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:
“I will commence with the action in rem, being that which is most resorted to, and which constitutes the peculiarity of the Court of Admiralty, and gives to it an advantage over other Courts having concurrent jurisdiction.”
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.
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.
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:
“The very able argument of counsel for the appellants rests upon the contention that the process of arrest of a vessel . . . is merely a method of enforcing an appearance in an action. In other words, that an action in rem in no way differs in its nature from an action in personam; save that there is attached to it a means of compelling the appearance of the defendant by the arrest of the vessel.
I am of the opinion that this view cannot be supported. The two cases upon which counsel have chiefly relied—The ‘Dictator’ and The ‘Gemma’—appear to me, when closely examined, to negative and not to support that proposition. They both of them treat the appearance as introducing the characteristics of an action in personam. In other words, it is not the institution of the suit that makes it a proceeding in personam, but the appearance of the defendant. And further, I think that the contrary is conclusively established by the case of The ‘Bold Buccleugh’, supported and approved as it was by the House of Lords in the case of Currie v McKnight . . .
I am, therefore, of the opinion that the fundamental proposition of the argument of the appellants’ counsel fails, and that the action in rem is an action against the ship itself. It is an action in which the owners may take part, if they think proper, in defence of their property, but whether or not they will do so is a matter for them to decide, and if they do not decide to make themselves parties to the suit in order to defend their property, no personal liability can be established against them in that action. It is perfectly true that the action indirectly affects them. So it would if it were an action against a person whom they had indemnified . . . I do not think that we are entitled to suppose that there has been a change in the nature of the action in rem merely because the modern language of the writ by which it is now commenced is unsuitable to that which I think the authorities establish to be its real nature.”
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:
” But we cannot allow it to be supposed that in our opinion the owner of the property is not indirectly impleaded. The course of proceeding, undoubtedly, is first to seize the property. It is, undoubtedly, not necessary, in order to enable the Court to proceed further, that the owner should be personally served with any process. In the majority of cases brought under the cognizance of an Admiralty Court no such personal service could be effected. Another course was therefore taken from the earliest times. The seizure of the property was made by means of a formality which was as public as could be devised. That formality of necessity gave notice of the suit to the agents of the owner of the property, and so, in substance, to him. Besides which, by the regular course of the Admiralty, the owner was cited or had notice to appear to shew cause why his property should not be liable to answer to the complainant. The owner has a right to appear and shew cause, a right which cannot be denied. It is not necessary, it is true, that the notice or citation should be personally served. But unless it were considered that, either by means of the publicity of the manner of arresting the property or by means of the publicity of the notice or citation, the owner had an opportunity of protecting his property from a final decree by the Court, the judgment in rem of a Court would be manifestly contrary to natural justice. In a claim made in respect of a collision the property is not treated as the delinquent per se. Though the ship has been in collision and has caused injury by reason of the negligence or want of skill of those in charge of her, yet she cannot be made the means of compensation if those in charge of her were not the servants of her then owner, as if she was in charge of a compulsory pilot. This is conclusive to shew that the liability to compensate must be fixed not merely on the property but also on the owner through the property. If so, the owner is at least indirectly impleaded to answer to, that is to say, to be affected by, the judgment of the Court. It is no answer to say that if the property be sold after the maritime lien has accrued the property may be seized and sold as against the new owner. This is a severe law, probably arising from the difficulty of otherwise enforcing any remedy in favour of an injured suitor. But the property cannot be sold as against the new owner, if it could not have been sold as against the owner at the time when the alleged lien accrued. This doctrine of the Court of Admiralty goes only to this extent, that the innocent purchaser takes the property subject to the inchoate maritime lien which attached to it as against him who was the owner at the time the lien attached. The new owner has the same public notice of the suit and the same opportunity and right of appearance as the former owner would have had. He is impleaded in the same way as the former owner would have been. Either is affected in his interests by the judgment of a Court which is bound to give him the means of knowing that it is about to proceed to affect those interests, and that it is bound to hear him if he objects. That is, in our opinion, an impleading. The case of The ‘Bold Buccleugh’ does not decide to the contrary of this. It decides that an action in rem is a different action from one in personam and has a different result. But it does not decide that a Court which seizes and sells a man’s property does not assume to make that man subject to its jurisdiction. To implead an independent sovereign in such a way is to call upon him to sacrifice either his property or his independence. To place him in that position is a breach of the principle upon which his immunity from jurisdiction rests. We think that he cannot be so indirectly impleaded, any more than he could be directly impleaded. The case is, upon this consideration of it, brought within the general rule that a sovereign authority cannot be personally impleaded in any court.”
