MV ,KALYANI, AND ANOTHER v. MUTIARA SHIPPING COMPANY NY

014-SLLR-SLLR-1998-V-2-MV-KALYANI-AND-ANOTHER-v.-MUTIARA-SHIPPING-COMPANY-NY.pdf


SC MV -KALYANI" and Another v. Mutiara Shipping Company NY 105
MV “KALYANI” AND ANOTHER
v.MUTIARA SHIPPING COMPANY NY
SUPREME COURTFERNANDO, J.
DHEERARATNE, J. ANDWADUGODAPITIYA, J.
S.C. APPEAL NO. 100/96C.A. NO. 253/96
H.C. ACTION IN REM NO. 17 OF 1995
24TH AND 25TH JUNE, AND 7TH OCTOBER, 1997
Admiralty jurisdiction – Admiralty Jurisdiction Act, No. 40 of 1983 – S. 2 (1) (a)
Power of the Court to grant damages for infringement of rights of ownership
Defendant's right to make a counter – claim for malicious arrest of a vessel
Power of the High Court to order plaintiff to give security for the counter-claim.
Per Fernando, J.
"It seems to me, therefore, that the more reasonable interpretation of section2 (1) (a) is that a plaintiff's claim “to” ownership includes a complaint not onlythat the defendant has challenged his title, but also that the defendant hasinterfered with or deprived him of all or any of his rights of ownership. Thatprovision does not limit the relief which the court may grant upon such a claim;it permits a declaration of title, and the restoration of possession, as well asdamages for the infringement of the rights of ownership”.
Held:
Accordingly, in terms of section 2 (1) (a) a defendant is entitled to counter-claim for damages for wrongful arrest of a vessel where there was eithermala fides or gross negligence which implies malice.
Per Fernando, J.
“. . . . the power of the court, consistently recognised and exercised overa long period of time to award damages for malicious arrest, is ancillary orincidental to its power to arrest a vessel, and can be exercised in the sameproceedings. Such a claim for damages can be made without awaiting thetermination of the proceedings.”
The High Court has the power to order the plaintiff to give security forthe defendant's counter-claim for damages for malicious arrest.
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Cases referred to:
Abdul Hamidu v. Perera (1925) 26 NLR 433. 436.
Bawazir v. Acting Master MV Ayesha (1986) 1 Sri LR 314 at 319-320.
Government of the USA v. The Ship Valiant Enterprise (1961) 63 NLR 337,343.
Xenos v. Aldersley (The Evangelismos) (1858) 12 Moo. PCC 352.
The Walter D. Wallet (1893) P 202.
The Cathead (1867) LR 1 A & E 314.
Churchill v. Siggers (3 E & B 929, 937).
The Strathnaver (1875) 1 AC 58, 66 (PC)
The Active (1862) 5 LT 773.
The Kate (1864) 9 LT 782.
The Collingrove
The Numida (1885) 10 PD 158, 160.
The Margaret Jane (1869) 20 LT 1017, 1018.
The Orion (1852) 12 Moo. PCC 356n.
The Nautilus (1852) 12 Moo. PCC 35n; (1852) Swa. 105.
The Gloria de Maria (1856) Swa. 106.
The Glasgow (1852) 12 Moo. PCC 356n.
The John (1830) 2 Hagg 305.
The Western Ocean (1870) LR 3 A & E 38.
The Eleonore (1863) 9 LT 397.
The George Gordon (1884) 9 PD 46.
The Eudora (1879) 4 PD 208.
The Cheshire Witch (1864) 11 LT 350.
The Crimdon (1900) P 171.
Astro Vencedor SA v. Mabanaft (1971) 2 QB 588, 595.
Eswaralingam v. Sivagnansunderam (1962) 63 NLR 396, 398.
Sirinivasa Thera v. Sudassi Thera (1960) 63 NLR 31.
Cargo (etc.) Management Corp v. The Ship Valiant Enterprise (1961) 64
NLR 271, 275.
The Carnarvon Castle (1878) Maritime Law Cases 607.
The Charkieh (1873) LR 4 A & E 120.
The D.H. Peri (1862) Lush 543, 167 ER 245.
The Mary (or Alexandra) (1867) 16 LT (NS) 98.
The Bazias 3, The Bazias 4 (1993) 2 ALL ER 964, 970.
Soleada SA v. Hamoor Tanker Inc (1981) 1 ALL ER 856.
APPEAL from the judgment of the Court of Appeal.
Chula de Silva P.C with R. Sri Kantha and Murshid Maharoof for the appellants.
N. Sinnathamby with D. Philips for the respondent.
Cur. adv. vult.
SC MV "KALYANI" and Another v. Mutiara Shipping Company NY
(Fernando, J.)"107
27th January, 1998FERNANDO, J.
