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|Judgments - Republic of India and Others v. India Steamship Company Limited.
Lord Cooke of Thorndon Lord Hope of Craighead
For the reasons given by my noble and learned friend, Lord Steyn, in his speech, a copy of which I have seen in draft, I would dismiss the appeal.
In June 1987 the respondents' vessel Indian Grace loaded a cargo of munitions in Sweden for carriage to Cochin in India and delivery to the appellant, the Indian Government. The vessel sailed. A few days later a fire occurred in the No.3 hold of the vessel. The Master and crew extinguished the fire with water. They also jettisoned 51 artillery shells and 10 charges. The vessel put into Cherbourg for survey and to repack and restow the cargo in No.3 hold. Upon completion of the necessary work the vessel resumed her voyage to Cochin. She arrived at Cochin in early September, and the cargo was cleared by 4 September 1987.
In the next few months the Indian Government notified two separate claims to the shipowners. The first was a claim for the total loss of the cargo of munitions. The second was a small claim for short delivery based on the loss of the cargo jettisoned after the fire. On 1 September 1988 the Indian Government issued a Plaint in the Subordinate Judge's Court in Cochin, seeking damages for the 51 shells and 10 charges which had not been delivered. The owners served a defence. This action came on for final hearing in December 1989. After a contested trial the judge gave judgment for the Indian Government for the amount of its claim in Rupees. At that time the sterling equivalent was £7200. An appeal against this judgment is still pending.
On 25 August 1989 (i.e. before judgment in the action in Cochin) the Indian Government caused a writ in rem to be issued in the Admiralty Court in England. On 4 May 1990 the writ was served on the Indian Endurance, a sister ship of the Indian Grace, at Tees Dock, Middlesbrough. In due course the parties agreed to the application of English law and the owners submitted to the jurisdiction of the Admiralty Court. The plaintiffs threatened to arrest the vessel in order to obtain security for their claim against the owners. Upon the provision of a Letter of Undertaking by the Steamship Mutual to pay the claim, if proved, the Indian Endurance was allowed to sail. The Statement of Claim, as subsequently amended, was in respect of damage to all the cargo in No.3 hold. The plaintiffs' case was that the munitions were subjected to radiant heat by the fire, and were consequently unreliable and worthless. The claim was largely made in Swedish kronor. The sterling equivalent was £2.6m.
Initially, the owners pleaded issue estoppel as a defence to the claim: they said that the plaintiffs could and should have brought their whole claim before the court in Cochin. The owners applied to strike out the claim. The summons came before the Admiralty Judge who was then Mr. Justice Sheen. The judge allowed the owners to amend their defence to rely upon section 34 of the Civil Jurisdiction and Judgments Act 1982. Section 34 provides as follows:
Sheen J. held that the cause of action was the same as that on which the plaintiffs had relied when they obtained judgment in India. He held that section 34 of the Act of 1982 was an absolute bar to the English proceedings. He struck out the proceedings. The plaintiffs appealed. The Court of Appeal dismissed the appeal: The Indian Grace  Lloyds Rep. 124. The Court of Appeal ruled that the causes of action were the same and that section 34 applied. The plaintiffs sought to argue that the owners were debarred by agreement, waiver or estoppel from relying on section 34. The Court of Appeal held that section 34 defined the jurisdiction of the court and that parties cannot by agreement, waiver or estoppel confer a jurisdiction upon the court which it did not have. The plaintiffs appealed to the House of Lords: Republic of India and Another v. India Steamship Co. Ltd.  A.C. 410. Counsel for the plaintiffs argued that the causes of action in the foreign and English proceedings were distinct. The House ruled that there was an identity between causes of action in the two sets of proceedings. But Lord Goff of Chieveley, speaking for a unanimous House, held that section 34 operated as a bar against proceedings rather than as an exclusion of jurisdiction. Accordingly, the operation of section 34 could in principle be defeated by agreement, waiver or estoppel. Lord Goff concluded that the matter ought to be remitted to the Admiralty Court to consider the issue of estoppel or waiver. Lord Goff further observed that the plaintiffs sought to raise for the first time in the House of Lords the argument that the judgment of the Cochin court was not a judgment between the same parties as the plaintiffs asserted in the Admiralty action, because it was a judgment in personam, whereas the action was an Admiralty action in rem: 424G. This matter too was remitted for consideration of the Admiralty judge.
