Mr Justice Gross:
INTRODUCTION
- This is an appeal by ship and cargo interests ("the Appellants") from an arbitration award dated 31st March, 2009, made by Mr. John Reeder QC, the Lloyd's Salvage Appeal Arbitrator ("the appeal arbitrator" and "the appeal award"). By the appeal award, the appeal arbitrator allowed an appeal by the Respondent salvors ("the Contractors") from the award of the first instance arbitrator, Ms Bucknall QC ("the arbitrator" and "the award"). The arbitrator had awarded the Contractors salvage remuneration in the amount of US$34,500,000 plus interest and costs; the appeal arbitrator increased that award to the sum of US$40,750,000, plus interest and costs.
- The appeal award was also concerned with a cross-appeal from the arbitrator, whereby the Appellants had sought to argue that the arbitrator had overstated the dangers to the casualty. That cross-appeal was dismissed by the appeal arbitrator and from that decision there is no appeal.
- The Appellants have been granted leave to appeal on three questions of law arising out of the appeal award:
i) Whether, when assessing salvage remuneration payable pursuant to a Lloyds Open Form salvage agreement in the standard form, it is correct to take into account, as an enhancing feature, the possibility that the salvor and/or the salvage industry may experience difficult economic conditions in the future;
ii) If, in principle, it is relevant to take such matters into account, whether it is permissible to take into account the actual economic conditions experienced between the date of termination of the services and the date of the award;
iii) Whether the principle in The Amerique (1874) LR 6 PC 468 is applicable to all types of salvage cases, including complex and comprehensive cases, or whether, as the appeal arbitrator found, a different principle applies in such cases.
Issues i) and ii) will be considered together; both concern the principle of "encouragement". Issue iii) will be considered separately.
THE UNDERLYING FACTS
- The underlying facts can be shortly summarised and appear from the Reasons accompanying the appeal award ("the Reasons").
- The m.v. "OCEAN CROWN" ("the ship") is a modern, handy sized, geared bulk carrier, 189.99 metres in length and 32.26 metres in bream, of 52,347 DWT, fitted with five holds, equipped with 4 deck cranes and powered by a diesel engine developing 7,880 kW. She was laden with 49,850.6 tonnes of copper concentrates in bulk ("the cargo"), when, in August 2007, in the course of a voyage from Chile to Indian ports, she ran aground on an uncharted rock in the Canal Darwin, in about a position 45º 24.57' S, 074º 03.717'W.
- By an agreement dated 7th August, 2007, on the LOF standard form of salvage agreement made between the Contractors and the owners of the ship, her cargo, bunkers and stores ("the LOF"), it was agreed that the Contractors would exercise their best endeavours to salve the vessel and her cargo and that the Contractors' remuneration for doing so would be determined by arbitration in London.
- The appeal arbitrator described the grounding location as "reasonably well sheltered" but in a pollution sensitive area and very remote from any major port, so posing a logistical challenge for the Contractors.
- It should at once be mentioned that the salved fund was of a very high value. The value of the ship (at the termination of the LOF services and so after the casualty) and her stores was US$66,096,259.79, that of her bunkers was US$243,291 and that of her cargo US$99,846,280.00, making a total salved fund of US$166,185,830.79.
- So far as concerns dangers, it was common ground that the casualty was immobilised until assisted by a professional salvor with the resources to perform the service. A lengthy period of immobilisation was itself a serious risk for a ship and cargo of this value; it may be noted that this grounding impacted on the market for copper concentrates.
