Every year the senior courts issue thousands of judgments, which our reporters assess for their legal significance as precedents. Only a few hundred are selected for reporting, and that is because they change or clarify the law in some way. While the other judgments are published, and may be of interest for various other reasons, they do not merit selection as precedents.

In this short series of commentaries some of our reporters have chosen a case that they believe truly changed the legal landscape in 2024.

In the post below, our law reporter Philip Ridd discusses the case of Argentum Exploration Ltd v The Silver (The Tilawa) [2024] UKSC 16; [2024] 2 WLR 1259, in which the UK Supreme Court considered a question of sovereign immunity in the context of a claim for an award of salvage arising out of interesting historical circumstances.

Silver, salvage, and sovereign immunity

The issue in this case was whether South Africa was entitled to sovereign immunity from in rem proceedings brought by the claimant company (“Argentum”) for an award for salvage. Argentum relied on the exception to sovereign immunity in section 10(4)(a) of the State Immunity Act 1978 –

“A State is not immune as respects—(a) an action in rem against a cargo belonging to that State if both the cargo and the ship carrying it were, at the time when the cause of action arose, in use or intended for use for commercial purposes”.

The facts were straightforward. In 1942 South Africa bought 2,364 bars of silver from India for the predominant purpose of the silver being made into coin by the South African mint. To that end a contract of carriage (f o b) was made for the transfer of the silver from Bombay (now Mumbai) to Durban. The SS Tilawa set out with the silver but in the Indian ocean it was torpedoed by the Japanese and sank to the seabed at a depth of some 2½ kilometres. Under wartime arrangements the UK compensated the shipping company for the loss of the Tilawa, but the silver, uninsured, was lost until such time if any, as techniques of salvage were developed sufficiently to enable recovery. In 2017 Argentum succeeded in salvaging the silver. Mistakenly believing that the UK owned the silver, Argentum had it transported to the UK where it was handed over to the Receiver of Wreck who had it put in safe custody. Argentum eventually accepted that South Africa was the owner, and the in rem proceedings followed.

Argentum initially relied on both “in use” and “intended for use”, but the High Court judge ( [2020] EWHC 3434 (Admlty); [2021] QB 585) held that the predominant intention was to make South African coinage, a sovereign purpose, and Argentum did not pursue that point, so the argument became limited to “in use … for commercial purposes”. Argentum was unable to suggest that South Africa had had the silver in use subsequent to the sinking of The Tilawa, so it was necessary to establish that regard should be had to the position before the sinking and to make good the proposition that South Africa then had the silver in use for commercial purposes.  Short of the Supreme Court Argentum succeeded. It was held that the cause of action arose when the relevant ingredient of the maritime law cause of action in salvage arose, not when that cause of action was complete with the occurrence of the last ingredient, i.e. 1942, not 2017, and that in 1942, by reason of the contracts of purchase and of carriage, commercial transactions, South Africa had the silver in use for commercial purposes. Further, there were concerns that “cargo in use … for commercial purposes” did not make sense so that the words in section 10(4)(a) could not carry their plain and ordinary meaning: the High Court judge said that the provision had to be construed “intelligently rather than mechanically”.

The Supreme Court’s decision

The Supreme Court did not agree that the wording of section 10(4)(a) poses any difficulty. It was a composite expression, reflecting the reality that a ship might be in use for commercial purposes while a cargo might be intended for use for commercial purposes. In any event examples could be given for “cargo in use … for commercial purposes”, notably sale by the owner while the goods were in transit. The Supreme Court considered that the cause of action arose in 2017 because it could not sensibly be said to have arisen before the salvage took place. South Africa having conceded that the position before the sinking required to be taken into account, consideration then had to be given to whether South Africa had the had the silver in use for commercial purposes. In the Court of Appeal ([2022] EWCA Civ 1318; [2023] KB 195) Elisabeth Laing LJ had dissented on the basis that as a matter of ordinary language a cargo which was sitting in the hold of a ship was not being used for any purpose, commercial or otherwise and, while it was undoubtedly the subject of commercial arrangements for its carriage, it would be a distortion of language to say that it was being used for the purposes of those arrangements: her succinct conclusion was that : “[The silver] was being carried, and that is all.” The Supreme Court ([2024] UKSC 16; [2024] 2 WLR 1259) agreed with that analysis. The Supreme Court therefore held that section 10(4)(a) did not apply, but added that the parties had in fact reached a settlement to conclude the matter.

Comment

Several comments might be made, but just three will be made here.

First, the analysis by Elisabeth Laing LJ, taken alone, puts an end to Argentum’s case: the contract of carriage was a preliminary to whatever use South Africa might have made of the silver, preliminary in the sense that an owner of goods cannot put the goods to use until they are in a place where that can be done; the concept of commerciality does not arise.

Secondly, South Africa’s concession that the position before the sinking required to be taken into account is surprising; the Supreme Court considered that, where the cause of action arose later in time, it was appropriate to have regard to whether there had been any change in use or intended use in the intervening period, averring that in the instant case there had been no such change so it was the status of the vessel and cargo at the time of carriage which would be determinative; but that is difficult to accept, given that the silver ceased to be cargo aboard a seaworthy ship and became part of the contents of an inaccessible wreck.

Thirdly, there is an immense amount of learning in the Supreme Court judgment but most of it is no more than background because the essential reasoning for the decision is self-standing.

Philip Ridd, Solicitor

Featured image: stacked silver bars (via Shutterstock) (Not the ones in the case, though.)