Chapter 3

Exercise of Jurisdiction

Introduction

3.1 Having considered in Chapter 2 the scope of the subject-matter jurisdiction of the Admiralty Court, it is necessary to consider in this chapter the manner in which that jurisdiction may be exercised, and the limits imposed by law upon the exercise of that jurisdiction. Admiralty jurisdiction may be exercised in personam or in rem. The exercise of in personam jurisdiction does not raise any peculiar difficulties as an Admiralty claim in personam is essentially no different to a claim in the Commercial Court or in the Queen’s Bench Division. All cases within the jurisdiction may be brought by an Admiralty claim in personam, but the unique and most important feature of litigation in the Admiralty Court is the ability in certain cases and in certain circumstances to bring an Admiralty claim in rem. The words used by Coote¹ in 1860 are equally applicable today:

Exercise of Jurisdiction in Rem

The nature of the claim in rem: the two categories

3.2 It should be noted at the outset of any consideration of the nature of the claim in rem that although there is in form only one claim in rem, in substance there are really two categories of in rem claims. Much confusion arises if one fails to distinguish these two categories. There is a category of in rem claim which could be described as truly in rem because it is brought against a ship irrespective of her present ownership and irrespective of any link with liability in personam on the part of the owner of the ship at the time the claim is brought. This category comprises claims to enforce maritime liens and mortgages, claims for forfeiture, droits of Admiralty, and claims relating to possession or ownership. These are claims where in substance there is a claim to the ship in whole or in part. That is to say claims which are true in rem claims are, as the name suggests, directed against the ship as res and not against any person who has an interest in the ship such as an owner. The other category comprises all other maritime claims which may be brought by issue and service of an in rem claim form, but which in fact depend upon establishing a link with liability in personam. These claims have been referred to as “statutory lien” claims or more accurately as statutory rights of action in rem, but could more conveniently be called quasi in rem claims to distinguish them from true in rem claims.

3.3 If this distinction is borne in mind, then many of the difficulties which have arisen in connection with attempts at an all embracing analysis of the claim in rem, which is epitomised by the judgment of Lord Steyn in The “Indian Grace” (No. 2)² and the corresponding criticisms of that judgment³ fall away. The single form of the modern “claim in rem” obscures the substance of two different types of claim which have separate historical roots and, it is suggested, separate juridical natures. The question “what is a claim in rem” therefore has two answers depending upon whether one is examining a true claim in rem or a quasi in rem claim.

The problematic interface between in rem claims and European jurisdictional law

3.4 The distinction between in rem claims and quasi in rem is a creation of English Admiralty law. The main remaining problem in relation to determining the jurisdiction for Admiralty claims arises from the fact that domestic law categorisation of claims is almost entirely irrelevant to determination of jurisdiction under Regulation 44/2001 (“The Brussels I Regulation”). The Brussels I Regulation does not contain a section providing for jurisdiction for in rem or quasi in rem claims. In 1982, when the United Kingdom acceded to the Brussels Convention, the general right to found jurisdiction for a claim against a party on the arrest of property belonging to that party in the jurisdiction was abandoned as against persons domiciled in Contracting States.⁴ The categories used in the Regulation to allocate jurisdiction over civil and commercial matters between Courts of the Member States of the EU are based on identifying the nature of the in personam claim. These categories of claim must be given an “autonomous” interpretation.⁵ For example, a claim which would be described as a matter of English law as a claim in tort may well be regarded as a “matter relating to contract” under the Regulation. Similarly, what may as a matter of English Admiralty Law be a true in rem claim will usually be treated as an ordinary in personam claim under the Regulation e.g. in considering a lis pendens-related actions application under Articles 27–30 of the Regulation.⁶ The reason for this is that apart from Ireland and the United Kingdom none of the legal systems of other Member States provide for or recognise true in rem claims. This is discussed in detail below but in summary

• (1) The issue and service of an in rem claim form will only found jurisdiction of the English Admiralty Court for a true in rem claim in cases where this is exceptionally permitted by the Brussels I Regulation—in particular under Article 4 (Defendant⁷ not domiciled in a Member State), Article 71 (pre-existing Conventions⁸) and all relevant domestic and/or Convention conditions are satisfied.⁹
  
• (2) The issue and service of an in rem claim form will found jurisdiction of the English Admiralty Court for a quasi in rem claim when the in personam jurisdictional rules contained in the Brussels I Regulation are satisfied.

In either case, the claim must fall within the subject matter jurisdiction of the Admiralty Court as discussed in Chapter 2 of this work.