Both the plaintiff-petitioner-respondent company (the plaintiff) and the2nd defendant-respondent-appellant (the defendant) claimownership of the MV Kalyani (the vessel). While the vessel was inthe Port of Colombo, in the possession and control of the defendant,the plaintiff instituted this action in rem in the High Court of Colomboon 10.4.95, by issuing a writ of summons,-in terms of rule 4 of theHigh Court (Admiralty Jurisdiction) Rules, 1991 (made under Article136 of the Constitution read with section 11 (3) of the AdmiraltyJurisdiction Act, No. 40 of 1983). At the same time the plaintiff appliedfor and obtained a warrant for the arrest of the vessel, under rule25, and the vessel was accordingly arrested on 10.4.95. On 21.4.95the High Court directed the release of the vessel upon the defendantgiving security, by means of bank guarantees to the value ofUS$ 300,000.
In its petition dated 17.5.95, the plaintiff claimed the ownership ofthe vessel, alleging that it was wrongfully and unlawfully in thepossession of the defendant who had no right thereto, and prayedfor a declaration that the plaintiff was the owner of the vessel, and:
"for damages in a sum of US$ 300,000, together with further
damages in a sum of US$ 3,000 per day until the vessel . . .
is delivered to the plaintiff in good order and condition.1'
The defendant filed a "statement of claim/answer" dated 25.4.95,and an answer dated 27.6.95, pleading that he was the owner of thevessel; he made three claims in reconvention, of which only one isrelevant to the present appeal: that the plaintiff "wrongfully and/ormaliciously and/or fraudulently caused the vessel to be arrested" onor about 10.4.95, in consequence of which wrongful arrest thedefendant had suffered loss and damage in a sum of US$ 300,000and continuing damages in a sum of US$ 3,000 per day. He alsoasked the court to order the plaintiff to deposit security/bail in respectof those counter-claims.
Although somewhat wider issues were argued in the High Court,the questions that now arise are just two. The first is whether thedefendant was entitled to make a claim in reconvention for damages
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for wrongful and/or malicious and/or fraudulent arrest (which I will forconvenience refer to as "malicious arrest"); and it is common groundthat this depends upon the interpretation of section 2 (1) (a) of theAdmiralty Jurisdiction Act, No. 40 of 1983. The second question, whicharises only if the Court does have the power to entertain such a claim,is whether the Court can order the plaintiff to give security/bail inrespect of that claim in reconvention for malicious arrest.
The High Court answered both questions in the affirmative, anddirected the plaintiff to give/deposit security for the claims in reconventionin a sum of US$ 300,000, as a condition precedent to the trial ofthe action. He held that the larger power, of determining claims topossession or ownership, must be taken to include the lesser power,of awarding damages in the event of a determination by the Courtthat the arrest was wrongful.
The plaintiff made applications for leave to appeal and for revisionto the Court of Appeal, which made an interim order staying the orderfor the deposit of security. In the course of that order, the Courtobserved:
. . an action in common law would lie tor the wrongful arrest of a ship evenin English law. Thus it is to be seen that the defendant is not entitled to makea claim for damages by way of a claim in reconvention in an action instituted bythe plaintiff for the arrest of a ship under the provisions of the Admiralty JurisdictionAct of 1983. The learned High Court Judge …. appears to have taken the viewthat since section 2 (1) (a) gives him a jurisdiction to determine any claim in regardto the possession or ownership of a ship that the said jurisdiction necessarilyempowers him to decide the question of damages arising on account of a wrongfularrest. This does not appear to us to be tenable and we are of the view that thelearned High Court Judge erred in requiring security . . .“
Mr. Chula de Silva, PC, for the defendant, submitted that the Courtof Appeal had decided the principal question in issue, and decidedit wrongly, on the mistaken assumption that simply because there isa common law remedy, there is no remedy under the statute, andasked for special leave to appeal to this Court.
Both counsel agreed that the question whether there can be acounter-claim for malicious arrest was of general importance and hadnot been the subject of any decision in Sri Lanka. Special leave wasgranted on three questions which ultimately became narrowed downto the two questions which I have set out earlier.
SC MV “KALYANI" and Another v. Mutiara Shipping Company NY
(Fernando, J.)"109
I. “Any claim to the possession or ownership of a ship."
1. Section 2 (1) (a) of the Act This provides:
"The admiralty jurisdiction of the High Court . . . shall … beas follows, that is to say, jurisdiction to hear and determine anyof the following questions or claims:
(a) any claim to the possession or ownership of a ship orto the ownership of a share therein . . ."
Before considering what claims a defendant may make inreconvention, it is relevant to consider what claims a plaintiff may makeunder this limb.
Mr. Sinnatamby for the plaintiff contrasted the language of someof the other limbs of section 2(1)- which refer to any claim in respectof a mortgage, any claim arising'out of any agreement, any claimin the nature of pilotage, and any question as to possession, etc. -and submitted that a claim "to" possession or ownership is muchnarrower in scope. The effect of this contention is that a claim "to"the ownership of a vessel is no more than an assertion that ownershiphas been denied; such a claim cannot result in anything more thana decree that the claimant is entitled to ownership, and to an orderthat the vessel be restored to him. This contention attempts to drawa distinction between title and other rights of ownership: and assertsthat only the outright denial of title gives rise to a claim "to" ownership,while interference with, or deprivation of, other rights of ownershipdo not give rise to claims "to" ownership – and accordingly that therecan be no adjudication or relief in respect of the latter. Claims fordamages for the deprivation of the possession of a vessel, or of itsuse, are not to be regarded as claims "to" ownership, and are outsidethe jurisdiction of the High Court. He contended that if the legislaturehad intended to allow such claims, paragraph (a) would have referredto "any claim in respect of [or as to] ownership".