- Turning to the physical risks to the casualty, hold No. 1 had flooded and the casualty was hard aground on her port side from about the aft end of No. 3 hold and the forward end of No.4 hold to about amidships. In agreement with the arbitrator, the appeal arbitrator held that the physical risks to the casualty were serious. In summary:
" There was a short term risk of further damage and flooding of No.3 hold; this risk became much more serious towards the end of September, carrying with it a risk of flooding No.4 hold with a prospect of the casualty in the future becoming unsalveable. There was some pollution risk. "
- The services were lengthy and successful. They lasted for some 66 days to the redelivery of the ship on the 11th October, 2007 and about 107 days until completion of redelivery of the transhipped cargo (an operation arranged by the Contractors under the LOF) on the 24th November, 2007. The appeal arbitrator held that the services had been rendered "with exemplary speed and efficiency in a remote and difficult location".
- As a matter of fact, the vast majority of the salvage services were performed by sub-contractors engaged by the Contractors. The total cost to the Contractors of the sub-contracted services was a little under US$18 million (without taking into account financing costs). It is therefore apparent – and should not be overlooked - that the Contractors took a very significant commercial risk in undertaking these salvage operations.
- As to the status of the Contractors, the appeal arbitrator said this:
" The Contractors are a young company, but the experience and professionalism of their officers and employees are well known from their service with other well known professional salvors of high repute. They have quickly established themselves as a major player in the salvage business, both by their activities and by their impressive investment…..The Arbitrator stated that the Contractors are (and were at the time of the services) entitled to be described as top class international salvors and entitled to the full encouragement accorded to salvors in this category. I agree with her. "
- In all these circumstances and on any view, the Contractors were entitled to a substantial award. That much is plain, not least from the size of the award of the arbitrator. Moreover, there is no question of an appeal to this Court simply on the basis that the appeal arbitrator awarded a still larger sum. However, the Appellants submit that in coming to his award, the appeal arbitrator erred in law in those respects identified in Issues i) and ii) and Issue iii).
ISSUES i) and ii)
- (I) Introduction: As already foreshadowed, Issues i) and ii) concern the principle of "encouragement".
- That principle long pre-dates the London Salvage Convention 1989 ("the 1989 Convention") in which it is now given express mention. Art. 13 ("Criteria for fixing the reward") of the 1989 Convention provides as follows:
" 1. The reward shall be fixed with a view to encouraging salvage operations, taking into account the following criteria without regard to the order in which they are presented below:
(a) the salved value of the vessel and other property;
(b) the skill and efforts of the salvors in preventing or minimizing damage to the environment;
(c) the measure of success obtained by the salvor;
(d) the nature and degree of danger;
(e) the skill and efforts of the salvors in salving the vessel, other property and life;
(f) the time used and expenses and losses incurred by the salvors;
(g) the risk of liability and other risks run by the salvors or their equipment;
(h) the promptness of the services rendered;
(i) the availability and use of vessels or other equipment intended for salvage operations;
(j) the state of readiness and efficiency of the salvor's equipment and value thereof."
- The leading textbooks on salvage both emphasise the principle of encouragement. Kennedy & Rose, Law of Salvage (6th ed.), comments as follows:
" 1453 The International Salvage Convention 1989 confirms the judicially promoted policy of encouraging salvage operations by the prospect of assessment of the reward in a generous way…..
1454 The Admiralty Court not only developed the general policy of encouraging salvage operations but overtly took on board the additional value of encouraging persons who were particularly able to render effective services, especially where they held themselves in readiness to provide services of a dedicated salvage nature. Four classes of salvor are recognisable: those who would normally not expect to render salvage services; those, like harbour authorities, whose normal work is not salvage but who might on occasions render salvage services as an incident of their normal work; those for whom salvage is a part of their normal activities, albeit not their exclusive concern (and who may hire in salvage equipment or sub-contractors to work with their salvage superintendent); and the full professional salvor who maintains specially equipped salvage vessels, pumps and other equipment in a state of readiness allowing for quick reaction to disasters. The tribunal will react progressively more favourably the further along this scale the claimant is…… "
- Brice on Maritime Law of Salvage (4th ed., edited by Mr. Reeder) observes that the concept of encouragement is "fundamental to the making of any award" (at para. 2-117) and that it "must be in the forefront of every case" (at para. 2-128).
