THE House of Lords decision in the Indian Grace (No 2) (The Republic of India v India Steamship Co) has radically reformulated the nature of the action in rem.
However, its reasons do not justify the reformulation which, if it prevails, will cause previously settled questions of admiralty law and practice to be revisited.
The House of Lords held that the orthodox analysis of the action in rem put forward by successive admiralty judges and others over the last century can no longer be supported.
While purporting to follow the decision of the Admiralty Court in the 1892 case of the Dictator, the House of Lords in fact failed to apply that decision and ignored the manner in which the action in rem has been understood by the courts for over a century. Many procedural questions affecting the action in rem have long been settled.
They may now be open to debate.
Background
The dispute in the Indian Grace turned upon a claim brought against the owners of the vessel by the Republic of India and by the Indian Ministry of Defence.
It had its origins in a fire on board in 1987 when the vessel was carrying a cargo of woodpulp and munitions from Sweden to India.
The fire was extinguished with water and the vessel put into Cherbourg, where it stayed for a month. The cargo was repacked under supervision of the cargo manufacturers, and 51 artillery shells and 10 charges were jettisoned. The voyage then continued.
In December 1989 the Indian Ministry of Defence obtained a judgment in India against the owners in respect of short delivery based on the loss of the jettisoned cargo.
The same plaintiffs also sought to bring an in rem action in England, issuing a writ for Pounds 2.6m (Dollars 4.1m) in 1989 against the vessel and 15 other vessels in the same ownership for alleged damage to the vessel’s entire cargo of 12,000 shells which were said to have been rendered worthless as a result of radiant heat from the fire on the vessel.
The in rem writ was served on a sistership of the INDIAN GRACE at a UK port in August 1990, and India Steamship subsequently relied on Section 34 of the Civil Jurisdiction and Judgments Act 1982 to defeat the claim.
That depended in part on whether the in rem proceedings were between the same parties as the proceedings in India.
In substance, the Lords ruled in The Indian Grace that the defendants to an action in rem are the owners of the ship. But, remarkably, the decision fails to take account of the striking characteristic of an admiralty action in rem whereby a maritime lien or statutory right of action in rem is enforceable after a change of ownership.
Procedural theory
In The Dictator, the admiralty action in rem was first explained in terms of the so-called ‘procedural’ theory, according to which the action in rem had developed as a means of bringing the owners of a vessel before the court.
But the theory could not explain the ability of the maritime lien to follow the vessel when it had been bought from the person liable in personam.
Although the courts have always followed The Dictator, the failure of the procedural theory to explain the ability of the maritime lien to follow the vessel has been noted over the years both by the courts and in legal textbooks.
In The Dictator, Sir Francis Jeune expressed the procedural theory of the admiralty action in rem; that it was, historically, a means of compelling the owners to appear before the court.
However, he did not state that the owners were parties to an admiralty action in rem before they entered an appearance.
What he said was that judgment in such an action could be obtained against the owners once they had entered an appearance and thereby submitted to the jurisdiction of the court.
If they did not enter an appearance, judgment could only be obtained in rem. In such circumstances, where there was no appearance, judgment could not be entered against the owners.
The crucial aspect of the judgment in this case is that the personal liability of the owners is not inherent in the admiralty action in rem but is added or introduced by the owners when they choose to appear.
What is quite remarkable is that the House of Lords in The Indian Grace has now said that the analysis of the modern admiralty action in rem expounded by Mr Justice Hobhouse in The Nordglimt (1988, 1 QB 183), an analysis founded upon The Dictator and the cases following it, ‘could no longer be supported’.
The House of Lords held that an admiralty action in rem was against the owners, not from the time of appearance (if any), as had been stated in all the cases since The Dictator, but from the earlier time of service of the writ in rem.
The reasons advanced by Lord Steyn for this conclusion, which overturned a century of understanding, must be closely examined. His reasons were essentially these:
(i) The dominance of the procedural theory as an explanation of the action in rem;
(ii) The effect of the sovereign immunity cases;
(iii) Further developments of the law by the Privy Council, by the Court of Appeal, and by the European Court of Justice.
The ability of the maritime lien to follow a vessel illustrates that the admiralty action in rem cannot be regarded as a mere procedural device for getting the owners before the court.
For this reason, the acceptance of the procedural theory as an explanation of the historical origins of the admiralty action in rem is not a good reason for concluding that the owners are party to an action in rem before they enter an appearance or, in the modern procedure, acknowledge service.