It was not, argued Mr. Sinnatamby, as if there was no remedyin respect of such other claims: actions could be brought in otherCourts, in Sri Lanka or elsewhere, in respect of such claims fordamages. That means, however, that if a vessel is hijacked in onejurisdiction, and if some of its equipment is removed and sold in
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another, and if it is then arrested in Colombo in an action in rembrought by the true owner, the High Court can only give him adeclaration of title and restoration of possession; and he would becompelled to institute separate actions, in Colombo or elsewhere, inrespect of his other causes of action. Even if the vessel had beencompletely stripped of its machinery and equipment, so that it becamea mere hull, the Court would be powerless to award damages orcompensation to the true owner to ensure that he would at leastreceive the actual value of his vessel. Such an interpretation wouldresult in great inconvenience; would encourage a multiplicity of suits;and may even compel an owner to institute proceedings in anotherjurisdiction with no real hope of enforcing the judgment. Indeed, thatinterpretation would seem to exclude the claim for damages whichthe plaintiff itself made.
Mr. de Silva submitted (citing Abdul Hamidu v. Perera,0)) that theword "any" excludes limitations or qualifications of any kindwhatsoever, and signifies that claims of every kind were permissible.A claim for damages in respect of the wrongful or malicious deprivationof possession of a vessel was therefore included in the phrase “anyclaim to possession". I do not agree with that reasoning. If the word“to" does indeed have the effect to restricting permissible claims tobare declarations (and to restoration of possession), and of excludingclaims for damages, the undoubted amplitude of the word "any" wouldhave the effect only of allowing "any" claim (i.e. all claims, or eachand every claim) falling within the permitted category, but would notin any way eliminate those restrictions, or enlarge the permittedcategory of claims.
However, I find it difficult to agree with Mr. Sinnatamby that theword "to" restricts the category of permissible claims to bare decla-rations (and restoration of possession). The use of other phrases -such as in respect of, arising out of, in the nature of, and as to -would make little difference, because it could nevertheless equally wellhave been argued that a claim "in respect of" (or "as to') ownershipincludes only a declaration, on the ground that a claim for damagesfor infringements of the rights of ownership is not one in respect of(or as to) ownership, but arises from the denial of the rights ofownership.
SC MV ’KALYANI“ and Another v. Mutiara Shipping Company NY
(Fernando, J.)"111
In my view this provision must be interpreted in the context of theundoubted purpose of the Act: to enable certain disputes to beresolved by the High Court under and in terms of the special pro-cedures provided. What then are the claims "to" ownership which theLegislature had in mind? The rights of the owner of a thing includenot only the right to recognition by others that he is the owner – i.e.recognition of title – but also his right to possess, to use, and to enjoythe fruits of that thing. A dispute regarding his ownership can certainlyarise if someone else merely claims title to that thing. But such adispute would also arise – and more often arises – when anotherinterferes with, or deprives him of, any of his other rights of ownership.So when the true owner of a thing asks the Court to decide a disputeregarding his claim "to" ownership, that claim will, more often thannot, involve assertions that the adverse party has wrongfully interferedwith or deprived him of his rights to the possession, use and enjoymentof that thing – and the denial of title will generally be only a matterof inference from those wrongful acts. Obviously, the effective reso-lution of such a dispute requires not only a declaration of title andan order for the restoration of possession, but also a remedy for thewrongful denial or infringement of other rights of ownership, and thatwould generally take the form of compensation or damages.
It is therefore more reasonable to interpret the jurisdiction to decideclaims "to" ownership as not being confined to the academic deter-mination and declaration of title, but as extending to the adjudicationof all the questions and issues arising from an alleged infringementof any of the rights of ownership.
Let me turn briefly to claims "to" possession. If a person claimsthat he was entitled to possession of a vessel under an agreementwith the owner, but that the owner has wrongfully deprived him ofhis rights of possession, could it reasonably be argued that his claim"to" possession cannot include a claim for damages for the wrongfuldeprivation of possession? Having regard to the delays in litigation,it may well happen that the agreed period for which he was entitledto possession has expired by the time the action is decided, so thatan order for restoration of possession is no longer possible: must hethen be content with a decree that he was indeed entitled topossession during that period? Here, too, it is more reasonable toregard his claim "to" possession as including a claim that he had beenwrongfully deprived of possession, and a claim for compensation.
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It seems to me, therefore, that the more reasonable interpretationof section 2 (1) (a) is that a plaintiff's claim "to" ownership includesa complaint not only that the defendant has challenged his title, butalso that the defendant has interfered with or deprived him of all orany of his rights of ownership. That provision does not limit the reliefwhich the Court may grant upon such a claim: it permits a declarationof title, and the restoration of possession, as well as damages forthe infringement of the rights of ownership. That interpretation hasthe added virtue of avoiding incovenience and injustice.