True in rem claims

Claims truly in rem are different in kind to claims in personam

3.5 It is important to note that in all of the recent cases¹⁰ in which the courts have been troubled by the question to what extent is a claim in rem different in substance from a claim in personam culminating in The “Indian Grace” (No. 2) the court was not considering claims truly in rem. In The “Indian Grace” (No. 2) Lord Steyn said¹¹: ” But this case is not concerned with maritime liens. That is a separate and complex subject which I put to one side.” It follows from this remark that his criticism of the analysis of Clarke J of the claim in rem at first instance (and of Hobhouse J in The “Nordglimt”¹²) can only be directed at that analysis in so far as it applies to quasi in rem claims and his own analysis of the nature of an in rem claim should also be considered as applicable only to quasi in rem claims. A true in rem claim is indeed a claim against the ship herself and is not a claim against her owners. A claim which is based upon a maritime lien is a claim against the ship to enforce the maritime lien, a form of proprietary security interest in the ship. A claim under a mortgage is against the ship to enforce a proprietary interest, the mortgage. A claim for forfeiture is a claim to the ship herself. A claim for droits of Admiralty is a claim to the droit itself and a claim to possession or ownership is a claim to possession or ownership of the ship herself.

3.6 In The “Longford”¹³ it was held that a statute which provided that no action shall be brought in which the Dublin Steam Packet Company shall be liable for any damage to any ship unless one month’s notice in writing shall have been given to the company, did not apply to Admiralty claim in rem. This claim concerned a claim for collision damage which gave rise to a maritime lien. At first instance Butt J considered it was not in name a claim against the company nor was it in substance a claim against the company because the remedy against the ship was not co-extensive with the remedy against her owners. His decision was upheld by the Court of Appeal on the rather narrow basis that before the passing of the Judicature Act there were only “suits” or ” causes” in the Admiralty Court and not ” actions”. The statute referred only to actions in His Majesty’s courts of law and the Admiralty Court had not been such a court at the time the statute was enacted.

3.7 The decision in The “Longford” was considered by the Court of Appeal in The “Burns”¹⁴ where the court had to consider whether a claim in rem against a ship owned by the London County Council was a claim against the London County Council which by statute had a limitation period of six months. Again this was a claim for damages arising out of a collision between two ships which gave rise to a maritime lien. Collins MR described the decision in The “Longford” in the following words¹⁵: “It seems to me that that case in substance decides that there is a real, and not a mere technical, distinction between an action in rem and an action in personam . .. “. Fletcher Moulton LJ said¹⁶:

3.8 This is the classic statement of the nature of the claim truly in rem in English law and it is submitted that it remains good law today in relation to such claims. The reasoning of these cases is not affected by the reasoning of the House of Lords in The “Indian Grace” (No. 2) because they are cases concerned with claims in rem to enforce a maritime lien. That is not however to say that for all purposes one can simply ignore the existence of the shipowner even in a claim which is truly in rem. Although such a claim in rem is a claim against the ship herself it obviously affects the owner of the ship which is proceeded against.

3.9 Bowen LJ in The “Longford”¹⁷ described a claim in rem as beginning ” by proceedings against the ship, though no doubt having the result of citing before the court the owner of the ship in person” and Butt J (at first instance) and Lord Esher MR (in the Court of Appeal) agreed that the effect of the decision in The “Parlement Belge”¹⁸ was that the owner of a ship is indirectly impleaded or indirectly affected by a claim in rem. The “Parlement Belge”¹⁹ is a case concerned with a claim truly in rem (another maritime lien claim for damage arising out of a collision) and with the question whether a claim in rem could be brought against a ship belonging to a foreign sovereign. During the course of the judgment Brett LJ carefully analysed the nature of the claim in rem and its effect upon the owner of the property proceeded against. He said²⁰:

3.10 The Court of Appeal²¹ and the House of Lords²² have both held that the issue of a claim form in rem against a vessel in a claim for possession in which a foreign sovereign state claimed an interest was impleading the sovereign state. In The “Cristina” Lord Wright approves the reasoning in The “Parlement Belge” and says²³:

3.11 It is significant to note that Lord Wright specifically refers to the writ in rem becoming “in effect also a writ in personam“. This is a feature of a true claim in rem as much as it is a feature of a claim quasi in rem. However, it does not follow from this, nor from the proposition that a foreign sovereign is “directly impleaded”, that the owner of the ship proceeded against in a claim which is truly in rem is a party to the claim from the outset. It is respectfully submitted that the conclusion of Lord Steyn in The “Indian Grace” (No. 2)²⁴ that the foreign sovereign is a party to the claim in rem does not logically follow from the sovereign immunity cases. Where the claim is a claim which is truly in rem the foreign sovereign is not a party at the outset at all, but it is directly impleaded by being given Hobson’s choice: appear and defend the claim or stay away and lose your ship.

Quasi in rem claims

3.12 Where the claim gives rise only to a statutory right to claim in rem the in rem claim is not in substance a claim against the ship. It is in form a claim against the ship, but in truth it is a claim against the owner of the ship at the time the claim is commenced. Such an in rem claim requires the in personam defendant to be the owner of the ship at the time when the in rem claim form is issued²⁵ and it is therefore simply an alternative procedure to bringing a claim in personam. The defendant is sued, but he is sued through service on the ship. There is no interest in the ship which is the subject matter of the claim.