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:
“I think the substantial soundness of this ruling is corroborated by considering the nature of the modern writ in rem. The history and effect of that writ have been fully explored by Jeune J in The ‘Dictator’, approved and followed by the Court of Appeal in The ‘Gemma’. It seems that originally the warrant was issued for the purpose of compelling the defendant to appear and submit to the Court, and was directed not merely against the property said to be the instrument of injury but any property of the defendant or even himself personally. But the modern writ in rem has become a machinery directed against the ship charged to have been the instrument of the wrongdoing in cases where it is sought to enforce a maritime or statutory lien, or in a possessory action against the ship whose possession is claimed. To take the present case the writ names as defendants the Cristina and all persons claiming an interest therein, and claims possession. The writ commands an appearance to be entered by the defendants (presumably other than the vessel) and gives notice that in default of so doing the plaintiffs may proceed and judgment be given by default, adjudging possession to the plaintiffs. A judgment in rem is a judgment against all the world, and if given in favour of the plaintiffs would conclusively oust the defendants from the possession which on the facts I have stated they beyond question de facto enjoy. The writ by its express terms commands the defendants to appear or let judgment go by default. They are given the clear alternative of either submitting to the jurisdiction or losing possession. In the words of Brett LJ the independent sovereign is thus called upon to sacrifice either its property or its independence. It is, I think, clear that no such writ can be upheld against the sovereign state unless it consents. It is therefore given the right, if it desires neither to appear nor to submit to judgment, to appear under protest and apply to set aside the writ or take other appropriate procedure with the same object. It may be said that it is indirectly impleaded, but I incline to think that it is more correct to say that it is directly impleaded. The defendants cited are ‘all persons claiming an interest in the Cristina’, a description which precisely covers on the facts of the case the Spanish Government and, to judge by the affidavits filed by the appellants in applying to obtain the warrant to arrest, no one else; under the modern and statutory form of a writ in rem, a defendant who appears becomes subject to liability in personam. Thus the writ in rem becomes in effect also a writ in personam. This emphasizes the view that the writ directly impleads the Spanish Government.”
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.
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:
“Now, apart from authority, it appears to me that when persons, whose ship has been arrested by the marshal of the Admiralty Court, think fit to appear and fight out their liability before the Court, the form of the proceedings in the Admiralty Court shew—and it is not disputed that the forms I have referred to are those which have been in use, according to the practice of the Court, from olden times—that the persons so appearing, as the defendants have done in the present case, become parties to the action, and thereby become personally liable to pay whatever in the result may be decreed against them; and the action, though originally commenced in rem, becomes a personal action against the defendants upon appearance.”
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.
“In my opinion an action which has been commenced as an action in rem continues until its termination as an action in rem unless it undergoes some alteration in its character by amendment, by order of the Court, or under the rules of Court. It is, in my opinion, a mistake to say that the action changes its character and ceases to be an action in rem and becomes an action in personam when the owner of the res appears and gives bail. It is no doubt true that when this is done the action, so far as its special characteristic as an action in rem is concerned, has served its purpose, or possibly its chief purpose, when the owner of the res has been induced, by reason of the arrest or fear of arrest of his vessel, to enter an appearance and to give bail in order to obtain the release, or avoid the seizure, of his vessel. It is also true that when once the owner of the res has appeared the plaintiff has the advantage of being able in case of necessity to take his property in satisfaction of the judgment in addition to the bail. These consequences, however, are, in my opinion, incidents only which arise in the course of the action in rem, which add to its value but which in no way alter or deprive it of its special character . . . . The advantage of the action being an action in rem still remains in the sense that, should the exceptional occasion arise, the Court in a proper case would no doubt still have jurisdiction to order the arrest of the vessel.”
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:
“It has been held in cases where the claim has been for money that, where the value of the res is insufficient to satisfy a money judgment given in an action in rem, the plaintiff may execute against the defendant who has appeared in the ordinary way, for instance by writ of fi. fa., in order to recover the balance. The basis on which it has been so held appears to be that, when a defendant enters an appearance to an action in rem, the action continues from then on also as an action in personam. The decisions on the point are The ‘Dictator’  P 304 and The ‘Gemma’  P 285, and the authority of those decisions was recently recognised by the Court of Appeal in The ‘Banco’  P 137. It has been thought to be implicit in those decisions that, in a case where the defendant did not appear to an action in rem, there would be no right in the plaintiff to do more than satisfy the judgment out of the res. There would be no further right to issue the ordinary forms of execution in order to recover the balance outstanding. I think it is right to say that, although that view of the law may well be implicit in the three decisions to which I have referred, yet the point did not strictly speaking arise for decision in any of them, and has not therefore strictly speaking been determined.’’
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.