Nothing in the Act denies to defendant the benefit of section 2(1) (a), and so it must follow that the claims in reconvention whicha defendant is entitled to make include such claims for damages. Iwill return to the question whether the defendant's claim for damagesfor malicious arrest falls within that class of claims, after dealing withthe legislative history of the 1983 Act.
At the conclusion of the oral argument, we asked both counselto cite any decisions interpreting the corresponding English provisions(and similar provisions, if any, enacted in other jurisdictions). Thewritten submissions later filed contained no reference whatever to anysuch decisions or provisions.
2. Legislative context and history. While I think that the languageof section 2 (1) (a) of the 1983 Act lends itself much more readilyto the broader interpretation, consistent with both convenience andjustice, than the narrower one for which Mr. Sinnatamby contends,yet I cannot ignore the fact that the 1983 Act – "to amend andconsolidate the law" – has a complex legislative history of manydecades. Indeed, what Mr. de Silva cited in support of the broaderinterpretation were three 19th century decisions. It is thereforenecessary to consider whether, possibly, the legislative context ofthe 1983 Act provides any justification for preferring the narrowerinterpretation. Was it the law before 1983 that such claims couldnot be entertained, and, if so, is there any reason to think thatthe Legislature intended the law to remain unchanged?
The history of our Admiralty law, and its dependence on Englishlaw, has been traced back to the Charter of Justice of 1833: seeBawazir v. Acting Master MV AYESHA,® at 319-320 and it is sufficientfor me to make a brief reference to just some aspects of that history.
SC MV °KALYANI" and Another v. Mutiara Shipping Company NY
(Fernando, J.)-113
The need to refer to English Law arises because our AdmiraltyLaw prior to 1983 was English Law. Section 2 of the Ceylon Courtsof Admiralty Ordinance, No. 2 of 1891, declared the Supreme Courtto be a Colonial Court of Admiralty (in terms of the Colonial Courtsof Admiralty Act, 1890), having:
"Jurisdiction, subject to the provisions and limitations contained in the ColonialCourts of Admiralty Act, 1890, over the like places, persons, matters and thingsas the admiralty jurisdiction of the High Court in England, whether existing byvirtue of any Statute or otherwise, and such Colonial Court of admiralty mayexercise such jurisdiction in like manner and to as full an extent as the High Courtin England . . ."
No distinction was made between statutory and common lawjurisdictions. It was held in Government of the USA v. The ship ValiantEnterprise (3>, that the jurisdiction conferred was limited to the admiraltyjurisdiction of the High Court of England as it existed at the passingof the Act; accordingly, statutory changes introduced after 1891 andbefore 1961 were not part of our law.
However, when that Ordinance was repealed by section 3 (1) (a)of the Administration of Justice Law, No. 44 of 1973, the High Court(designated in terms of section 23) was given "admiralty jurisdiction",namely:
"the admiralty jurisdiction lor the time being of the High Courtof England" (section 54),
unless and until the Legislature made contrary provision.
Thus in 1973 the admiralty jurisdiction of the High Court was thesame as that of the High Court of England, and included thosejurisdictions introduced by statute after 1891, as well as after 1973.Here, too, no distinction was made between statutory and commonlaw jurisdictions.
Immediately before the 1983 Act was enacted, therefore, the admiraltyjurisdiction of the High Court was the same as that of the High Courtof England.
What then was the admiralty jurisdiction of the English High Court?Or, rather, did that jurisdiction include the power to entertain a claimfor damages for malicious arrest?
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Mr. Sinnatamby's contentions were summarized thus in his writtensubmissions tendered after the oral argument:
. . there is no justification for adding to the jurisdiction ofthe Court provided by section 2 (1) of the Act. It is significant thateven the English Law – Supreme Court Act, 1981 – does not vestthis jurisdiction to entertain claims for wrongful arrest, but assuming,not conceding, that is a common law remedy, the English Lawmay have left the door open by section [20 (1) (c) which broughtin 'any other admiralty jurisdiction which it had immediately beforethe commencement of this Act']. This provision is not in our Actand accordingly it is not open to introduce English Law, more soas the Legislature has considered the matter and in section 12of our Act expressed the limitation on the use of English Law tomatters of procedure as against jurisdiction.
. . . none of the Admiralty Law text writers – such as Meeson,Jackson – make any reference to a jurisdiction to try claims forwrongful arrest or [to order] security for counter-claims and neitherdoes Halsbury or the British Shipping Laws make any referenceto such a jurisdiction. The Evangelismos case is not even referredto by them, though the Strathnaver case is referred to [in] Halsburybut not in relation to this but on the aspect of the right of a partyto question the acceptance of a surety provided for the releaseof a vessel."
Section 1 (1) (a) of the Administration of Justice Act, 1956, isvirtually identical to section 20 (2) (c) of the Supreme Court Act, 1981,and to our section 2 (1) (a). Section 2 (1) of the 1956 Act makesprovision similar to section 20 (1) (c) of the 1981 Act, but our 1983Act has nothing of that sort.