3.13 From a claimant’s point of view there are two practical advantages to proceeding in rem as opposed to proceeding in personam:

• (i) Obtaining of security for the claim. It is only by proceeding in rem that a claimant is able to procure the arrest of the ship and thereby obtain security for his claim: the arrested ship may either be released by the court upon the provision of security for the claimant’s claim or the ship may be sold and the proceeds of sale be retained by the court as security for all claims against the ship, and in the event that the total value of the claims exceed the proceeds of sale the court will divide the proceeds according to the Admiralty rules of priority.
  
• (ii) Establishing jurisdiction. A claim in rem may be brought provided the property proceeded against (the res) is within the jurisdiction, notwithstanding that the same claim could not be brought against the owner of the property in personam, there being no ground upon which service out of the jurisdiction of an in personam claim form could be obtained.

These two practical advantages reflect two distinct and separate juridical aspects of the claim in rem: as a form of provisional measure, a means of obtaining security for a claim, by arrest; and as a means of establishing jurisdiction for a claim by service of the claim form. In each case however it must be observed that the security which is being obtained, and the jurisdiction which is being established, is for the claimants’ claim against the shipowner and not for any claim which is in substance against the ship. Whether jurisdiction can be sustained will ultimately depend on the application of the Brussels I Regulation (or if applicable the Brussels Convention or the Lugano Convention) to the particular facts of the case.

3.14 If the shipowner fails to appear to defend the claim brought against him through his ship, then the claim may be enforced against him by the sale of his ship. The issue of the claim effectively creates a charge over the ship which is enforced by the process of a court sale, but if one examines the position immediately prior to the time of issue of the in rem claim form, there is no right in or to the ship at all at that time. The only substantive right is against the shipowner and if he sells the ship before the claim form is issued the right to proceed in rem is lost. By contrast, where the claimant has a maritime lien or mortgage, a claim to ownership or possession or a claim to forfeiture or a droit he has a substantive right in the ship (or property subject to the droit) independently of the issue of a claim form in rem. If the shipowner were to sell the ship before the claim form were issued, the claim may still be enforced against the ship. It is thus a claim against the ship and not the shipowner.

3.15 In The “Indian Grace“ (No. 2) the House of Lords held that for the purpose of section 34 of the Civil Jurisdiction and Judgments Act 1982 a quasi in rem claim was a claim against the owners of the ship so that it was between the same parties as an in personam claim against the shipowners which had been brought in India. Although the reasoning in that case appears at some stages to go further, it is respectfully suggested that it was not in fact concerned with claims truly in rem.

3.16 In The “Deichland”²⁶ the Court of Appeal held that for the purposes of Article 2 of the Brussels Convention 1968 the shipowners were being “sued” where a claim was brought in rem just as much as if the claim had been brought in personam. This was also a case where there was a quasi in rem claim.

3.17 It can therefore be said that a claim to enforce a statutory right of action in rem is a claim against a personal defendant and for that reason perhaps ought to be called a claim quasi in rem to distinguish it from true in rem claims. However, although it is a claim which is against a personal defendant that does not mean to say that it is the same as an in personam claim. Apart from being a means of obtaining security and establishing jurisdiction there are other procedural peculiarities which arise from it being a claim in rem: e.g. judgment in default has to be obtained by proof of the claim in court, summary judgment is not available and persons other than the defendant who have an interest in the res may defend the claim. However, these in rem characteristics will only be of significance while the claim remains solely in rem because once the defendant has acknowledged service the claim will also proceed in personam against him.

A claim in rem becomes also a claim in personam if and when the issue or service of the claim form is acknowledged

3.18 The Court of Appeal held in The “Tatry”²⁷ that after acknowledgment of service in an Admiralty claim in rem the claim does not lose its in rem character, but proceeds as a hybrid, being both in rem and in personam even though the res may have been released by the court. This was a case where the claim was a quasi in rem claim, but it is a principle which is equally applicable and in many respects more significant in the context of a true in rem claim.

3.19 In The “Gemma”²⁸ the question arose whether after judgment in a claim in rem a vessel owned by foreigners resident abroad who had appeared as defendants could be seized as being the goods and chattels of the defendants under a writ of fieri facias issued by the claimants in respect of an unsatisfied balance of damages, though bail to her full value had been given and the vessel released from arrest.

3.20 The Court of Appeal held that by appearing the owners had rendered themselves personally liable and that payment of the unsatisfied balance could accordingly be enforced by a writ of fieri facias. The judgment of the Court was given by A.L. Smith LJ who said²⁹:

3.21 The learned Lord Justice then suggested three reasons why a defendant would appear: first, to release the ship so that he could go on trading her; secondly, to contest the claimant’s claim; and thirdly, to prevent the vessel being sold by the court. These reasons still hold good today.

3.22 It should be observed however that in a claim which is truly in rem a person may acknowledge service in order to defend the claim against the ship but having no personal liability for the claim he does not assume any personal liability (other than for the costs of the claim) simply by acknowledging service.

