Government beats UK hedge fund manager in R743 million shipwrecked silver case

One of Britain’s top hedge fund managers lost a legal fight over the salvage of $40 million (R743 million) of silver from the wreck of a ship sunk by a Japanese submarine in World War II.

The UK’s Supreme Court on Wednesday dealt a blow to a company controlled by Paul Marshall, ruling that South Africa, the silver’s owner, wouldn’t need to get embroiled in a case because it enjoys state immunity.

At stake was a cargo of 2,364 bars of silver, once destined for the South African Mint, that lay hidden two and a half kilometres below the surface of the Indian Ocean for decades until it was found and lifted by Marshall’s Argentum Exploration.

The firm had argued it was owed a substantial salvage figure and said it wanted a court to “fix an award,” but the judges dismissed the claim. They said they were informed that the two sides had recently agreed to a confidential settlement. 

“The court has firmly sent a message to those hoping to find and claim ownership of lost treasure that finders are not always keepers,” said Jonathan Goulding, a lawyer for the South African government at HFW. 

A lawyer for Argentum declined to comment.

The treasure haul was aboard the SS Tilawa, which was sailing from Mumbai on its way to Durban in 1942 when it was struck by two torpedoes and sunk with the loss of 281 passengers and crew.

The sinking has been dubbed “India’s Titanic” for the scale of the tragedy. 

Marshall has been pursuing the riches of the deep alongside a younger executive at his hedge fund Anthony Clake, who may be the most successful shipwreck hunter of modern times, a Bloomberg Businessweek investigation reported in November.

Clake has taken advantage of underwater technology to open up the ocean floor to exploration in a way that has never happened before.

Clake said he’d conducted about 30 wreck salvages in all, sometimes as the main investor, sometimes as a minority investor and often with his companies working on behalf of a client. 

Among them is the SS Tilawa. The vessel was first discovered at the bottom of the Indian Ocean in 2014, before being salvaged in a secret expedition three years later.

The silver was brought to the British port of Southampton before being locked up in a secure warehouse, where it has remained ever since.

The South African government had argued that that it not only still owns the silver, but insisted that it shouldn’t have to submit to the lawsuit at all. 

The Supreme Court judges agreed, saying that the silver was a non-commercial cargo and the government was entitled to immunity. 

The ruling overturned two prior court decisions, with a judge previously saying that the government had probably “forgotten” about the bullion. UK Companies House filings record that Marshall controls Argentum.

The case shows that if a salvaged cargo was originally intended to be used by a state, then it can be recovered by that same government, HFW’s Goulding said.

“As we continue to learn more about the ocean seabed, many more historic wrecks have already been targeted,” Goulding said. 

“In light of this ruling, anyone hoping to recover valuable lost cargo, and bring it to the UK to claim ownership of it, will need to first need to take steps to identify the original owner and make contractual agreements with them to salvage cargo before attempting to do so,” he said.