Mr. de Silva relied heavily on the Privy Council decision in Xenosv. Aldersley (The Evangelismos)(4). That was a claim for damage doneby collision brought against the Evangelismos, which was arrested anddetained for some months; the plaintiffs failed to establish that it wasthe vessel which had caused the damage; the owner of that vesselwas therefore dismissed from the suit with costs; and he asked theHigh Court of Admiralty of England to award damages against theplaintiffs for the damages and losses sustained in consequence ofsuch arrest and detention. The Court refused, as it considered that
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the arrest had been made in the bona fide belief that it was the vesselwhich had been in collision with the plaintiffs' vessel. On appeal, thePrivy Council said:
"It appears that there was a defence put in, by which the appellants claimednot only to have the suit dismissed, but to have costs and damages awarded tothem for the injury sustained by the detention and demurrage of the ship whileunder arrest . . .
It is also said that it is the established rule of .the Admiralty Court where aparty brings an action and succeeds in upholding it, that he is entitled, unless thereare circumstances to take it out of the ordinary rule, to have some compensationfor the loss he has suffered, which in some cases is very inadequate, but it isthe only compensation the Court can award.
Their Lordships think there is no reason for distinguishing this case, or givingdamages. Undoubtedly there may be cases in which there is either mala tides,or that crassa negligentia, which implies malice, which would justify a Court ofAdmiralty giving damages, as in an action brought at Common Law damages maybe obtained. In the Court of Admiralty the proceedings are, however, more con-venient, because in the action in which the main question is disposed of, damagesmay be awarded.
The real question in this case, following the principles laid down with regardto actions of this description, comes to this: is there or is there not, reason tosay that the action was so unwarrantably brought, or brought with so little colour,or so little foundation, that it rather implies malice on the part of the plaintiff, orthat gross negligence which is equivalent to it?"
The Privy Council agreed that there were circumstances whichafforded ground for believing that the vessel was the one which hadbeen involved in the collision, and affirmed the judgment, anddismissed the appeal.
Mr. de Silva also cited The Walter D. Wallet®, and the Cathead<e>.The former was not an admiralty action in rem, but an action atCommon Law for the malicious arrest of the vessel. It was held:
"No precedent, as far as I know, can be found in the books of an action atCommon Law for the malicious arrest of a ship by means of admiralty process… As Lord Campbell said in Churchill v. Siggers,m. To put into force the processof law maliciously and without any reasonable or probable cause is wrongful; and,if thereby another is prejudiced in property or person, there is that conjunction ofinjury and loss which is the foundation of an action on the case'. Why is the processof law in admiralty proceedings to be excepted from this principle? It was longago held that an action on the case would lie for malicious prosecution … Itcan hardly be denied that it would have lain for malicious arrest of a person by
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admiralty process in the days when admiralty suits so commenced . . . But if forarrest of a person by admiralty process, why not for arrest of a person’s property?
I can imagine no answer, and the language of the reasons of the Privy Councilin the case of The Evangelismos . . . appears to me to treat the existence ofsuch an action at Common Law as indisputable . . . Probably the reason whyno example of such an action at common law is to be found, is that superiorconvenience, though not exclusive jurisdiction, to which the above words refer. Asthe Court of Admiralty, when setting aside the arrest (which would be the preliminaryto a Common Law action) could do full justice to the injured person, he wouldnot, and probably could not, subsequently resort to a Common Law tribunal".
There was no actual damage; the ship was not detained in portby the arrest; nor was her loading interfered with. "Still, the actionof the defendants was … in common law phrase, without reasonableor probable cause; or, in equivalent admiralty language, the result ofcrassa negligentia, and in a sufficient sense mala tides." One poundsterling was awarded as damages.
That was an action at Common Law. The Cathcart (supra) wasan action in rem, in the Admiralty Court, on a mortgage. The plaintiffswere condemned in costs and damages because:
“. . . they had full knowledge of the facts . . . and would have known theyhad no right to arrest the vessel. Add to this, the arrest of the vessel was onthe eve of commencing a profitable voyage, and after a decision of the magistrateadverse to their claim, and [they] have attempted to support the proceeding bymaking charges of fraud against the defendants which they have quite failed toprove."
Mr. de Silva submitted that in the present case the defendant’scounter-claim was the same: damages for a malicious arrest withoutreasonable or probable cause.
If the question which we now have to decide had arisen at anytime after 1891 and before 1973, our Courts would have had todetermine what the English Law was in 1891, and I have no doubtthat our Courts would have regarded the 1858 decision of the PrivyCouncil (supported by the two subsequent decisions) as correctlystating the English Law. Likewise, in and after 1973, the provisionsof the Administration of Justice Act, 1956, and the Supreme CourtAct, 1981, would have been regarded as confirming, and not reversing,those three English decisions.
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However, in view of Mr. Sinnatamby's very confident assertion thatHalsbury and English text-writers do not even refer to The Evangelismos,I tried to see whether that was a wayward or now obsolete decision,or whether other decisions either had followed it or were to the likeeffect. There were numerous relevant references in the English andEmpire Digest, volume 1 (of which the 1961 edition is the latestavailable in the Supreme Court library). In several cases TheEvangelismos had been applied or approved: The Strathnaver<8>, TheActive191, The Kate1'01, The Collingrove<”>, The Numida°2>, and TheMargaret Jane1’3*, are some.