3.23 It should also be noted that the claim does not change from being a claim in rem to being a claim in personam but continues to be in rem. In The “Broadmayne”³⁰ Bankes LJ said³¹:

Judgment in a claim truly in rem is not a bar to a subsequent claim in personam

3.24 It is a well-established principle that even though judgment has already been obtained in a claim in rem, a party may bring a subsequent claim in personam in respect of the same claim, unless the proceeds of sale are sufficient to cover the damages.³² However, this rule probably applies only to claims which are truly in rem and not to claims quasi in rem. In The “Indian Grace” (No. 2)³³ Lord Steyn said³⁴: “The House was not referred to any authority extending the rule beyond maritime liens. It is an ancient and strange rule which I would not wish to extend beyond the limits laid down by authority.” Lord Steyn was in fact mistaken, because the House was referred to The “Cella”³⁵ and The “Rena “’,³⁶ which were both cases not concerning maritime liens.

3.25 Notwithstanding these comments it is suggested that it is not a strange rule at all. It is logical that if certain claims create a security interest, that the creation of the security interest is additional to and not in substitution for the personal liability of the defendant. Thus if the security is enforced, but is insufficient to satisfy the claim, why should the defendant not be pursued personally as well?

3.26 On the other hand where there is only a personal liability on the part of a shipowner, it should in principle make no difference whether the claim is pursued against him in personam or quasi in rem. This inevitably leads to the question whether if in a claim which is quasi in rem the defendant does not appear, any judgment in default is limited to the res or whether it can be enforced against him in personam. The logic of The “Indian Grace” (No. 2) suggests that if a quasi in rem claim is a claim against the shipowners, then if a default judgment is obtained in such a claim it is a judgment against the shipowners which ought not to be limited to the ship, but should be enforceable also against the shipowners in personam. This conclusion is contrary to the understanding of practitioners hitherto, but hitherto insufficient attention has probably been paid to the distinction between claims which are truly in rem and claims which are quasi in rem. That is not to say however that the point has not been alluded to previously. In The “Conoco Britannia”³⁷ Brandon J said³⁸:

He then went on to suggest that the reasoning in those cases may need to be examined closely in the future. In fact it appears that all of the cases³⁹ were cases where the claim was truly in rem and therefore they may not in fact provide any authority in respect of quasi in rem claims. In addition they were, of course, all cases in which the question was whether there was in personam liability after appearance and were not concerned with the position in the absence of appearance.

3.27 In The “Dictator”⁴⁰ Jeune J said⁴¹:

It is clear from this passage that Jeune J was concerned with a claim in rem to enforce a maritime lien. However, it also highlights the potential objection to holding that a default judgment in rem may be enforced in personam, that the shipowner has not been personally served. On the other hand service on the ship is in a sense a form of substituted service on the shipowner, and in any case where a shipowner could establish that he did not in fact have notice of the proceedings and had a good arguable defence he would no doubt be able to have the default judgment set aside.

3.28 It would be most unfortunate if it were to be held that in a claim quasi in rem a default judgment in rem was to be a bar to subsequent proceedings in personam and that enforcement was limited to the res as this would leave an in rem judgment creditor in a worse position than if he were an in personam judgment creditor who could execute against any property belonging to the judgment debtor, including, but not limited to, the ship.

Judgment in a claim in personam is not a bar to a subsequent claim truly in rem

3.29 Judgment and execution in a previous claim in personam has been held not to preclude a subsequent claim in rem.⁴² For the reasons considered above, this principle would appear to be restricted to cases where the claim is truly in rem. A maritime lien will not be extinguished by judgment in personam unless the claim has been satisfied in full. However, the High Court of New Zealand has held that the principle in The “Rena K”⁴³ that an unsatisfied arbitration award was no bar to a subsequent claim in rem had not been affected by the decision of the House of Lords in The “Indian Grace” (No. 2).⁴⁴

An Admiralty claim in rem may be brought to enforce a foreign judgment in rem

3.30 It is also well established that an Admiralty claim in rem may be brought in England to enforce the judgment of a foreign court where such judgment has been given in a claim in rem.⁴⁵ However, a claim in rem may not be brought to enforce a foreign judgment in personam.⁴⁶ In The “City of Mecca”,⁴⁷ after reviewing the English authorities,⁴⁸ a decision of the US Supreme Court⁴⁹ and certain learned works,⁵⁰ Sir Robert Phillimore concluded⁵¹ “that it is the duty of one admiralty court, a duty arising from the international comity, to enforce the decree of another upon a subject over which the latter had jurisdiction.” The actual decision was reversed on the facts by the Court of Appeal⁵² when it appeared that contrary to the facts presented at first instance, the foreign judgment was only in personam.

3.31 In The “Despina GK” ⁵³ Sheen J in an ex parte decision followed the reasoning of Phillimore J in The “City of Mecca” although he pointed out that there was a limit to the principle in that the ship could only be proceeded against in rem in England provided the ownership had not changed and the ship was still owned by the foreign judgment debtor at the time the claim was begun.