- (II) The appeal award: The appeal arbitrator dealt with this topic in paras. 248 – 259 of the Reasons. Against the background already outlined, much of what the appeal arbitrator said in this "chapter" is undoubtedly correct and is not challenged.
- The appeal arbitrator began by underlining that Art. 13 (of the 1989 Convention) requires an award to be fixed with a view to encouraging salvage operations. Next, he observed:
" Plainly the award must in all the circumstances be fair to all parties or else salvage operations will not be encouraged. Nevertheless, the concept of what is fair is influenced in individual cases by the application of the criteria relevant to the fixing of the award. Those criteria may lead in particular cases to the award of very large sums…."
The upshot could be, as Sir John Nicholl had said in The Industry (1835) 3 Hagg 203, at p.204, that "…the reward may fall upon an individual owner with some severity". That, however, would only be the case where, as the appeal arbitrator put it, "the factors in the assessment call for an award on a very liberal scale, or there are other special circumstances".
- Continuing, the appeal arbitrator then identified a number of factors underpinning the principle of encouragement. First, through the making of generous awards in appropriate cases, salvors were encouraged to continue to respond to casualties. Secondly, salvors were to be encouraged to keep tugs on permanent salvage station, so incurring idle time, at the expense of salvors but to the benefit of the maritime community. Thirdly, salvors were to be encouraged to look favourably on future investment in salvage personnel, craft and equipment. Fourthly, encouragement was necessary because salvage was a "high risk" business, extending to the financial risks arising from inadequate rewards where the salved fund was low and no reward at all from abortive sorties. LOF of course is and essentially remains a "no cure no pay" contract.
- With regard to the second of these factors, the appeal arbitrator pointed out that the Contractors had adopted such a policy with regard to one of their tugs. As to the third factor, the Contractors had recently undertaken such investment and that was a factor which was of "some weight" in fixing the award.
- Thus far (paras. 248-257 and 259 of the Reasons), no issue is or could be taken with anything said by the appeal arbitrator. Furthermore, on the factors already identified, the award was properly bound to be generous and encouraging.
- I turn next, however, to para. 258 of the Reasons; here, the appeal arbitrator said this:
" In my view another factor to be borne in mind, is that encouraging awards provide the professional salvor with a cushion in difficult times. When this service was performed the market was very buoyant, as demonstrated by the high rates of hire for the lightning vessels and hull values. Since then there has been a dramatic collapse. If this service were performed today it would perhaps cost less, but the difficulty in obtaining loans and credit in the current economic climate offsets that consideration. Without some reserve, salvors face a financing problem in larger cases. "
To this paragraph in the Reasons the Appellants do take exception – and it gives rise to Issues i) and ii).
- (III) The rival cases: For the Appellants, Mr. Brenton QC submitted as to Issue i) that, in paragraph 258 of the Reasons, the appeal arbitrator had erred in law by taking into account, as a specific and relevant enhancing feature, the possibility that the Contractors and/or the salvage industry may experience difficult economic conditions in the future. The possibility of difficult economic conditions in the future was not a relevant factor in the determination of salvage remuneration. None of the criteria in Art. 13 of the 1989 Convention referred to the risk of a future economic downturn.
- It was wrong to take this risk into account as it could lead to double counting; if the services were performed during "good" times, the salvor would (as here) get the benefit of a high value fund (inflated by the then current boom conditions); it could not be right that the salvor should additionally get the benefit of the risk of a future downturn. Further, it was not self evident that a salvor's profitability would be adversely affected by an economic downturn. Still further, if the risk of future downturn was relevant, it would be relevant to introduce expert evidence (for example, from economists) as to future economic conditions and their likely impact on the salvor and/or the industry; that was contrary to the practice in salvage litigation or arbitration. Moreover, there was no need to take into account the risk of a future economic downturn; over an economic cycle, the good times compensated for the bad.