Further, in The Evangelismos the Privy Council followed establishedprinciples, and did not create a new precedent. Prior to 1858,defendants complaining of wrongful arrest had been awarded “costs,losses, charges, damages, demurrage and expenses caused by theillegal arrest of "The Orion1’4*, "costs and expenses consequent onthe arrest of" The Nautilus1’5*, and "costs, damages, demurrage andexpenses" caused by the arrest of The Gloria de Maria*’6*, a salvageaction which was later abandoned by the plaintiff. Again, in TheGlasgow<’7>, a dispute as to ownership which has a resemblance tothe present case – the ship was sold by her master without anyauthority from her owner, and her name was changed; it was thenarrested:
"at the suit of her owner … in a cause of possession, andthe ship remained under arrest until the cause was heard . . ..the Judge, by his interlocutory decree, dismissed the defendantswho had purchased this ship, and condemned .. . her former ownerin demurrage and costs."
One of the decisions cited in the argument in the Privy Councilwas The John<’e). The Vice-Admiralty Court of Gibraltar in a causeof possession, decided in favour of the plaintiff, the alleged purchaserof the vessel; that decision was reversed on appeal, and the Courtordered restitution of the vessel to its former possessor:
. . as he has been dispossessed of his vessel, which hasbeen in the hands of [the plaintiff] for two or three years, I shouldnot do full justice if I did not pronounce also for compensation,in the nature of demurrage … I am willing to presume thateverything has been done for proper motives; but, as I think the
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judgment of the Court below is founded on erroneous principles… it is my duty to reverse it, and award to the party such reliefas may amount to an equitable compensation for the injury whichhe has sustained."
Damages or wrongful arrest have been awarded, not only in actionsfor damage done by involving collision, in which the wrong vesselwas arrested (as in The Evangelismos (supra) ), but in many othertypes of action. Where after obtaining the arrest of a vessel the plaintiffabandoned the suit, in The Western Ocean 09), an action to enforcea mortgage – he was ordered to pay the defendant interest on themoney paid into Court to obtain the release of the vessel; see alsoThe Gloria de Maria (supra), and The Eleonord20), both salvageactions. In the latter, it was held that the fact that the arrest wasmade without prior claim and for a sum disproportionate to the valueof the property and the services rendered, was evidence of negligence,and that the defendant was entitled to damages.
Apart from abandonment, in salvage actions damages have beenawarded where the arrest was improper: The Nautilus (supra), wherethe vessel had been arrested although the sum due had been tenderedbefore the arrest, and The George Gordon l2,), where the defendanthad to provide bail in an exorbitant sum, because the claim wasunreasonably excessive, the plaintiffs were ordered to pay all costsand expenses of finding bail. However, damages were not awardedwhere mala fides or gross negligence were lacking: The Kate (supra),The Strathnaver (supra), and The Margaret Jane (supra). In TheEudora(22), the holder of a bottomry bond arrested the secured vesselbefore the bond was due; the bond was paid at or before maturity;and the shipowner was held entitled to costs, but not to damagesin the absence of mala tides or gross negligence. The John and TheGlasgow were causes of possession. The dispute in The Walter D.Wallet, (supra) had its origin in an agreement to sell the vessel,although the question of damages arose in a subsequent action atCommon Law.
In most of these causes damages were awarded for arrest anddetention during the period before judgment. In the The CheshireWitchi*21*, the vessel was detained for twelve days after the action hadbeen dismissed, because the plaintiff was considering an appeal,which he then decided against: damages were awarded. In The John
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(supra) compensation seems to have been awarded even for detentionpending appeal.
Finally, I must refer to The Crimdon(24), which involved R.S.C. Order29, rules 12 and 18 – which are similar to rules 159 and 163 of ourold Admiralty Rules, 1883, which have been re-enacted as rules 141and 145 of our present High Court (Admiralty Jurisdiction) Rules, 1991:
"141. Any person desiring to prevent the arrest of any property may file anotice undertaking, within three days after being required to do so, to give bailto any action or counter-claim that may have been, or may be. brought againstthe property, and thereupon the Registrar shall enter a caveat in the caveat warrantbook . . .
145. The entry of a caveat warrant shall not prevent the issue of a warrant, buta party at whose instance a warrant is issued for the arrest of any property inrespect of which there is a caveat warrant outstanding shall be condemned in allcosts and damages occasioned thereby unless he shall show to the satisfactionof the Judge good and sufficient reason to the contrary.*
Despite an undertaking by the defendants' solicitors, given withoutqualification, to enter an appearance and to give bail in a sum notexceeding the value of the ship, cargo and freight, and the caveatthereupon entered, the plaintiffs arrested the ship (even without inquiryas to whether the undertaking was satisfactory). It was held that theyhad failed to show good and sufficient reason for the arrest and werecondemned in damages and costs.
For the sake of completeness, I must also refer to our old Rule129, now re-enacted as Rule 115:
“115. A party claiming an excessive amount, either by way of claim or set-off or counter-claim, may be condemned in all costs and damages therebyoccasioned."
If a party having a just claim may be condemned in damagesbecause the amount he claimed was excessive, can a party makinga wholly unjust claim escape?