The Claims for Which a Claim in Rem May Be Brought

3.32 It is not for every claim within the Admiralty jurisdiction that a claim in rem may be brought. The right to bring a claim in rem is restricted by the Senior Courts Act 1981, and it is not available for the following claims:

• (i) Any claim for damage received by a ship. It would be difficult to conceptualise such a claim being brought in rem, as there would be no property against which it could be brought. However, claims falling within this head of jurisdiction often fall within another in respect of which a claim in rem could be brought, for example a claim for damage done by a ship.
  
• (ii) Limitation claims.⁵⁴
  
• (iii) Applications under the Merchant Shipping Acts.

Claims which may be brought irrespective of ownership

3.33 Certain claims in respect of which a claim in rem is available may be brought against a ship or other property in connection with which the claim arises, irrespective of who owns the property at the time the claim is commenced, and irrespective of who may be liable on the claim in personam, so that these claims may be considered to be truly in rem. The following claims fall into this category:

• (i) any claim to the possession or ownership of a ship or to the ownership or possession of any share therein⁵⁵;
  
• (ii) any question arising between the co-owners of a ship as to possession, employment or earnings of that ship⁵⁶;
  
• (iii) any claim in respect of a mortgage or charge on a ship or any share therein⁵⁷;
  
• (iv) any claim for the forfeiture or condemnation of a ship or of goods which are being or have been carried or have been attempted to be carried in a ship, or for the restoration of a ship or any such goods after seizure or for droits of Admiralty⁵⁸;
  
• (v) any case in which there is a maritime lien or other charge on any ship, aircraft or other property.⁵⁹

The first four of these claims have been considered in Chapter 2,⁶⁰ and it is therefore necessary to consider further at this point maritime liens and other charges.

Maritime Liens

3.34 These have been considered in Chapter 1.⁶¹

Other Charges

3.35 In The “St Merriel” ⁶² it was held that “other charge” within the equivalent section of the 1956 Act meant no more than the words “charge upon a ship” in the Merchant Shipping Acts, and did not include a possessory lien for repairs. Hewson J said⁶³: ” ‘Other charge’ obviously is meant to refer to something which, though not within the restricted definition of maritime lien, is nevertheless not as wide as ‘any claim arising in connection with a ship’. Manifestly it does not refer to charges in the nature of a mortgage, because they are specifically dealt with in section 3(2).” ⁶⁴ After considering the arguments put forward by counsel, and after referring to section 513(2) of the Merchant Shipping Act 1894 and sections 35(2) and 42 of the Merchant Shipping Act 1906 he went on to say⁶⁵:

3.36 In The “Ocean Jade”⁶⁷ the High Court of Singapore held that cargo could not be proceeded against in rem in respect of a claim for freight, and that the shipowners’ possessory lien on cargo did not amount to a ” charge” within the meaning of section 4(3) of the Singapore High Court Admiralty Jurisdiction Act.

3.37 In The “Acrux“ (No. 3)⁶⁸ Hewson J considered a wider meaning could be given to the word “charge” so as to include a charge given on a vessel under foreign law to secure a claim similar to those recognised by the English court as giving rise to a maritime lien. He said⁶⁹:

Claims which are limited by considerations of ownership

3.38 Other claims may only be brought in rem against the ship in connection with which the claim arises if the following conditions are satisfied⁷¹:

• (i) the claim must have arisen in connection with a ship; and
  
• (ii) the person who would be liable on the claim in a claim in personam must have been the owner⁷² or the charterer⁷³ or in possession or control of the ship when the cause of action arose; and
  
• (iii) at the time when the claim is brought, i.e. when the claim form is issued,⁷⁴ the person who would be liable on the claim in a claim in personam must be the beneficial owner⁷⁵ of all the shares in the ship or the charterer of it by demise.

3.39 The following claims fall into this category:

• (i) Any claim for loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or in consequence of the wrongful act, neglect or default of
  
  
  
  • (a) the owners, charterers or persons in possession or control of a ship; or
    
  • 
    

    (b) the master or crew of a ship, or any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of a ship are responsible,

    
    

    being an act, neglect or default in the navigation or management of a ship, in the loading, carriage or discharge of goods on, in or from a ship, or in the embarkation of persons on, in or from the ship.⁷⁶

  
  
• (ii) Any claim for loss of or damage to goods carried in a ship,⁷⁷
  
• (iii) Any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship.⁷⁸
  
• (iv) Any claim in the nature of towage in respect of a ship or an aircraft.⁷⁹
  
• (v) Any claim in the nature of pilotage in respect of a ship or an aircraft.⁸⁰
  
• (vi) Any claim in respect of goods or materials supplied to a ship for her operation or maintenance.⁸¹
  
• (vii) Any claim in respect of the construction, repair or equipment of a ship or dock charges or dues.⁸²
  
• (viii) Any claim by a shipper, charterer or agent in respect of disbursements made on account of a ship.⁸³
  
• (ix) Any claim arising out of an act which is or is claimed to be a general average act.⁸⁴

Claims which may be brought against sister ships

3.40 Certain claims may be brought not only against the ship in connection with which the claim arises (referred to below as “ship A”), but also against other ships (referred to below as “ship B”), commonly referred to as “sister ships”, if the following conditions are satisfied⁸⁵:

• (i) the claim must have arisen in connection with a ship (“ship A”); and
  
• (ii) the person who would be liable on the claim in a claim in personam must have been the owner⁸⁶ or the charterer⁸⁷ or in possession or control of “ship A” when the cause of action arose; and
  
• (iii) at the time when the claim is brought, i.e. when the claim form is issued,⁸⁸ the person who would be liable on the claim in a claim in personam must be the beneficial owner⁸⁹ of all the shares in the ship against which the claim is brought (“ship B”).