- As to Issue ii), it was in any event impermissible to take into account – as Mr. Brenton submitted that in para. 258 of the Reasons the appeal arbitrator had done - the actual economic conditions experienced between the date of termination of the services and the date of the (appeal) award. Salvage remuneration was assessed at the date of termination of the services; as was well established, subsequent fluctuations in the value of the salved fund were irrelevant.
- Mr. Brenton submitted that Issue i) should be answered "no" and Issue ii), "not applicable", alternatively "no".
- For the Contractors, Mr. Hill QC submitted as to Issue i) that the appeal arbitrator had neither misdirected himself nor made new law; what he had said was no more than a statement of the obvious. The appeal arbitrator had done no more than state an "indirect factor" that may justify encouragement. It could not be said that good and bad economic times balanced themselves out. It was the case that an economic downturn did adversely affect salvors. The Court could and should take note of the fact that in 2008 (when the global downturn was under way), only 83 LOFs had been signed – the second lowest number on record. The position in 2009 (to the date of the hearing) was that only 66 LOFs had been signed. Taking into account the risk of economic downturns did not mean that expert evidence would be required – any more than parties adduced evidence as to the likelihood of tugs being kept on station or increased salvage investment, if generous awards were made. Overall, as Mr. Hill put it:
" You cannot encourage someone for something in the past; something that they have already done. You can only encourage someone for the future…..To so encourage it is necessary to look to see what the future conditions may be within which the salvors are operating. "
As to Issue ii), the appeal arbitrator had not suggested that a salvage award should be assessed at any time other than the date of termination of the services.
- In any event, as to both Issues i) and ii), Mr. Hill submitted that the appeal arbitrator was not saying in para. 258 of the Reasons that he was awarding the Contractors more money than he would otherwise have awarded them because of present or future financial conditions. The appeal arbitrator
" …was not seeking to make an increased award to reflect this particular difficulty. He was not making an 'enhanced' award ….because of the likely future global financial problems. He was simply stating that, as a generality, this is just one of the many reasons why salvors should be encouraged by a generous award."
- (IV) Discussion: For my part, I would accept that there is necessarily a "future" element in the principle of "encouragement". As Mr. Hill put it, "you can only encourage someone for the future". Cyclical economic conditions (both "boom" and "bust") can be anticipated to form part of the future. To that extent at least, a statement that an encouraging award will provide professional salvors with a cushion in difficult times, is no more than a statement of fact and indeed a statement of the obvious. It does not, however, follow that the risk of future economic downturns is or should be a specific factor serving to enhance salvage remuneration.
- First, there is no mention of this risk in the criteria enumerated in Art. 13 of the 1989 Convention. By contrast, those criteria look to the position pertaining at the commencement of, during or at the termination of the salvage services in question, rather than to future risks. The position accordingly is that salvage operations are to be encouraged for the future, by reference to factors prevailing at the time of the salvage in question.
- Secondly, I think that Mr. Brenton is right to focus on the risk of double counting, if the position was otherwise. The present case is a good example. Subject only to the proper constraints to be discussed under Issue iii), the Contractors will enjoy the benefit of having salved a very large fund – enjoying a higher value than would have been the case had good economic times not prevailed at the time of the termination of services. To further enhance the award because of the risk of a future downturn, would give salvors the best of both worlds and does not strike me as fair to all parties.
- Thirdly, if the question is to be debated at anything other than the level of generalities or truisms, there is indeed a risk that evidence would be needed of likely economic fluctuations. How else is a specific risk of economic downturn to be evaluated? I very much doubt that this would be a wise development in salvage litigation or arbitration.
- Fourthly, if an award is to be enhanced because of an anticipated economic downturn, how is the court or tribunal to address a likely economic upturn? It cannot be right – and it would certainly be novel – if a salvage award during an economic downturn offered "reduced" encouragement because of evidence of an anticipated, relatively imminent, upturn.