The present Admiralty judge, Mr. Justice Clarke, ordered preliminary issues to be tried. After a 6 day trial he gave a detailed and careful judgment. He ruled that: (i) the owners were estoppel from relying upon section 34 by an estoppel by convention and an estoppel by acquiescence; (ii) in any event, the English action being an Admiralty action in rem, although an action brought on the same cause of action as the Cochin action, was an action brought against a different party viz the ship rather than the owners; and (iii) that the principle laid down in Henderson v. Henderson (1843) Hare 100, at p. 115, did not prevent the plaintiffs bringing in rem proceedings in the Admiralty court: The Indian Grace (No. 2)  2 Lloyds L.R. 321. The owners appealed. The Court of Appeal came to a contrary conclusion on all three issues and allowed the appeal: The Indian Grace (No.2)  2 Lloyd's L.R. 12.
Reversing the order in which the issues were considered in the courts below I propose to examine first whether the English action in rem is "between the same parties, or their privies" within the meaning of section 34 as the action in which the plaintiffs obtained judgment in Cochin. If the answer to that question is yes, the question arises whether the owners are estopped from relying on section 34. If the owners fail on both the principal issues the further question arises whether the owners can rely on the principle in Henderson v. Henderson (1843) 3 Hare 100, viz abuse of process, to defeat the action in rem.
Clarke J. concluded that the authorities show that, although an action in personam and an action in rem may involve the same cause of action, historically they have been regarded as being between different parties: 350, 2nd col. Recognizing that an action in rem affects the owners, the judge cited the dictum of Fletcher Moulton L.J. in The Burns  P. 137 that "the action in rem is an action against the ship itself." He also relied on the judgment of Hobhouse J. in The Nordglimt  Q.B. 183 along the same lines. Accordingly, the judge held that section 34 is inapplicable because the parties in the two sets of proceedings were different. Counsel for the plaintiffs supported this reasoning and amplified it in a helpful argument. It is necessary to understand the nature of the pending action in rem.
The pending action
The claims endorsed on the writ do not involve maritime liens. Instead the claims of the plaintiffs invoked the enlarged Admiralty jurisdiction of the High Court. The grounds of jurisdiction relied on by the plaintiffs are two paragraphs in section 20(2) of the Supreme Court Act 1981, namely:
The indispensable conditions upon which in such cases, among others, the jurisdiction of the Admiralty Court is predicated is defined in section 21(4) of the Act of 1981. Section 21(4) provides that in the case of claims of the type under consideration (i.e. falling within section 20(2)(g) and (h)) an action in rem may be brought where:
This is the statutory basis upon which the Indian Government invoked the jurisdiction of the Admiralty court.
The manner in which the Indian Government invoked the jurisdiction of the Admiralty Court was by the issue and service of a writ in the form prescribed by RSC Order 75, rule 3(1), read with Form No. 1 in Appendix B. The writ is expressed to be directed to the owners of the ship as defendants and other persons interested in her.
The historical perspective
The historical context of the problem before the House of Lords is noteworthy. Before the Judicature Acts (1873-1875) the courts of King's Bench regarded the High Court of Admiralty as in a sense a superior court but being of limited jurisdiction, amenable to restraint by prohibition: James v. South Western Railway Company (1872) L.R. 7 Ex. 287. The common law courts effectively blocked the assumption by the High Court of the Admiralty of personam jurisdiction. This was done by writs of prohibitionto restrain the expansion of the jurisdiction of the High Court of Admiralty. The writ of prohibition did not extend to the Admiralty jurisdiction over the ship. Maritime liens over the ship were immane from the writ of prohibition, see the valuable discussion in Thomas Maritime Liens, 1980 7. Admiralty practitioners and judges used the concept that the ship is a defendant in an action in rem, as a means of defending and extending the jurisdiction of the High court of Admiralty. An enlarged view was taken of what constitutes a maritime lien. The personification theory flourished. But this struggle for power was ended by the Judicature Acts.
In the nineteenth century it was believed that an admiralty action could only be brought in respect of a maritime lien: The Bold Buccleugh7 Moore 267 (P.C., 1851). By statute actions in rem were subsequently permitted in new categories. But only after the Judicature Acts was it established that the new categories did not involve maritime liens: Henrich Björn (1886) 11 App. Cas. 270. While the action in rem was still confined to maritime liens, courts sometimes ascribed personality to a ship. The ship was regarded as both the source and limit of liability. The ship herself was the "wrongdoer." After the Judicature Acts the personification theory fell into decline.
