The Teh Hu ; Teh Hu (Owners) and Owners of Her Cargo and Freight v Nippon Salvage Company Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS |
| Judgment Date | 09 October 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J1009-1 |
| Court | Court of Appeal (Civil Division) |
| Date | 09 October 1969 |
[1969] EWCA Civ J1009-1
In The Supreme Court of Judicature
Court of Appeal
Appeal by the Contractors (Defendants) from judgment of Mr. Justice Brandon on the 6th May 1969.
The Master of the Rolls (Lord Denning)
Lord Justice Salmon and
Lord Justice Karminski
In the Matter of the Arbitration Act 1950
and
In the Matter of an Arbitration Under
Lloyd's Standard form of Salvage Agreement
The "Teh Hu"
Mr. B.C. SHESN, Q.C., and Ilr. A. CLARKE (instructed by Messrs. Constant & Constant) appeared on behalf of the Contractors, Appellants.
Mr, J.F. WILLMER, Q.C., and Mr. H. THOMAS (instructed by Messrs. Iliddleton, Lewis & Co. London) appeared on behalf of the Owners of the "Teh Hu", and (instructed by Messrs. Woodhouse-Vaux & Elborne) appeared on behalf of the Owners of her cargo and freight.
In January 1967 a ship, the "Teh Hu", owned by a Panama company and registered in Liberia, was carrying a cargo of steel products From nizushicia, Japan, to Houston; United States of Araerioa. On the 25th January 1967, when she was in the middle of the Pacific, there was an explosion in the engine room, Water poured in. The engine room and boiler rooms were flooded. The vessel was in danger of sinking.
The shipowners sought help from a Japanese company, the Nippon Salvage Company. On the 27th January, 1967, the salvors agreed to send a salvage tag, the "Hayashid Maru., out from Moji (in Japan) to the rescue. The tug went on the terms that, if the "Teh Hu" was feasible of salvage, the salvors were to undertake to salve the vessel under the terms of Lloyd's Standard Form of Salvage Agreement, "No cure - no pay".
The tug went full speed for six or seven days, covering 2070 miles. She reached the "Teh Hu" on the 2nd February, 1907. The next day the Master of the tug and the Master of the "Teh Hu" signed Lloyd's Standard Form, stNo cure - No pay". The salvors pumped out most of the water from the engine room and towed the "Teh Hu" about 2,000 miles to Honolulu. They arrived there on the 7th February, 1967. The salvage services then tereinated.
The salvors, having saved the "Teh Hu", were, of course, entitled to salvage rewards and in accordance with the terms of Lloyd's Standard Form, their remuneration was to to be fixed by Arbitration in London". In calculating this remuneration the arbitrator would, of course, have regard to the out-of-pocket expenses which had been incurred by the salvors, such as the wages for the crew of the tug, the fuel for the tug and so forth. They had paid all these in Japanese currency, namely, the yen. The arbitrator would also have ragard to the salved value of ship and cargo at the date when the salvors' services terminated. This value would, no doubt, be calculated by the parties in Japanese yen or in United States dollars.
The salvors asked for and received security for this remuneration. It was provided on behalf of both ship and cargo inUnited States dollars by a bank guarantee. It was open to the Committee of Lloyd's, under clause 10 of the Standard Form, to pay out of the security such sum as they might think reasonable on account of any out-of-pocket expenses by the salvors.
So far all was plain sailing. If the arbitration had been held reasonably soon and the award given before November 1967, there world have been no trouble about currency. The salvage reward would have been the same in all currencies, namely, 126,000 United States dollars, or 45,360,000 Japanese yen, or £45,000 sterling. But in November 1967 sterling was devalued. The arbitration was not held till hay 1968 and the award given in July 1968. The Japanese yen and the United States dollar remained stable, but the pound sterling was devalued by 14%. The salvage reward, in tersas of dollars or yen would still be 126,000 United States dollars or 45,360,000 Japanese yen. But £45,000 sterling world only fetch 108,000 United States dollars or 38,880,000 Japanese yen.
The salvors claim that the reward in sterling should be up-lifted from £5,000 to take account of the devaluation. But the shipowners claim that it should remain at £4-5,000, even though sterling has been devalued.
