike-Out Principles

[35]     Under r 15.1(1) this Court may strike out all or part of a pleading if it—

(a)      discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b)      is likely to cause prejudice or delay; or

(c)      is frivolous or vexatious; or

(d)      is otherwise an abuse of the process of the court.

[36]     The  authors  of  McGechan  on  Procedure  provide  the  following  helpful summary of the principles relevant to r 15.1(1):6

The established criteria for striking out was summarised by the Court of Appeal in A-G v Prince [1998] 1 NZLR 262, (1997) 16 FRNZ 258, [1998] NZFLR 145 (CA) at 267, and endorsed by the Supreme Court in Couch v A-G [2008] NZSC 45 at [33], per Elias CJ and Anderson J:

(a)       Pleaded facts, whether or not admitted, are assumed to be true. This does not  extend  to  pleaded  allegations  which  are  entirely  speculative  and without foundation.

(b)       The cause of action for defence must be clearly untenable. In Couch Elias CJ and Anderson J, at [33], said: “It is inappropriate to strike out a claim summarily unless the court can be certain that it cannot succeed.”

(c)       The jurisdiction is to be exercised sparingly, and only in clear cases. This reflects

the Court’s reluctance to terminate a claim or defence short of trial.

(d)       The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.

(e)       The Court should be particularly slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation. In Couch, at [33], Elias CJ and Anderson J said: “Particular care is required in areas where the law is confused or developing.” There is considerable authority that developments in negligence need to be based on proved rather than hypothetical facts.

[37]     Therefore, I would strike out either of the causes of action if Seafuels is able

to prove that the plaintiff’s pleadings disclose no reasonably aruable cause of action.

First cause of action

[38]     The first cause of action is essentially a claim that, following the grounding of the Rena, Seafuels took advantage of the extraordinary circumstances of imminent environmental catastrophe, and threatened to refuse to make the Awanuia available for salvage purposes unless the Charterparty was agreed to on its specified terms.

[39]     The resulting Charterparty is said to be voidable on the grounds of duress. In its application to have this cause of action struck out, Seafuels says that the cause of

action here must focus on the process which led to the contractual terms rather than

6 (online looseleaf ed, Brookers) at [HR15.1.02(1)].

the fairness or otherwise of the terms themselves. Therefore, the terms regarding remuneration which may seem unfair or unfavourable to one party are not evidence of duress.

[40]     In  McIntyre  and  ors  v  Nemesis  DBK  Limited,7    the  Court  of  Appeal established that “contractual duress is the imposition of improper pressure by threats that coerce a party to enter a contract. Contracts that have been procured by duress are  voidable  at  the  discretion  of  the  coerced  party...”.  There  are  two  elements inherent in the definition of duress:

(a)      Exertion  of illegitimate pressure on  a victim,  which  arises  out  of threats of a physical or economic nature that the law regards as illegitimate;8 and

(b)A causal connection in that those threats compelled the other party to enter into a contract.

[41]     In support of its claim, Svitzer cites cases where a threat not to contract, except on exorbitant terms, was considered illegitimate and the subject of a duress claim.9  It says that Seafuels issued a similar threat not to contract unless Svitzer agreed  to  what  is  says  were  exorbitant  terms,  and  that  this  threat  should  be considered as illegitimate as the only alternative at the time was likely environmental disaster.

[42]    Seafuels denies that any illegitimate pressure was put on Svitzer in the negotiations, saying that Svitzer, an experienced international salvage company, simply accepted the contractual terms on offer which it now contends, without real justification in all the prevailing circumstances, were unreasonable. Seafuels claims

that commercial pressure of this nature is expected and permitted by the law in

7 [2010] 1 NZLR 463 (CA)

8 Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384; [1982]2 All ER 67.