The interaction, and cumulative effect, of a number of factors contributed to the decline of this theory. First, there is the factor, already noted, that actions in rem were permitted in new categories which did not involve maritime liens. It became less easy to personify the ship as the real defendant. Secondly, before 1873 actions in rem were commenced by a form of writ which did not name the owners of the ship as defendants. By 1883 the modern form of process, which named the owners as defendants, had evolved. This development made it easier to regard an action in rem as an action against the owners of the vessel. An argument that the procedural changes brought about no change in substance was expressly rejected by Jeune J. in The Dictator  P. 304, at 307. The procedural change influenced the reasoning of judges in subsequent important decisions: The Tervaete  P. at 274, per Atkin L.J; The Jupiter  P. 236, at 245, per Atkin L.J; The Cristina  A.C. 485, per Lord Atkin (at 492) and Lord Wright (at 505). In The Arantzazu Mendi  A.C. 256, the plaintiffs sought to avoid a plea of sovereign immunity by issuing a writ naming the ship as a defendant. Lord Atkin observed that the writ was wholly irregular since it "purported to make a chattel (the ship) a defendant and to order the chattel to enter an appearance" at 262-263. The other Law Lords agreed. Thirdly, until the Judicature Acts, it was not possible to combine an action in rem with an action in personam in the Admiralty. Since The Dictator was decided in 1892 the law has been that once the owners enter an appearance (or in modern phraseology when they acknowledge issue of the writ) there are two parallel actions: an action in personam and an action in rem. From that moment the owners are defendants in the action in personam. This development militated against the personification theory. It became implausible to say that the owners are the defendants in the action in personam but the ship is the defendant in the action in rem or, alternatively, as counsel for the Indian Government suggested, there is no defendant in the action in rem. Fourthly judges, steeped in Admiralty history with its civilian roots, tended to be more sympathetic to the personification theory than judges trained in the common law. At appellate level common law judges tended to take the robust view that a ship is an inanimate thing, incapable of making contracts and committing torts, and devoid of legal personality. In authoritative judgments common law judges eschewed the mystique of the personification theory.
The personification theory gave way to a more realistic view of the nature of actions in rem. This development took place in the context of the changes which I have sketched. The breakthrough came in The Dictator  P. 304. In one of his first sittings as President of the new Probate Divorce and Admiralty Division Sir Francis Jeune, a common lawyer, undertook a comprehensive review of the development of actions in rem. He concluded that when the owners do appear the action in rem (at 320):
This was the procedural theory which subsequently became dominant. The historical analysis in The Dictator has been criticised: Wiswall, The Development of Admiralty Jurisdiction and Practice since 1800, 1970, Chapter 6. On the other hand the foremost historian of Admiralty history has supported it: Select Pleas in the Court of Admiralty, ed., by R.E. Marsden for the Selden Society, 1894, 1xx1--1xx11. The Dictator was followed and endorsed by the Court of Appeal in The Gemma  P 285. It is true that a few years later, in The Burns  P. 137, at 149, Fletcher Moulton L.J. appeared in effect to be repudiating the procedural theory by saying that "the action in rem is an action against the ship" and by acknowledging only that "the action indirectly affects them (the owners)": 149. That observation was made on a point of statutory construction and did not reflect the reasoning of the majority. The reasoning in the The Dictator prevailed. In The Tervaete  P. 259, Scrutton L.J. said that it was established that an action in rem was not based upon the wrongdoing of the ship personified as an offender but was a means of bringing the owner of the ship to meet this personal liability by seizing his property: 270. Atkin L.J. expressed a similar view: at 274. See also The Jupiter  P. 236. In The Cristina  A.C. 485 the House of Lords unambiguously rejected the personification theory, and adopted the realist view that in an action in rem the owners were the defendants.
This historical account of the evolution of the procedural theory must be qualified. Thomas; op cit, at 7 (n. 40) and 8 (n. 48) has pointed out that the procedural theory does not explain why a maritime lien may be enforced against a bona fide purchaser and that it is not entirely consistent with the fact that certain maritime liens accrue independently of personal liability of the ship owner. These may be regarded as distant echoes of the personification theory. But this case is not concerned with maritime liens. That is a separate and complex subject which I put to one side.
Given this general historical perspective, counsel for the plaintiffs acknowledged that the procedural theory became dominant but argued that it tells us nothing about the answer to the question before the House. He said that the procedural theory is a neutral fact. That is unrealistic. The procedural theory stripped away the form and revealed that in substance the owners were parties to the action in rem.
