No salvage operation is ever clear-cut

On 1st September 1991 a Cape Town based tug, Herdentor (125 ton BP), secured a line on board the laden tanker Atlas Pride drifting 40 miles off East London. After 10 days holding the casualty, the Herdentor slipped its tow, and left. There followed the mother of all legal battles, as Simon Tatham explains.

Herdentor had been engaged under a Towhire contract by one of the European based international salvors. They in turn had been awarded an LOF, but they depended on what units were available locally. After the tow was abandoned, they had to engage further subcontractors, this time on ISU Award Sharing terms. The salvors, rather than paying a daily rate, found themselves having to share the salvage award for the work they argued the Herdentor should have done. They claimed back the difference. The High Court decided that there was a valid claim for diminution in the price received for the services.

The case highlights the misunderstandings that can arise when a tug is engaged on commercial terms to carry out what is, to all intents and purposes, a salvage operation. The owners of the Herdentor believed they were being engaged to escort or assist the casualty into port. The salvors maintained that the Herdentor had to follow orders, until placed offhire.

Where the lead contractor, having secured an LOF, critically needs a local tug but is reluctant to share his eventual award, there are a number of potential sub-contracts that might be employed. A daily rate contract is generally preferred because it may be uncertain how long the job will last. For example there may be no port authority prepared to give refuge or it may take weeks before they are placated and provided with security. Towhire is the most commonly used agreement, not because it is ideally suited, unless of course the operation is a straightforward tow, but rather because the towage industry is familiar with it. Supplytime tends to feature more prominently where OSVs are involved, for the same reason. It is arguably the least suitable in unamended form for salvage, unless being used for ancillary supporting services. To address this, the ISU in 2005 came up with the Salvhire and Salvcon forms of agreement, for use where a salvor wishes to engage sub-contracted assistance in a salvage operation. These do not differ greatly from Towhire or Towcon but have standard clauses germane to a salvage situation allowing the scope of the work to be set out. They have been not however been generally adopted to date.

Uncertainty can prevail at the outset of an incident. A tugowner who has a suitably crewed and equipped unit may rightly be tempted to hold out for award sharing terms rather than accept a daily rate, especially if his property and crew are taking risks. But all too often precious little information is made available to him: what is the condition of the ship and cargo, are there other units in the area who will then take the job?  For whatever reason, the owners of the Herdentor were not willing to commit further, and walked away. Subcontractors in such situations would be best advised to take careful stock of the situation, before getting into it.

Simon Tatham

Simon Tatham is a partner at Tatham Law and founder member of the service. He has more than 30 years’ experience of shipping law.

Reproduced with kind permission of International Tug & OSV magazine