9 The Rialto [1891] P 175 (where one ship refused to tow another in distress in the Atlantic Ocean

unless paid £6,000); Post v Jones 60 US 150 (1856) (where salvors would only agree to rescue stranded whalers if the whalers agreed to sell their cargo for a nominal amount); and The Port Caledonia and the Anna [1903] P 184 (where the salvor’s terms were “£1,000 or no rope”).

appropriate settings, and could not be said in this case to go so far as to be illegitimate.

[43]     The second element of duress is one of compulsion.   The victim of duress is someone who will intentionally submit to demands in a situation where there is no reasonable  alternative.10   Here,  the  parties  dispute  the  reasonableness  of  options which may have been open to Svitzer, and whether it could have refused to accept and renegotiate the terms of the Charterparty or resorted to legal remedies in the very short space of time that it had available to it.

[44]     Seafuels seek orders striking out this duress cause of action on the basis that this second element also cannot be made out. It says that the pressure here, even if considered illegitimate, is not what compelled Svitzer to enter into the Charterparty contract. This appears to be a timing issue. Seafuels maintains that an agreement in principle was reached and it had started performing its obligations under the Charterparty before the exact terms were agreed. It was not until after performance had commenced that the contract was signed on terms which are now challenged by Svitzer. Therefore, at the time pressure was allegedly exerted in terms of the charter rates and compensation clauses, Svitzer had already committed itself to the contract. Seafuels contends that this sequence of events shows that there was no causative link between any commercial pressure that may have been applied and Svitzer’s decision to enter into the Charterparty.

[45]     Although that might ultimately be shown to be the case here, in my view, under all the circumstances prevailing at the time, there is a possible argument that Svitzer was under some duress in its decision to continue with the Charterparty arrangement it had already agreed on in principle, and therefore to agree to Seafuels’ required terms. No agreement was finally reached as to remuneration until the Awanuia was already en route to the wreck of the Rena, and Svitzer may have therefore been compelled to go ahead with the contract on the dictated terms, as

effectively it had already been partly performed. These are all intensely factual

10 Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 400 (HL).

matters and the causation issue advanced by Seafuels here, in my view, does not provide a basis for striking out the duress claim.

[46]     And, in any event, the Court of Appeal has warned that in many cases, a claim  of duress  is  simply not  suitable for a strike out  or  defendant’s  summary judgment  application,  in  the absence of any obvious  flaws  in  the pleadings.  In Magsons Hardware Ltd v Concepts 124 Ltd, 11  the Court of Appeal stated that the factual inquiry required for a finding of duress does not lend itself to determination on affidavit evidence in a summary procedure, in the absence of cross-examination

of deponents.   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 they 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.  I am satisfied these issues here cannot be determined on the basis of the pleadings alone.

[47]     For all these reasons, Seafuels’ application to strike-out the first cause of action here fails.

Second cause of action

[48]     Svitzer’s second cause of action here relies 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 1994.12    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 says that both of these elements are made out in this case and

11 Magsons Hardware Ltd v Concepts 124 Ltd [2011] NZCA 559 at [32].

12 Maritime Transport Act 1994, s 216 and Schedule 6.

therefore the Court should modify the terms of the Charterparty contract to reflect what would be a more reasonable rate of remuneration.

[49]     In the application to strike out this cause of action, Seafuels claims that it has no prospect of success as the Convention applies only to salvage contracts, and as the Charterparty contract it says is not a salvage contract it falls outside the scope of any cause of action or remedies under the Convention.

[50]     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 Article 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”.

[51]     Seafuels claims that the Charterparty contract 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 maintains also 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. In this regard, it relies on an English Court of Appeal decision The Sea Angel,13 where a Charterparty was entered into by the salvor to assist in salvage operations, and the Court found that it was not a “salvage contract” but rather one entered into

“in the context of salvage”.   Seafuels contends also that treating contracts with independent third parties as salvage contracts would lead to absurd consequences.  It says this would lead to situations where ship owners who simply hired out vessels for   undisclosed   purposes   could   find   themselves   unwittingly   subject   to   the Convention.