- Fifthly, as it seems to me, it would be difficult to delve into the risk of future economic downturns without straying into a consideration of post-termination events. But for very good reason, the law of salvage has adopted the date of termination of services as the relevant cut-off point. By way of obvious example, if the fund is lost (say because the casualty sinks) after termination, the salvor is not deprived of his remuneration; conversely, if the fund increases in value (say because of a rise in the market price of the cargo salved), that too is neither here nor there. If, however, regard was to be had to actual economic conditions experienced between the date of termination of the services and the date of any award, fairness might well dictate having regard to post-termination changes in the value of the salved fund. To do so seems wrong in principle; not to do so, serves to heighten the risk of double counting already identified.
- I therefore conclude that if, in para. 258 of the Reasons, the appeal arbitrator had in mind as a specific enhancing factor the risk of future downturns, then, with respect, his reasoning cannot be sustained. A fortiori, if in doing so, he took account of actual economic conditions experienced between the termination of services and the appeal award.
- The question therefore remains, as to whether the appeal arbitrator did that which Mr. Brenton alleges. I confess that I was initially attracted to Mr. Hill's submission, in essence, that para. 258 contained no more than a statement of the obvious and was merely declaratory or descriptive by nature. But, on reflection, I do not think that is right. My reasons follow.
- First, as a matter of the structure of this part of the appeal award, the appeal arbitrator listed those factors he considered relevant to the making of an appropriately encouraging award in this case. It is difficult to treat para. 258 differently from the paragraphs which preceded it, giving impeccable reasons for the making of an encouraging award and which were undoubtedly not declaratory only.
- Secondly, if, therefore, the appeal arbitrator had regard to the risk of a future economic downturn and the actual economic conditions experienced post-termination, as specific factors enhancing his award, then, with respect, he was taking into account factors which should not have been taken into account. It is of course the case that the process of reasoning involved in arriving at a suitably encouraging award does not (and should not) entail a mechanistic arithmetical exercise, adding identifiable sums for each relevant factor; that would be quite wrong. Instead, the arbitrator's task is to take a broad, overall view in coming to his conclusion as to the right level for an encouraging award, fair to all parties. But even so, if the Reasons make it apparent that the arbitrator has wrongly taken a particular factor or factors into account, then it cannot necessarily be said that their inclusion made no difference.
- Thirdly, I do not think it can be right to speculate as to what the appeal arbitrator had in mind or to assume that the inclusion of para. 258 made no difference to the appeal award. Notwithstanding the respect to which the appeal arbitrator is entitled for his knowledge of this area of the law, the award must stand or fall on the Reasons expressed. Fairness to all parties and in this instance to the Appellants in particular, requires no less.
- In the circumstances:
i) I answer Issue i), "no" and Issue ii), "not applicable" or "no".
ii) The Appellants are accordingly entitled to relief in respect of these Issues. I defer the question of the appropriate form of relief until after my consideration of Issue iii).
ISSUE iii)
- (I) Introduction: As already indicated, Issue iii) concerns the principle in The Amerique (supra) and the approach to be taken to high value funds. Here, as elsewhere, cases are best considered having regard to their factual context. In The Amerique, the award made at first instance was £30,000, a sum treated by the Privy Council as the largest sum then awarded in any English case, with but one exception. Although the casualty was a derelict, the Privy Council (at p.474) was of the view, in all the circumstances, that the ground upon which the award was to be justified, if at all, was the value of the property salved. In the event, the decision of the Privy Council was to reduce the award by 40% to the sum of £18,000. As the headnote put it:
" Where the Court below had awarded an exceptional and excessive amount of remuneration solely from regard to the value of the property salved, their Lordships, notwithstanding their general rule of non-interference upon a question of mere discretion, reduced the said amount…."