There is a very real connection between admiralty actions in rem and maritime liens. The former is the means by which the latter are enforced.
In The Indian Grace, at first instance, Mr Justice Clarke, in response to the argument that the mere issue and service of a writ in rem made the owner party to the action, asked rhetorically: ‘Which owner does the issue and service of a writ in rem make a party where there has been a change of ownership?’ Lord Steyn avoided answering this question.
Moreover, a similar rule exists in the case of statutory rights of action, whereby once a writ in rem has been issued the right in rem can be enforced against a purchaser of the ship from the person liable in personam.
If one varied the facts of The Indian Grace and assumed a case where the vessel had been sold after the date of issue of the writ but before the date of service, the action could still proceed in rem.
The new owners would be entitled to acknowledge service and defend the claim but would not be liable in personam.
Assume that they did acknowledge service. Would the in personam action in India against the former owners be an action ‘between the same parties’ as the action in rem? I would suggest that the answer is no.
The former owners were party to the in personam proceedings in India. While the writ in rem may have called upon them to appear, they did not do so and so took no part in the action. The new owners did so and became parties to the action though not liable in personam.
Sovereign approach
In The Indian Grace, Lord Steyn, referring to an earlier decision of the House of Lords in The Christina, said: ‘The proposition that the foreign sovereign is directly impleaded as a defendant by service on his vessel is. . . conclusively established. That proposition must carry with it the legal consequence that the sovereign is a party to the action in rem.’
At first instance in The Indian Grace, Mr Justice Clarke did not consider that that conclusion could be drawn. Perhaps it all depends on what is meant by ‘impleading’.
In The Christina, Lord Wright concluded that because the sovereign owner of a ship is commanded by the writ to appear or let judgment go by default, he is called upon to sacrifice either his property or his independence. He was therefore directly ‘impleaded’.
Given his acceptance of the analysis of the action in rem set out in The Dictator, it would be wrong to conclude that Lord Wright considered that an owner who did not appear was party to the action in rem. If so, Lord Steyn was wrong to conclude that an owner is a party to an action in rem before appearance.
By contrast, Mr Justice Clarke, at first instance, distinguished between being impleaded and being party to an action. He was right to do so.
Lord Steyn referred to recent decisions involving the action in rem and the Brussels Convention. But none of these cases required an analysis of the action in rem as a matter of English law. They were more concerned with interpretation of the Brussels Convention.
Conclusion
So the reasons advanced by the House of Lords for its reappraisal of the nature of the admiralty action in rem do not support that reappraisal.
Moreover, the House of Lords did not consider the characteristic of the action in rem whereby it is enforceable against a vessel notwithstanding a change in ownership.
This characteristic, more than any other, demonstrates the unique character of the action in rem and the fact that it is not merely a procedural device for bringing the person liable in personam before the court.
The House of Lords has brought about a fundamental reappraisal of the action in rem without considering that characteristic.
That reappraisal may well lead to a reconsideration of the question of whether a statutory right of action in rem can be continued against the purchaser of a vessel not liable in personam; if the action in rem is in substance an action in personam, why should it be so continued? It may also lead to debate as to whether in an action-in-rem judgment in default can be entered against the person liable in personam once the writ in rem has been served; why should that not be possible if that person is a party to the action once the writ in rem has been served?
It may also reopen the question of whether the rule that a cause of action in rem does not merge in a judgment in personam applies not only to maritime liens but also to statutory rights of action in rem; why should it not if Lord Steyn is correct as to the true nature of an action in rem?
These questions were previously settled but are now open for debate.
It is surely undesirable that such uncertainty be introduced into this area of the law.
The best way of avoiding such uncertainty is to regard the decision in The Indian Grace as a decision only on the ambit of Section 34 of The Civil Jurisdiction and Judgments Act 1982 on the facts of that case and not as a decision on the true nature of an admiralty action in rem.
Given the broad extent of the reasoning in that case, this may of course be a forlorn hope.
Art 34 Civil Jurisdiction Judgments Act 1982
NO proceedings may be brought by a person in England and Wales or Northern Ireland on a cause of action in respect of which a judgment has been given in his favour in proceedings BETWEEN THE SAME PARTIES, or their privies, in a court in another part of the United Kingdom or in a court of an overseas country, unless that judgment is not enforceable or entitled to recognition in England and Wales or, as the case may be, Northern Ireland.