Just pause a moment to see what this means. Neither shipowners nor salvors use sterling as their currency. They think in dollars or yen, They buy and sell in dollars or yen. They pay and receive in dollars or yen. Their purchasing power is reckonedin dollars or yen. Yet if the shipowners are right in their contention, it means that, by reason of the devaluation of sterling (which is really nothing to do with either party) the payment is made in devalued pounds, so that the shipowners pay less than they ought and the salvors receive less than they deserve.
Both the orisinal arbitrator (Mr. Darling, Q.C.) and the appeal arbitrator (Mr. Nalsby. Q.C.) rejected the shipowners' contention. Each of them thought that there should be an uplift of "the sterling award" so as to make up for the devaluationof the pound sterling. But the learned Judge has hold that devaluation shonld be ignored and that even today, since devaluation, the shipowners should pay only £ 45000 and the salvors receive only £45,000, although it is far less than they ought in Justice to receive.
The Judge has based himself on the rule of the common law that, when a court of law lives judgment for debt or damages, it must give Judgment in pounds sterling: and that, when the debt or damages have accrued in foreign currency, the rate of exchange is taken at the; date when the cause of action accrued. The Judge held that the rule is the same in salvage law. He says that salvage reward is assessed at the date of termination of the services; and that a so far as the general law of salvage is concerned, a devaluation of the pound occurring after the termination of the salvage services is not a relevant factor to take into account in fixing the reward for them".
I am afraid that the common law rule on tills subject is most unsatisfactory. It was fixed at the time when the pound sterling was a stable currency of whose true fixed and constant quality there is no fellow in the firmament". But that enviable state of affairs is gone. Sterling is no longer the most stable currency in the world. It has been devalued more than once. We ought to recognise this. We should modify the common law to meet the new situation. Apart from this, the common law proceeded on the assumption that the Courts of England had no power to save judgment in a foreign currency. Every judgment of an English Court has, so it is said, to be given in sterling. So the Courts felt obliged to lay down a rule for converting a foreign debt, or foreign damages, into sterling. The rule they laid down, for better or for worse, was that a sum. payable for debt or damages is to be converted at the date when the cause of action accrued.
I see no reason to extend this rule to the English maritime law or to arbitrations held under Lloyd's Standard Form of Salvage Agreement to use no pay' this form of agreement isused all over the world. Whenever a ship is In distress and calls for help - and a salvor comes to the rescue - as often as not, the Meters sign Lloyd's Standard Form. A ship may belong to an owner in one country, its cargo to an owner in another country. The salvors may be subjects of yet another country. All agree to arbitrate in London. By so doing, they agree impliedly that the reward shall be ascertained according to English law. They do not mean that it shall be ascertained by the English law of contracts or torts. They mean that it shall be ascertained by the English maritime law which is accepted by seafaring nations generally. Vie had occasion to emphasise the difference recently in the "Tojo moru". But never hitherto have we had to consider what English maritime law says upon this currency question.
I start with this. The maritime law as to salvage is a peculiarly equitable jurisdiction. It, seeks to do what is fair and just both to the salvors and to the owners of the ship and cargo which is saved. If all of them - salvors and owners -conduct their affairs in a stable currency, such as United States dollars or Japanese yen, then the salvage reward should be calculated in that currencys and the arbitrator should make his award in that currency. There is nothing, so far as I know, to stop him. After all, there are many countries whose Courts can give judgment for a sum of money in a foreign currency, including some important maritime countries such as Norway, Germany or Italy. See Dr. P.A. Mann on The Legal Aspects of money (2nd edition) (1953) page 307. And I see no reason why English Courts in a salvage suit should not do the same. But even if the Courts cannot do it, I think that Lloyds-arbitrators can. Take this very case. The shipowners put up security in United States dollars. It is obviously fair and just that the award should be made in United States dollars. If the shipowners do not pay, it can and should be taken out of the dollar security. Remember also that the salvor's out-of-pocket expenses can be paid out of the security. Surely they should be paid in the currency in which they were incurred, rather than in devalued pounds.
Such being the principle, I think the task of the arbitrator in this case is straightforward. First, he should calculate the out-of-pocket expenses of the salvor in yen or dollars (it matters not which, for they remained steady at the time When those expenses were incurred). Second, he should calculate the salved value of the ship and cargo in yen or dollars likewise at the date when the services terminated. Taking those figures and any other relevant matters into consideration, he...
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