These rules reflect the undoubted jurisdiction of Admiralty Courtsto compensate a party for the injury he has suffered by reason ofwhat amounts to the malicious abuse of its process. As observed inThe Kate: (supra)
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", . . redress in the form of costs and damages, is a just remedy approvedpn The Evangelismos] . . . and has been the undisputed and uniform practice ofthis court from the beginning down to the present time."
So also in The Collingrove (supra), The Numida (supra), thedefendant was awarded as damages the commission he paid to obtainbail in order to obtain the release of the vessel and thereby to avertthe damage he would have suffered by its continued detention, because:
"It has always been the practice in the Court of Admiralty for the judge to awardthese damages to the defendant, whereupon the trial the facts have shown thathe was entitled to them, without putting him to the necessity of bringing a freshaction for them."
The reason was stated thus in The Walter D. Wallet: (supra)
"As the Court of Admiralty, when setting aside the arrest . .could do full justice to the injured person, he would not, andprobably could not, subsequently resort to a Common Law tribunal".
In view of this mass of case law, Mr. Sinnatamby's submissionthat The Evangelismos had not been referred to in Halsbury and bytext-writers surprised me. I find that Halsbury (volume 45, paras 1378-1379) does refer to that decision, and half a dozen besides, in supportof the following:
"1378. An action lies against a person who maliciously and without reasonableand probable cause procures, by means of Admiralty proceedings, the arrest ofa ship, if the ship has been released and the proceedings have terminated in favourof the person aggrieved by the arrest.
1379 . . . Where actual damage has been sustained, the Admiralty Court willnot, if the facts are properly brought to its knowledge … put the injured partyto the necessity of bringing a fresh action, but will, in the original action, awardhim damages for the wrongful arrest, usually in the nature of demurrage".
Further, The Evangelismos was manifestly approved in AstroVencedor SA v. MabanaftfS5>. In considering whether a claim fordamages for wrongful arrest was within the scope of an arbitration(upon charterers' claim for damages against shipowners), Lord Denningsaid :
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(Fernando, J.)
121
“The arrest of the ship was the direct consequence of the charterers' claimfor damages against the shipowners. . . The arrest was simply the follow-up tothat claim. It was so closely connected with it that the rightness or wrongness ofthe arrest is also within the scope of the arbitration. This is borne out by the practiceof the Admiralty Court. There have not been many claims for wrongful arrest recently.But the practice of the Court of Admiralty is to deal with a claim for wrongfularrest at the same time as the claim for which the arrest was made. In TheEvangelismos … the Privy Council said that such procedure is very 'convenient'.11
As for omission by text-writers, The Evangelismos is in fact referredto in the British Shipping Laws (1971 ed., voj. 2, para 1192; and 1961ed., vol. 4, paras 399-400 and 445).
I now turn to Mr. Sinnatamby's submission that the jurisdiction, ifany, to award damages for malicious arrest is a Common Lawjurisdiction which exists in England because it is expressly saved, andis absent in Sri Lanka because our Act lacks a similar saving clause.
In considering whether that was a Common Law jurisdiction, it isnecessary to remember that while a jurisdiction granted by statuteto a Court cannot be expanded, either by removing statutoryrestrictions or by extension to other subjects, under the guise ofinterpretation, yet the grant of such a jurisdiction generally implies thegrant of all that is necessary to make it effective.
The decisions discussed above show that the power to awarddamages for malicious arrest – which is an abuse of the process ofthe Court – has always, "from the beginning down to the present time",been regarded as ancillary or incidental to the several jurisdictionsof the Court of Admiralty, whether in "causes of possession" (as inThe Glasgow), (supra) or in other actions in respect of mortgages,collisions, salvage, sale agreements, or bottomry bonds; and neveras distinct jurisdiction.
It is true that a power of that kind is often expressly given,particularly in relation to ex parte orders – as, for instance, interiminjunctions (section 667, CPC), and orders for arrest and sequestrationbefore judgment (section 654, CPC). However, in the case of thoseadmiralty actions which commence with an ex parte arrest, "theundisputed and uniform practice" of the Court has always been togrant a "just remedy" in the form of costs and damages, "withoutputting the defendant to the necessity of bringing a fresh action",provided the arrest has been mala fide or grossly negligent, thereby
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doing "full justice to the injured person". The duty of the court toprevent an injustice, especially where it arises from the act of thecourt itself, has been recognized (eg. Eswaralingam v.Sivagnanasunderamt26>, Sirinivasa Thero v. Sudassi Them*271).
In my view, that power is not a distinct jurisdiction; and certainlynot a distinct Common Law jurisdiction -.and none of the casessuggests that it has ever been regarded as such. On the contrary,it has been exercised as a power which is necessarily incidental toan admiralty jurisdiction – whether conferred by statute or otherwise-which commences with an arrest because the Court must be ableto do full justice, by repairing an injury done to a party by the arrestordered by the Court, at the instance of the other party in an action"which was so unwarrantably brought, or brought with so little colour,or so little foundation" as to imply malice. To put it another way, whena plaintiff makes a claim, he invokes a jurisdiction; the arrest of thevessel is "simply the follow-up to that claim"; and the "wrongnessof the arrest" is a matter within the scope of the original claim, andtherefore of the jurisdiction originally invoked.