The sovereign immunity cases
The reality that an action in rem is an action against the owner of the ship is supported by the line of sovereign immunity cases. I will refer only to the most significant cases. In The Parlement Belge (1880) 5 P.D. 197 the Court of Appeal held that an action in rem indirectly impleaded a sovereign who was the owner of the vessel served because his property was affected by the judgment of the court. In this century the courts have gone further and held that a sovereign whose ship is served in an action in rem is in fact directly impleaded as a defendant. This appears clearly from the judgments of Lord Atkin (at 491), Lord Thankerton (at 493), Lord Macmillan (at 498) and Lord Wright (at 505) in The Cristina  A.C. 455. A perusal of those judgments show clearly that the reasoning of the House of Lords depended in the first place not on principles of international law but on an analysis of the development of the action in rem in English law. Because the sovereign was held to be directly impleaded the principle of sovereign immunity was then applied. The decision of the House of Lords in The Arantzazu Mendi  A.C. 256 was to the same effect. The proposition that the foreign sovereign is directly impleaded as a defendant by service on his vessel is therefore conclusively established. That proposition must carry with it the legal consequence that the sovereign is a party to the action in rem.
Confining myself to the more important decisions only, there are other decisions of high authority for the proposition that the true defendant in a duly constituted action rem are the owners of the ship. In The August 8  2 A.C. 450, Lord Brandon of Oakbrook, a former Admiralty judge, explained (at p. 456A-B).
More importantly, in The Deichland  1 Q.B. 361 the Court of Appeal held that the owner of a vessel which is served with proceedings in rem is "sued" for the purpose of Article 2 of Schedule 1 of the Civil Jurisdiction and Judgments Act 1982. The essential basis of the decision is to be found in the observation of Sir Denys Buckley that "In reality, distinguished from formal aspects, the instant action is, in my judgment, as much a suit against Deich as would be an action in personam.":389F. This reasoning was based on a perception of the true nature of an action in rem in English law. It is a view that I share.
The decision of the European Court of Justice in The Maciej Rataj
In The Maciej Rataj  1 Lloyd's Rep. 302 the European Court of Justice had to consider the applicability of Article 21 of the Brussels Convention (Schedule 1 to the Civil Jurisdiction and Judgment Act 1982) to actions in rem and in personam. Article 21 provides:
The European Court held that an action in rem and an action in personam involve the same cause of action, the same object and the same parties: paragraphs 47 and 48. The Advocate General observed (at par 19 of his Opinion):
Counsel for the plaintiffs has emphasized that, unlike Article 21, section 34 of the Act of 1982 is a provision of domestic origin designed to address a problem of domestic law. That is true. On the other hand, a comparison of Article 21 and section 34 reveal a striking similarity in language. In drafting section 34 the draftsman must have taken Article 21 as a model. In these circumstances it would be curious if one were to arrive at a decision on "the same parties" in respect of section 34 which diverges from that which applies to Article 21. This consideration reinforces the view that I take on a consideration of the nature of an action in rem judged from the perspective of domestic English law.
The purpose of section 34
The function of section 34 was to overcome the anomaly created by the fact that the doctrine of merger did not apply in the case of foreign, i.e. non-English, judgments: Republic of India v. Indian Steamship Co. supra, at 423E per Lord Goff of Chieveley. The rationale of the bar against proceedings caught by section 34 is that it is unjust to permit the same issue to be litigated afresh between the same parties: at 422H, per Lord Goff of Chieveley. Given this legislative objective, it would in my view be wrong to permit an action in rem to proceed despite a foreign judgment in personam obtained on the same cause of action. The purpose of section 34 militates in favour of the bar created by it applying to the action in rem. That seems to me to be a factor weighing strongly against the arguments of the plaintiffs.
Clarke J. relied on the judgment of Hobhouse J. in The Nordglimt. Hobhouse J. had to consider whether in the context of Article 21 a Belgian action in personam against owners was between "the same parties" as an Admiralty action in rem. Hobhouse J. held that at the date of its commencement an action in rem was not between the same parties as an action in personam. That was always a very narrow view. Given the decision of the European Court of Justice in The Tatry  E.C.R. I-5439 the decision in The Nordglimt is no longer good law. But Clarke J. relied on The Nordglimt for its exposition of the nature of an action in rem. Hobhouse J. in turn founded his decision on the observations of Fletcher Moulton L.J. in The Burns  P. 137 encapsulated by the statement that "the action in rem is an action against the ship itself." In the light of the development of the action in rem after the Judicature Acts that proposition can no longer be accepted. It has been overtaken by the developments which I have described in this century, notably the analysis in the sovereign immunity cases. Those decisions were apparently not cited to Hobhouse J. and he did not mention them. His analysis can no longer be supported.