3.41 The following claims fall into this category:

• (i) Any claim for loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or in consequence of the wrongful act, neglect or default of
  
  
  
  • (a) the owners, charterers or persons in possession or control of a ship; or
    
  • 
    

    (b) the master or crew of a ship, or any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of a ship are responsible,

    
    

    being an act, neglect or default in the navigation or management of a ship, in the loading, carriage or discharge of goods on, in or from a ship, or in the embarkation of persons on, in or from the ship.⁹⁰

  
  
• (ii) Any claim for loss of or damage to goods carried in a ship.⁹¹
  
• (iii) Any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship.⁹²
  
• (iv) Any claim in the nature of towage in respect of a ship or an aircraft.⁹³
  
• (v) Any claim in the nature of pilotage in respect of a ship or an aircraft.⁹⁴
  
• (vi) Any claim in respect of goods or materials supplied to a ship for her operation or maintenance.⁹⁵
  
• (vii) Any claim in respect of the construction, repair or equipment of a ship or dock charges or dues.⁹⁶
  
• (viii) Any claim by a master, shipper, charterer or agent in respect of disbursements made on account of a ship.⁹⁷
  
• (ix) Any claim arising out of an act which is or is claimed to be a general average act.⁹⁸
  
• (x) Any claim for damage done by a ship.⁹⁹
  
• (xi) Any claim in the nature of salvage.¹⁰⁰
  
• (xii) Any claim by a master or member of the crew of a ship for wages.¹⁰¹
  
• (xiii) Any claim arising out of bottomry.¹⁰²

The meaning of “beneficial owner”

3.42 Except in the case of claims which may be brought irrespective of ownership, or where the claim may be brought against a ship which is under demise charter, it is necessary for the court to identify the beneficial owner of all the shares in the ship which is sought to be proceeded against in rem in order to determine whether the claim may be brought against that ship. This process has given rise to controversy as to precisely what is meant by the phrase ” beneficial owner” .

3.43 In The “I Congreso del Partido” ¹⁰³ Robert Goff J held that the words ” beneficially owned” in the corresponding provisions of the Administration of Justice Act 1956, referred only to cases of equitable ownership, whether or not accompanied by legal ownership, and were not wide enough to include cases of possession or control without such ownership, however full and complete such possession and control may be. He said¹⁰⁴: “the intention of Parliament in adding the word ‘beneficially’ before the word ‘owned’ . .. was simply to take account of the institution of the trust, thus ensuring that, if a ship was to be operated under the cloak of a trust, those interested in the ship would not thereby be able to avoid the arrest of the ship.” In that case the relevant person was the operator and manager and the ship was held not to be beneficially owned by them.

3.44 In an earlier case heard ex parte, The “Andrea Ursula”,¹⁰⁵ Brandon J had held that the words “beneficially owned” in the 1956 Act were wide enough to include a case where the ship was not legally or equitably owned by a person, but was in his full possession and control so that it included a demise charterer. That decision was contrary to an earlier decision of Hewson J in The “St Merriel”,¹⁰⁶ and it was not followed in The “I Congreso del Partido” after Robert Goff J had had the benefit of full argument from both sides. In The “Father Thames” ¹⁰⁷ Sheen J also declined to follow The “Andrea Ursula”, and followed The “I Congreso del Partido” and held that the phrase “beneficially owned” in the 1956 Act did not apply to a demise charterer.¹⁰⁸

3.45 Those cases all concerned the 1956 Act. The wording of that Act provided that a claim in rem could be brought against:

• “(a) that ship,¹⁰⁹ if at the time when the action is brought it is beneficially owned as respects all the shares therein by that person; or
  
• (b) any other ship which, at the time the action is brought, is beneficially owned as aforesaid.”

3.46 The draftsman of the 1981 Act introduced an important change in the wording of the relevant provisions by introducing specific reference to a demise charterer and the corresponding provision of section 21(4) of the Senior Courts Act 1981 is as follows:

• “(i) that ship,¹¹⁰ if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of it under a charter by demise; or
  
• (ii) any other ship which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it” (emphasis added).

Thus where the ship sought to be arrested is the ship in connection with which the claim arises, the ship may be arrested if the person liable in personam is the demise charterer, but where the arrest is of another ship it is clear that the ship cannot be arrested unless the person liable in personam is the owner of the ship, and not merely the demise charterer. The distinction drawn between the demise charterer on the one hand and the beneficial owner on the other, puts the matter beyond argument; ” beneficial owner” clearly has its ordinary meaning of equitable owner as held in The “I Congreso del Partido” .