“In The ‘Parlement Belge’ it was said that The ‘Bold Buccleugh’ decides that ‘an action in rem is a different action from one in personam and has a different result.’ But I do not think it follows, or that the Privy Council or the Court of Appeal intended to lay down that an action in rem could affect only the res. It may well be that, if the owners do not appear, the action only enforces the lien on the res, but that, when they do, the action in rem not only determines the amount of the liability, and in default of payment enforces it on the res, but is also a means of enforcing against the appearing owners, if they could have been made personally liable in the Admiralty Court, the complete claim of the plaintiff so far as the owners are liable to meet it. It appears to me consonant with common sense that if the owners have had no personal notice, and are not, save in the sense indicated in The ‘Parlement Belge’ before the Court, the effect of its judgment should be limited to the res in its hand, but that, if the owners appear to contest or reduce their liability, they should be placed in the same position as if they had been brought before the Court by a personal notice.”
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.
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
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.
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.
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
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:
“It will be seen, therefore, that although ‘charge’ is not defined in the Administration of Justice Act 1956,66 there exist in shipping statutes the very words, ‘a charge upon the ship’. In the absence of any direct words by the legislature which enlarge the meaning of ‘other charge’ I am not disposed to extend its meaning beyond the words I find in the Merchant Shipping Acts to which I have been referred. Though I have much sympathy with the argument put forward so powerfully by Mr Willmer, I am not satisfied that the holder of a possessory lien has been put by this statute into such a position that his rights and his remedies amount to a charge upon the ship for the amount claimed. They certainly amount to an inconvenience, but, as I say, in the absence of express words such as ‘other charge or right to possession by the holder of a possessory lien’ I am not disposed to extend the meaning further than I have indicated. ‘Other charge’ seems to me to have some meaning based upon other statutes dealing with merchant shipping.”
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:
“Section 3(3)70 was considered in The ‘St Merriel’ and there I found that the expression ‘other charge’ was meant to refer to something which, though not within the restricted definition of a maritime lien, was, nevertheless, not as wide as any claim arising in connection with a ship. In that case, the court was dealing with the right of the holder of a possessory lien under English law and it was not necessary to look at foreign law. Obviously section 3(3) does not refer to charges in the nature of a mortgage because they are already dealt with under section 3(2). ‘Other charges’ means any charge on a vessel given under the law of any nation to secure claims similar to those recognised by this court as carrying a maritime lien such as wages, damage, salvage and bottomry. The categories of maritime lien as recognised by this court cannot, in my view, be extended except by the legislature.”
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
- (a) the owners, charterers or persons in possession or control of a ship; or
- (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
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
- (a) the owners, charterers or persons in possession or control of a ship; or
- (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
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
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.
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.
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:
” in real commercial life, thus far at least, registered owners, even when one-ship companies, are not bare legal owners. They are both legal and beneficial owners of all the shares in the ship and any division between legal and equitable interests occurs in relation to the registered owner itself, which is almost always a juridical person. The legal property in its shares may well be held by A and the equitable property by B, but this does not affect the ownership of the ship or shares in that ship. They are the legal and equitable property of the company.”
and later when he said126:
“This127 involves the proposition that the registrations are shams. I am as realistic as most judges who have served in the Commercial Court, but I really do not see the commercial advantage of the creation of sham registered ownerships. Mr Pothitos no doubt has a legitimate interest in running these ships, including the two ships with which we are concerned, as a fleet, but he can do this by running a series of genuine one-ship shipowning companies as a group. He does not need a structure involving a holding company and subsidiaries, and still less sham companies. As governing shareholder in each company, he can cause them to use their individual assets to the mutual advantage of the members of the group and of Mr Pothitos.”
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:
“The truth of the matter, as I see it, is that section 21 does not go, and is not intended to go, nearly far enough to give the plaintiffs a right of arresting a ship which is not ‘the particular ship’ or a sister ship, but the ship of a sister company of the owners of ‘the particular ship’. The purpose of section 21(4) is to give rights of arrest in respect of ‘the particular ship’, ships in the ownership of the owners of ‘the particular ship’ and those who have been spirited into different legal, i.e. registered, ownership, the owners of ‘the particular ship’ retaining beneficial ownership of the shares in that ship.’’
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:
“Nothing in this Act shall authorise proceedings in rem in respect of any claim against the Crown, or the arrest, detention or sale of any of [Her] Majesty’s ships130 or aircraft,131 or of any cargo or other property belonging to the Crown, or give to any person any lien on any such ship, aircraft, cargo or other property.”
And section 24(2) of the Senior Courts Act 1981 provides:
“Nothing in sections 20 to 23 shall— …
- (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
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
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
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.