- The principle was stated by Sir James Colville as follows (at p.475):
" The rule seems to be that though the value of the property salved is to be considered in the estimate of the remuneration, it must not be allowed to raise the quantum to an amount altogether out of proportion to the services actually rendered. And this is consistent with what is said by Lord Stowell in The Blenden Hall.... 'In fixing a proportion of the value the Court is in the habit of giving a smaller proportion where the property is large, and a higher proportion where the value is small, and for this obvious reason, that in property of small value a small proportion would not hold out a sufficient consideration; whereas in cases of considerable value a smaller proportion would afford no inadequate compensation."
- That principle was echoed in The Glengyle [1898] P 97. This case concerned purpose built, dedicated salvage vessels, keeping permanent salvage station, apparently the first such case before the English Court (see, at p.109). The casualty, it should be underlined, was in "imminent danger of ….certain loss" and the salvage posed "danger and possible loss" to the salving vessels and their crews (at p.110). The value of the salved fund was a little over £76,000. At first instance, Gorell Barnes J made an award in the amount of £19,000, so about 25% of the value of the fund. After citing The Amerique (supra), Gorell Barnes J said this (at p.103):
" The value salved is an element – an important element – in considering the amount to be awarded; but the Court must not be induced by it to award a sum which is out of proportion to the services of the salvors. "
The Court of Appeal declined to reduce the award, having regard, inter alia, to the dangers and the very significant element of professionalism involved.
- The Queen Elizabeth (1949) 82 Ll. L. Rep 803, involved the salvage of the famous ship of that name, after a grounding. The reputational risks, as they would now be called, were manifest; the services were short; the total value of the salved fund was a little in excess of £6.2 million, a value without precedent at the time (see at p.821); the amount of the award was some £43,500. Significantly, this high value fund faced the certainty of continuing damage and a small risk of much more serious loss. Willmer J, as he then was, put the matter this way (at p.821):
" …where one has…a practical certainty of continuing damage and continuing expense, coupled with a possibility, even if it is not more than a bare possibility, of a much more serious loss, one has to give some real effect to the very high value of the salved property. By that I mean that one must give some effect to it, beyond saying to oneself merely that this is a case in which the value of the salved property at least provides a sufficient and abundant fund out of which to reward the salvors.
I am not saying that you can measure salvage awards as sums in arithmetical proportion in relation to the salved property when you have values of the magnitude that you have in this case, but equally it would not …be right to say that, where you have a value of this size, the addition of a few millions of the subtraction of a few millions would make no difference whatsoever. So long as even an outside chance of anything in the nature of total loss remains, then …the increase of value must involve some, although possibly not great, increase in the salved award over and above what might have been awarded had the value been much smaller.
I have tried to give effect to that in the awards which I propose to make in this case. I have tried to give effect to the well-known principle whereby a salvage award should be a fair remuneration for the services rendered…. I have tried to give effect to the principle that the awards must be such as will encourage these salvors, and others, to be ready to go out and render like services in similar emergencies to other vessels… "
- Self evidently, as these authorities demonstrate, no simplistic "percentage" approach can be adopted.
- (II) The appeal award: The appeal arbitrator dealt specifically with the high value of the fund in paras. 260 – 269 of the Reasons. In the course of doing so, he referred to the three authorities which I have already highlighted. In para. 261, he emphasised the dangers in the present case, in these terms:
" …there was a short term risk of continuing damage and risk of flooding of No.3 hold which would have damaged the cargo, though the risk was not of a high order. In the longer term there was a serious risk of this occurring, coupled with a risk to the No. 4 hold. The casualty could in time have become unsalveable. This scale of risk requires clearly to be reflected in the award. The damage is not a remote possibility: the risks defined are very real and important, as is the continuing loss and expense associated with the casualty being immobilised. "
- Having cited the statement of principle in The Amerique, the appeal arbitrator, controversially, went on to say this (at para. 263):
" This statement of principle has full force and effect in cases where the services are straightforward. Its significance dwindles away in complex and arduous cases of almost continuous activity requiring Contractors to exhibit diverse salvage skills. However, in so far as an award of salvage must be fair to all parties in all circumstances of the case, a sense of proportion has to be maintained in all cases, but liberality is merited in complex cases, for how else is hard work and skill to receive recognition and encouragement? This was a complex case."
