Svitzer Salvage Bv v Z Energy Ltd v Seafuels Ltd

• Jurisdiction: New Zealand
• Judge: D.I. Gendall
• Judgment Date: 20 July 2012
• Neutral Citation: [2012] NZHC 1650
• Docket Number: CIV-2012-485-452
• Court: High Court
• Date: 20 July 2012

BETWEEN

In the Matter of An admiralty action in personam

Svitzer Salvage Bv

Plaintiff

and

Z Energy Limited

First Defendant

and

Seafuels Limited

Second Defendant

[2012] NZHC 1650

CIV-2012-485-452

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

Application by first defendant Z Energy Ltd to be removed as a party to proceedings — application by second defendant Seafuels Ltd to strike out pleaded causes of action — container ship M.V. Rena ran aground on Astrolabe Reef — plaintiff was appointed salvor and sought to hire additional vessel to remove fuel — only available vessel owned by Seafuels and on charter to Z Energy — short term Charterparty contract entered into between second defendant and plaintiff — plaintiff now sought to have contract set aside and terms recast as terms now considered to be exorbitant and unfair and signed under duress — contract provided certain remuneration to be paid to Z Energy — whether Z Energy was “improperly” included as a party — whether Seafuels could prove that pleadings disclosed no reasonably arguable cause of action.

Counsel:

LJ Taylor & AJB Orpin — Counsel for the Plaintiff

RJ Gordon — Counsel for First Defendant

P. Barratt — Counsel for Second Defendant

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.

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...