De Beers ordered to pay for salvage of equipment

De Beers has been ordered to pay a reward to a marine subcontractor who salvaged one of the diamond giant’s robotic submarines, but substantially less than the amount demanded.

The submarine was recovered by De Beer's long-time marine subcontractor, Harry Dilley who sought an additional R5m reward, arguing that the salvage operation wasn’t part of his initial contract. 

The Supreme Court of Appeal (SCA) this week ruled the contractor was justified in making make a salvage demand, but reduced the amount to R80,000.

De Beers uses robotic submarines to map the sea bed at its Namibian mining operations, which the company said contain “the richest marine diamond deposit known in the world”.

De Beer’s partnership with the Namibia government was renewed in 2017 for a further 10 years. At the time the operations were the country’s biggest source of tax receipts, which amounted to $233m in 2016.

De Beers later commissioned new equipment for its Namibian operations and conducted sea trials in the Western Cape with assistance from Dilley.

In 2017, the company Beers signed a new contract with Dilley to charter his work boat. Part of the agreement including “towing” and “recovery” services, should they be required.

During the trials one of robot submarines suffered a communications breakdown and washed up near Simon’s Town.

Dilley and some divers nearby undertook a salvage operation, using Dilley’s boat and equipment to recover and secure the vessel.

Dilley claimed the salvage operation was outside his contract with De Beers, meaning he could charge a separate, higher rate. De Beers viewed the salvage as part of the towing services contained in the contract.,

Dilley instituted action in the high court for an initial salvage reward of R10m. The Cape Town high court agreed the salvage wasn’t part of his contract but granted him about R5m, prompting De Beers’ appeal to the SCA.

Writing for a unanimous court on Thursday, appeal justice Ashton Schippers said the two issues were whether the salvage by Dilley was outside the contract with De Beers and, if it was, whether the reward of about R5m was warranted.

In terms of international salvage law, to which SA is a signatory, an entitlement to a salvage reward depends on whether the salvaging was done “voluntarily”. As Schippers noted, that means a salvage reward will be granted only if the salvager’s services were outside a contract.

De Beers argued what Dilley called “salvaging” was, in fact, “recovery” in terms of the existing contract — putting it beyond voluntary work.

Schippers disagreed: “The parties never contemplated that [Dilley] would monitor the [submarines] — for which De Beers was solely responsible — nor that [Dilley] would render recovery services.”

Schippers said Dilley’s contract was limited to chartering work boats to enable De Beers to conduct its research, and ruled that salvaging had occurred and a reward be granted.

The second issue was whether R5m, as ordered by the high court, was appropriate. Schippers noted the submarine’s value was about R2.5m after recovery, and ordered the R5m reward be replaced with R80,000 and that De Beers pay costs.

moosat@businesslive.co.za