#5156 - The Indian Grace No. 2 - Conflict of Laws BCL

The Indian Grace (No. 2)

Facts

In June 1987 the respondent defendants' vessel Indian Grace loaded a cargo of munitions in Sweden for carriage to Cochin in India and delivery to the appellant plaintiffs, the Indian Government. The vessel sailed. A few days later a fire occurred in the no. 3 hold of the vessel. The master and crew extinguished the fire with water. They also jettisoned 51 artillery shells and 10 charges. The vessel put into Cherbourg for survey and to repack and restow the cargo in no. 3 hold. Upon completion of the necessary work the vessel resumed her voyage to Cochin. She arrived at Cochin in early September, and the cargo was cleared by 4 September 1987.

In the next few months the Indian Government notified two separate claims to the defendants. The first was a claim for the total loss of the cargo of munitions. The second was a small claim for short delivery based on the loss of the cargo jettisoned after the fire. On 1 September 1988 the Indian Government issued a plaint in the subordinate judge court in Cochin, seeking damages for the 51 shells and 10 charges which had not been delivered. The owners served a defence. This action came on for final hearing in December 1989. After a contested trial the judge gave judgment for the Indian Government for the amount of its claim in rupees. At that time the sterling equivalent was 7,200. An appeal against this judgment is still pending.

On 25 August 1989 (i.e. before judgment in the action in Cochin) the Indian Government caused a writ in rem to be issued in the Admiralty Court in England. On 4 May 1990 the writ was served on the Indian Endurance, a sister ship of the Indian Grace, at Tees Dock, Middlesbrough. In due course the parties agreed to the application of English law and the owners submitted to the jurisdiction of the Admiralty Court. The plaintiffs' case was that the munitions were subjected to radiant heat by the fire, and were consequently unreliable and worthless. The claim was largely made in Swedish kronor. The sterling equivalent was 2.6m.

Initially, the defendants pleaded issue estoppel as a defence to the claim: they said that the plaintiffs could and should have brought their whole claim before the court in Cochin. The defendants applied to strike out the claim. The House ruled that there was an identity between causes of action in the two sets of proceedings. But Lord Goff of Chieveley, speaking for a unanimous House, held that section 34 operated as a bar against proceedings rather than as an exclusion of jurisdiction. Accordingly, the operation of section 34 could in principle be defeated by agreement, waiver or estoppel. Lord Goff concluded that the matter ought to be remitted to the Admiralty Court to consider the issue of estoppel or waiver. Lord Goff further observed, at p. 424, that the plaintiffs sought to raise for the first time in the House of Lords the argument that the judgment of the Cochin court was not a judgment between the same parties as the plaintiffs asserted in the Admiralty action, because it was a judgment in personam, whereas the action was an Admiralty action in rem.

Questions

Whether the English action in rem is "between the same parties, or their privies" within the meaning of section 34 as the action in which the plaintiffs obtained judgment in Cochin.

If the answer to that question is “Yes”, the question arises whether the defendants are estopped from relying on section 34.

Holding

Section 34 – In rem and In Personam Actions

Since The Dictator was decided in 1892 the law has been that once the owners enter an appearance (or in modern phraseology when they acknowledge issue of the writ) there are two parallel actions: an action in personam and an action in rem. From that moment the owners are defendants in the action in personam. This development militated against the personification theory. In The Tervaete [1922] P. 259, 270 Scrutton L.J. said that it was established that an action in rem was not based upon the wrongdoing of the ship personified as an offender but was a means of bringing the owner of the ship to meet this personal liability by seizing his property.

The reality that an action in rem is an action against the owner of the ship is supported by the line of sovereign immunity cases. In this century the courts have gone further and held that a sovereign whose ship is served in an action in rem is in fact directly impleaded as a defendant. This appears clearly from the judgments in The Cristina of Lord Atkin, at p. 491, Lord Thankerton, at p. 493, Lord Macmillan, at p. 498, and Lord Wright, at p. 505. A perusal of those judgments show clearly that the reasoning of the House of Lords depended in the first place not on principles of international law but on an analysis of the development of the action in rem in English law. Because the sovereign was held to be directly impleaded the principle of sovereign immunity was then applied.

The Maciej Rataj (Case C-406/92) [1995] 1 Lloyd's Rep. 302:

"No importance must therefore be attached to the fact that the proceedings in question may possibly be of a different nature under the civil procedural law of one or other of the states concerned - What is important is whether or not the substantive issues which the court is called upon to examine are the same."

On the other hand, a comparison of article 21 and section 34 reveal a striking similarity in language. In drafting section 34 the draftsman must have taken article 21 as a model. In these circumstances it would be curious if one were to arrive at a decision on "the same parties" in respect of section 34 which diverges from that which applies to article 21. This consideration reinforces the view that I take on a consideration of the nature of an action in rem judged from the perspective of domestic English law.

The purpose of section 34: The function of section 34 was to overcome the anomaly created by the fact that the doctrine of merger did not apply in the case of foreign, i.e. non-English, judgments: Republic of India v. India Steamship Co. [1993] A.C. 410, 423, per Lord Goff of Chieveley. The rationale of the bar against proceedings caught by section 34 is that it is unjust to permit the same issue to be litigated afresh between the same parties: per Lord Goff of Chieveley, at p. 422h. Given this legislative objective, it would in my view be wrong to permit an action in rem to proceed despite a foreign judgment in personam obtained on the same cause of action. The...