3.47 A company which has filed a petition under chapter 11 of the US Bankruptcy Code and which has thereby been transformed into a “debtor in possession” remains the beneficial owner within the meaning of the Senior Courts Act 1981.¹¹¹

Ascertaining the beneficial owner

Court may look behind the registered owner

3.48 Another aspect of beneficial ownership that has given rise to controversy is the extent to which it is permissible to look beyond the registered owner of a ship in order to find the beneficial owner. It is plain from the wording of the Act that Parliament did not intend the investigation simply to be limited to the identification of the registered owner as Robert Goff J observed in The “I Congreso del Partido” in the passage cited above.¹¹² Moreover in The “Aventicum”¹¹³ there was a dispute as to the beneficial ownership of a vessel and Slynn J said¹¹⁴: “Where damages are claimed by cargo owners and there is a dispute as to the beneficial ownership of the ship, the Court in all cases can and in some cases should look behind the registered owner to determine the true beneficial ownership.”

3.49 He went on to say¹¹⁵: “it is plain that . .. the Act intends that the Court shall not be limited to a consideration of who is the registered owner or who is the person having the legal ownership of the shares in the ship; the directions are to look at the beneficial ownership. Certainly in a case where there is a suggestion of a trusteeship or nominee holding, there is no doubt that the Court can investigate it”

3.50 These two passages from the judgment of Slynn J are uncontroversial, but certain other passages in his judgment¹¹⁶ which appear to suggest that the court is empowered to embark upon a wide ranging investigation of corporate shareholding and to lift the corporate veil simply for the purpose of the investigation of beneficial ownership are obiter dicta and it is submitted are also wrong. At the time when Slynn J decided The “Aventicum” the divergence of view between Brandon J in The “Andrea Ursula” and Robert Goff J in The “I Congreso del Partido” was a live issue and had not finally been resolved. Slynn J expressly declined to resolve it in the case before him as he considered it unnecessary on the facts of that case. Many of his remarks must therefore be taken in the context of considering a possible wider meaning of beneficial ownership which cannot be applicable to cases decided under the 1981 Act.

Purported change in beneficial ownership

3.51 In The “Saudi Prince” ¹¹⁷ Sheen J investigated the purported transfer of ownership of a ship before the claim form was issued in order to see if there had in truth been a change in the beneficial ownership. On the facts, the court held that there had been no effective transfer of ownership and therefore the ship could properly be proceeded against in rem and arrested.

The “one-ship company” situation

3.52 It has long been the practice in the shipping business to arrange for several ships which are financed by a common source and managed or operated as a fleet, to be registered in the names of separate companies whose only asset is the particular ship registered in its name. Often such companies will be registered in a country where the identification of shareholders in companies is not a matter of public record. This arrangement has become known colloquially as the “one-ship company” and has been a source of irritation to cargo interests and others who consider that they are thereby deprived of the benefit of the sister ship provisions of the 1981 Act. However, it is clear that the courts have recognised that the ” one-ship company” is a legitimate business arrangement, and in the absence of evidence of fraud it is not permissible to lift the corporate veil in order to look behind the “one-ship company” structure for the purposes of identifying the beneficial owner of the company and say that the beneficial owner of the company is the beneficial owner of the ship. In law the beneficial owner of the ship is the company, which is a separate and distinct legal entity or person from the beneficial owner of the company.

3.53 Thus in The “Maritime Trader”¹¹⁸ a ship was owned by a company MTS, and the shares in that company were owned by MTO so that MTS was a wholly owned subsidiary of MTO. The court held that the ship was not beneficially owned by MTO and therefore could not be arrested to secure a claim against that company. Sheen J said¹¹⁹: ” the starting point is the fundamental principle of company law that a shareholder has no property, legal or equitable in the assets of the company”.¹²⁰ He cited Pennycuick J in Rodwell Securities v IRC¹²¹: “According to the legal meaning of the words a company is not the beneficial owner of the assets of its own subsidiary. The legal meaning of the words takes account of the company structure and the fact that each company is a separate legal person.” Sheen J then went on to say: “From that starting point there is no way in which it can be said that Maritime Trader was ‘beneficially owned as respects all the shares therein’ by MTO unless the corporate veil can be lifted. I would not hesitate to lift that veil if the evidence suggested that it obscured from view a mask of fraud rather than the true face of the corporation.”

3.54 In that case there was no evidence that the ship had been purchased by MTS in order that it would not be available as security for a judgment against MTO and so Sheen J refused to lift the corporate veil. In effect indorsing the “one-ship company” arrangement he said¹²²: “Mr Saville asked the rhetorical question. ‘What is wrong with using the company structure to limit liability?’ To that question he said the answer must be, ‘Nothing, unless it is a sham’. I agree.”

3.55 The legitimacy of the one-ship company structure has also been endorsed in Hong Kong where it was held in The “Neptune”¹²³ that the use of one-ship companies as a means of limiting liability did not raise an inference of fraud so as to justify the lifting of the corporate veil.