Later, it would seem by way of development of his thinking, the appeal arbitrator expressed the matter this way (at para. 267):
" This was a case where the service was complex and comprehensive and thus the principle in The Amerique does not apply in terms. Rather general considerations of proportionality and balance are to be applied. "
There then followed a reference to a passage in the decision of David Steel J in The Voutakos [2008] 2 Lloyd's Rep 516, which, with respect to the appeal arbitrator, is not at first blush entirely easy to follow – as it deals with the significance of sub-contracted services.
- Be that as it may, in para. 269, the appeal arbitrator sought to bring together his thinking both on the size of the fund and the topic of sub-contracted services, as follows:
" ….There is no direct relationship between a simple service and the size of the award but the award should not be allowed, on account of the size of the fund, to rise to a level out of all proportion to the services rendered. Similarly, in largely subcontracted cases, there is no direct relationship between the sum awarded and the amount of the expenditure. Expenditure has to be taken into account and that has to be balanced with other factors, but the award, on account of the size of the fund, should not be allowed to rise to a level out of all proportion to the amount of the expenditure. In addition, high expenditure imports financial risk and risk increases encouragement, but subcontracting has an effect in reducing the breadth of that encouragement. It is a question of balance and assessment, not calculation."
- (III) The rival cases: For the Appellants, Mr. Brenton's attack focussed squarely on the passages in paras. 263 and 267 of the Reasons, cited above. His straightforward submission was that the appeal arbitrator was wrong in law; there was one relevant principle, namely that set out in The Amerique; it was applicable in all cases; there was no warrant for restricting its application to straightforward cases. The appeal arbitrator was saying something different to allow himself an additional element of liberality; the danger in the appeal arbitrator's approach was that of liberality without the moderating influence of the principle in The Amerique. It could not be assumed that the appeal arbitrator would reach the same and the correct outcome, by the application of "general considerations of proportionality and balance", which in any event the appeal arbitrator appeared to regard as something different from the principle in The Amerique.
- For the Contractors, Mr. Hill accepted from the outset that the principle of The Amerique was applicable in all cases; there was accordingly no issue in that regard. The appeal arbitrator had not erred in law because, properly construed, paras. 263 and 267 of the Reasons did not suggest otherwise. The Amerique principle was one of "proportionality" and the appeal arbitrator, so experienced in this area, had not gone beyond that. With regard to para. 263 of the Reasons, all that the appeal arbitrator was saying was that the effect of the principle was less in complex and arduous cases; not that the principle itself had less significance or was inapplicable in such cases. As to para. 267 of the Reasons, Mr. Hill put his submission this way:
" What Mr. Reeder QC was saying was that where the services are complex and arduous, though performed in whole or in part by a sub-contractor, the principle still applies but the effect of its application will be muted or more limited than in cases where the services were straightforward. This is of course logical…."
Even if paras. 263 and 267 of the Reasons were not easy to follow, they involved no more than a conflation of the appeal arbitrator's thoughts on the principle in The Amerique, cases of high value funds and the impact of sub-contracting; it would not be right to conclude that he had erred in law.
- (IV) Discussion: At the outset, I should dispose of one preliminary matter. Mr. Brenton, if I understood his submission correctly, suggested that because leave to appeal had been given under s.69 of the Arbitration Act 1996, the Court hearing the appeal was bound to accept that a question of law had arisen for decision. With great respect, that is not right. The Court hearing the appeal cannot of course reopen the grant of leave and leave cannot properly have been granted unless the Judge seised of that issue has concluded (amongst other things) that a question of law did arise out of the award under consideration. But the Court hearing the appeal is in no other way bound by the decision of the Judge granting leave. On hearing the appeal, the Court is not restricted as to its conclusions; so, it may conclude that in reality there is no question or error of law at all. Nor does any such conclusion involve implicit criticism of the Judge who granted leave; the task of the Judge considering the grant of leave is different from the task of the Judge hearing the appeal.