[52]     In the alternative, Seafuels contends that, even if the Charterparty contract is a salvage contract, the requirements of Article 7 allowing the Court to modify its terms are not met here.

[53]     In response, Svitzer argues that the operation of removing oil from the Rena was an integral part of the whole salvage operation and the Charterparty here should be considered a salvage contract for the purposes of the Convention. In terms of the Article 6 definition, Svitzer maintains 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. In this regard Svitzer  relies  here  on  the  decision  in  Shell  Tankers  (UK)  Ltd  v  Astro  Comino

Armadora  SA14,  where  the  activity  of  offloading  crude  oil  from  a  vessel  was

recognised as a salvage operation.  Seafuels also claims that salvage operations must now include those which are undertaken to protect the environment, as an integral part of a salvor’s duty is to minimise environment damage. As the Charterparty was entered into for that purpose, Svitzer argues that it must be seen as a salvage contract entered into as part of the salvage operation and thus covered directly by the Convention.

[54]     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 Article 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.15

[55]     In the alternative, Svitzer claims 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 is contended that the requirements

of Article 7 are fulfilled, as the Charterparty contract either under Article 7(a) was entered into under the influence of danger and its terms are inequitable, or alternatively under Article 7(b) in that the agreed remuneration under the contract was excessive.

[56]     Given the little New Zealand jurisprudence on the Convention to date, and the contested nature of the Charterparty contract here, in my view it  would be unsuitable to strike out this cause of action at this early stage.  And, 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, as I see it 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 Article  7  to  modify the  terms  of  the  Charterparty  contract, involves intense and complex factual matters requiring a full hearing and testing of the evidence.  It is certainly not appropriate therefore to strike out this second cause of action here.

Defendants’ Summary Judgment

[57]     For completeness, I now turn briefly to Seafuels’ second application, that seeking summary judgment.  Rule 12.2(2) of the High Court Rules provides that a court may give summary judgment against a plaintiff if the defendant satisfies the court that none of the plaintiff’s causes of action can succeed. In this case, Seafuels is required to show that both the claim in duress and the claim under the Article 7 of the Convention have no prospects of success if the case went to trial.

[58]     A defendant’s application for summary judgment is similar to a strike out application, the difference being that a summary judgment application requires affidavit evidence, and can be decided on material other than that contained in the pleadings. If there are material disputes of fact on the affidavit evidence, however, summary judgment must be refused. Summary judgment will  generally only be

awarded where there is a complete defence to the plaintiff’s claim, or a clear answer

to the claim which cannot be contradicted. 16

[59]     In the present case, for all the reasons I have outlined above for refusing to strike out both Svitzer’s causes of action, summary judgment must also be refused. Seafuel’s summary judgment application is dismissed.

Costs

[60]     As Svitzer’s opposition to Z Energy’s application first to be struck out as a party to this proceeding and secondly for certain provisions in the statement of claim to be struck out has succeeded, I see no reason why costs on that application should not follow the event in the normal way.

[61]     Costs are therefore awarded to Svitzer against Z Energy on this application on a category 2B basis together with disbursements as fixed by the Registrar.

[62]    In addition, as Svitzer’s opposition to Seafuel’s strike-out and summary judgment applications has also succeeded again I see no reason here why costs on those applications should not follow the event in the usual way.

[63]     Costs are therefore awarded to Svitzer against Seafuels on those applications on a Category 2B basis together with disbursements as fixed by the Registrar.

[64]     I certify for one counsel only for Svitzer.

16 Westpac Banking Corp v MM Kembla NZ Ltd [2001] 2 NZLR 298. At [60].

Further Directions

[65]     The Registrar is directed to list this matter for call in an appropriate Associate Judge’s Chambers List for further directions to be made to progress this proceeding to trial.

‘Associate Judge D.I. Gendall’