3.56 The ” Maritime Trader” was a case concerned with a vertical relationship between a holding company and a subsidiary. The horizontal relationship between connected ” one-ship companies” was considered by the Court of Appeal in The “Evpo Agnic”¹²⁴ which is now the leading authority in this area.

3.57 The Evpo Agnic was proceeded against in rem and arrested in respect of a cargo claim arising out of the sinking of another ship, the Skipper 1. The two ships were owned by separate Panamanian companies, whose officers and shareholders were the same individuals, and the ships were managed by the same Panamanian company. It was the contention of cargo interests that lifting the corporate veil would establish that the two ships were in the same beneficial ownership (allegedly that of a particular Greek shipowner connected with the managers) and that discovery should be given to enable investigation of the question of beneficial ownership to take place. This argument was rejected by the Court of Appeal which held that the right of arrest under section 21(4)(ii) did not extend to a ship owned by a sister company of the company owning the ship in connection with which the claim arose.

3.58 The principal flaw in the attack on the one-ship company structure was exposed by the Master of the Rolls, Lord Donaldson, in the following words¹²⁵:

and later when he said¹²⁶:

3.59 The distinction between the cases of The “Maritime Trader” and The “Evpo Agnic” on the one hand, and The “Aventicum” and The “Saudi Prince” on the other, is that the latter pair of cases involved an allegation by the defendant shipowners of a change in beneficial ownership subsequent to the claim arising but before the issue of the claim form, so that the genuineness of this change required investigation, whereas there was no change of ownership involved in the former pair of cases, and there was therefore nothing to investigate. This was also recognised by the Master of the Rolls, Lord Donaldson, in The “Evpo Agnic” where he said¹²⁸:

Limits on the Exercise of Admiralty Jurisdiction

Crown immunity

3.60 At common law the Crown was immune from the exercise by the Admiralty Court of its jurisdiction in rem¹²⁹ and this situation is preserved by the Crown Proceedings Act 1947. Section 29(1) of the Act provides:

And section 24(2) of the Senior Courts Act 1981 provides:

• (c) authorise proceedings in rem in respect of any claim against the Crown, or the arrest, detention or sale of any of Her Majesty’s ships¹³² or Her Majesty’s aircraft,¹³³ or, subject to section 2(3) of the Hovercraft Act 1968, Her Majesty’s hovercraft, or of any cargo or other property belonging to the Crown.”

However, the Admiralty Court jurisdiction may be exercised in personam against the Crown.¹³⁴

3.61 Where a claimant institutes proceedings in rem “in the reasonable belief” that the property proceeded against did not belong to the Crown, the court may order that the proceedings be treated as if they were in personam, duly instituted, and may allow them to continue accordingly.¹³⁵

3.62 For the purposes of Crown immunity, the “Crown” includes government departments, ministers, officers, servants and agents of the Crown.¹³⁶ A vessel chartered to the government, but not by demise has been held not to be a ship of the Crown.¹³⁷

3.63 It should be noted that other specific aspects of Admiralty jurisdiction and practice generally apply to the Crown, such as limitation of liability,¹³⁸ limitation of actions,¹³⁹ salvage,¹⁴⁰ apportionment of loss in collision claims.¹⁴¹

Foreign sovereign immunity

Claims in respect of ships and property other than cargo

3.64 A State is not immune as regards any claim in Admiralty proceedings,¹⁴² or any claim which could be made the subject of Admiralty proceedings,¹⁴³ against or in connection with a ship belonging¹⁴⁴ to the State, if at the time when the cause of action arose the ship was in use or intended for use for commercial purposes.¹⁴⁵ This lack of immunity applies as regards claims in personam,¹⁴⁶ claims in rem against the ship in connection with which the claim arose¹⁴⁷ and claims in rem against “sister ships” provided both ships were in use or intended for use for commercial purposes at the time when the cause of action arose.¹⁴⁸

Claims in respect of cargo

3.65 A State is not immune as regards any claim in rem against cargo belonging¹⁴⁹ to the State if both the ship and the cargo were in use or intended for use for commercial purposes at the time when the cause of action arose.¹⁵⁰ If however Admiralty proceedings,¹⁵¹ or any claim which could be made the subject of Admiralty proceedings,¹⁵² are brought in personam to enforce a claim in respect of cargo belonging¹⁵³ to the State, there is no immunity if the ship carrying it was then in use or intended for use for commercial purposes.¹⁵⁴

Insolvency

3.66 Where the owner of property which may be proceeded against in rem becomes insolvent a potential conflict arises between the interests of the claimant in a claim in rem in seeking to assert his right against the ship or other property proceeded against in priority to claimants who do not have such rights of action in rem, and the interests of the general body of creditors in having all the property of the insolvent owner available to be dealt with in the insolvency proceedings. There is also a potential conflict of priorities; claims will rank pari passu in the insolvency proceedings,¹⁵⁵ but the Admiralty Court will apply its own rules of priority. The insolvency legislation restricts, and in certain cases prevents, legal proceedings being taken against the property of an insolvent company or individual.