- Returning to the substance of this Issue, I am unable to accept Mr. Hill's valiant submissions in defence of the appeal award. However benevolently construed, it seems plain to me that paras. 263 and 267 do disclose an error of law.
- As was not or not seriously in dispute before me, the relevant principles are as follows:
i) The value of the salved fund is in any case a significant element in the assessment of a salvage award. Additionally and in accordance with the principle of encouragement already discussed, where the value of the salved property is very high and it is at risk of damage or loss in the absence of assistance, then it is right "to give some real effect to the very high value of the salved property" beyond simply recognising it as furnishing a sufficient fund out of which to reward salvors. See: The Queen Elizabeth (supra), at p.821; Kennedy & Rose (op cit), at paras. 1457-1458.
ii) However, the high value of the fund must not be allowed to raise the quantum of a salvage award to an amount altogether out of proportion to the services actually rendered; this is the moderating principle, for which The Amerique (supra) stands as authority. The point is well illustrated in Brice (op cit), at para. 2-159:
" If one bears in mind that a ship of a certain size laden with a very valuable cargo is just as easy or difficult to salve as an identical ship laden with a cargo of about the same size but of little value, one can see why the salved value, though significant, must not be allowed to detract from the true worth of the service. "
Moreover, as observed in the authorities to which reference has already been made, where the value of the property is high, an award of a small proportion may well provide adequate compensation.
iii) The moderating principle in The Amerique (itself a case of derelict) is equally applicable to all cases, whether straightforward, or involving high dangers (e.g., The Glengyle – imminent danger of certain loss), or complex services.
iv) That said, the application of this moderating principle is necessarily fact sensitive; whether an award will be "altogether out of proportion" to the services actually rendered must involve a consideration (inter alia) of the applicable dangers and the nature of the salvage services. So, an award which is "altogether out of proportion" in a case of low dangers, involving short and simple salvage services may well not be disproportionate in a case where the risks to the salved property are serious and complex salvage services have been provided. The key point, as it seems to me, is that the value of the salved property by itself must not be allowed to result in an award "altogether out of proportion" to the services actually rendered.
- As already foreshadowed, I regret that I cannot reconcile paras. 263 and 267 of the Reasons with these principles. Suffice to reiterate that, on the face of it, the appeal arbitrator said that the principle in The Amerique "does not apply in terms" in complex cases. But it does. It may be of course, that the same or a similar result could be reached by way of the appeal arbitrator's recourse to "general considerations of proportionality and balance"; here again, however, it would be quite wrong to speculate. Furthermore, to my mind, the need to consider the moderating effect of the principle in The Amerique is and ought to be a part of the reasoning of a court or tribunal seised of such issues.
- Accordingly, I answer Issue iii), "yes", or in more extended form, "the principle in The Amerique is applicable to all types of salvage cases, including complex and comprehensive cases".
- It follows that the appeal must be allowed on Issues i) – iii).
RELIEF
- There was a brief debate before me as to the appropriate form of relief if I concluded, as I now have done, that the appeal is to be allowed. Mr. Brenton's preferred course was that I should simply reinstate the award of the arbitrator. On balance, I am not persuaded. Before adopting that approach it would plainly be necessary to require further materials from the parties and further argument as to the right level of award, on the basis of the law as set out in this judgment. I think, instead, that the right course is to remit the appeal award to the appeal arbitrator for reconsideration in the light of this judgment. I have no reason to think that, on this footing, the appeal arbitrator will not conscientiously and fairly revisit the question of the justification for the significant amount by which the appeal award exceeded the already substantial sum awarded by the arbitrator.
- I was grateful to both counsel for their submissions and will be grateful for their assistance now in drawing up an appropriate order and on all questions of costs.