That may be illustrated by reference to the Admiralty Court Act,1840, which was enacted to improve the practice and to extend thejurisdiction of the High Court of Admiralty in England. Section IVconferred jurisdiction "to decide all questions as to the title to orownership of any ship or vessel, or the proceeds thereof remainingin the Registry, arising in any cause of possession, salvage, damage,wages or bottomry, which shall be instituted in the said Court." TheGlasgow (supra) was one such "cause of possession", decided in1855, and involved a question as to title to ownership; the arrest wasreferable to the jurisdiction granted by section IV; and the determi-nation that the arrest was wrongful and the order for demurrage werealso referable to that same jurisdiction. Sections III and VI gavejurisdiction in respect of mortgages, salvage, towage, damage toships, and necessaries supplied, and awards of damages for arrestsin such cases were referable to those jurisdictions. A “cause ofpossession" in one in which a "claim to possession" is made; and"the cause of possession contemplated in section 4 [of the 1840 Act]is of the same nature as the possessory action in respect of landknown to our courts under the Roman Dutch law, namely …. asuit in which a person who had possession can be restored topossession if wrongly dispossessed": Cargo (etc.) Management Corp.v. The Ship Valiant Enterprise(2B).
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MV “KALYANI" and Another v. Mutiara Shipping Company NY
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Turning to our old rules of 1883, Form 21 (12) provides specimenpleadings in an action for restitution of a ship: the appropriate claimis for "the restitution of the vessel together with costs and damagesfor the seizure thereof."
I therefore hold that, prior to the 1983 Act, the power of the Courtsof Admiralty to award damages for malicious arrest was incidental totheir power to arrest vessels in order effectually to exercise theirstatutory jurisdictions. I find nothing, within the four corners of the 1983Act, suggestive of a legislative intention to take away that power. WhileI do consider the more reasonable interpretation of the language ofsection 2 (1) (a) to be that it permits both a claim as well as a counter-claim for damages for interference with of deprivation or the rightsof ownership (cf. Form 21 (12) ), that, however, is not necessary forthe decision of this appeal, because the defendant's claim is morerestricted: it is a claim for damages for malicious arrest. I hold thatsuch a claim is permissible; and that any contrary interpretation isunacceptable because of the language of section 2 (1) (a) and itslegislative history, and the resulting inconvenience and injustice.
3. The nature of the claim for damages for malicious arrest.
This appeal was argued on the assumption, by bench and bar, thatthe claim was wholly delictual in nature. However, there can be adelictual claim for "malicious arrest" only in respect of a person. Themalicious arrest of a vessel, by admiralty proceedings, it seems tome, would constitute a malicious abuse of legal proceedings, and acause of action would accrue to a defendant aggrieved by suchproceedings only if and when the proceedings terminate in his favour.It follows that until then he can neither institute an action nor makea counter-claim. However, the power of the Court, consistently rec-ognised and exercised over a long period of time to award damagesfor malicious arrest, is ancillary or incidental to its power to arresta vessel, and can be exercised in the same proceedings. Such aclaim for damages can be made without awaiting the termination ofthe proceedings.
Answering the first question, I hold that the defendant was entitledto make a counter-claim for damages for a wrongful arrest where therewas either mala tides or gross negligence which implies malice.
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II. Security for counter-claim
Mr. de Silva referred to rules 18 and 46, which recognise the rightof a defendant to make a counter-claim against the plaintiff, and citedrule 36 in support of his contention that the Court can order the plaintiffto give security in respect of such a counter-claim. He referred toThe Carnarvon Castle1291, and The Charkieh<30>. Rule 36 provides:
"36 (1). Bail on behalf of a party to an action in rem shall be
given by bond and shall be [in form 13] and the sureties to the
bond must enter into the bond …"
However, that rule does not require or authorise the Court to orderbail; it only prescribes how bail is to be given, if the Court does orderbail. Whether and when the Court can order bail depends on otherprovisions.
Rule 114, for instance, provides that "if a plaintiff… is not residentin Sri Lanka, the Judge may, on the application of the adverse party,order him to give security for costs." Prima facie, the express grantof the power to order security for costs and the omission of any powerto order security for a counter-claim, gives rise to a legitimate (thoughnot conclusive) inference that the latter is excluded.
Mr. Sinnatamby went much further. "Bail" in rule 36, he submitted,was confined to security for the release of a vessel or other property;"bail" did not include security for other matters; and hence there couldbe no "bail" for a claim for damages for malicious arrest. Further,under the rules a plaintiff could be required to give security only forcosts, and for nothing else; in English Law, exceptionally, security fora counter-claim, he said, "has only been entertained in collision caseswhere each party sues the other and accordingly it would be unfairto permit one party to arrest a vessel in cases where the other cannotdo so as the vessel either does not exist or is not within the Court'sjurisdiction”. At a more fundamental level, he argued, "not even theDistrict Court under the Civil Procedure Code has the power to requirea plaintiff to give security for a counter-claim . . . [and] what is soughtto be obtained is an order unheard of in the Civil Law in this country”.
Whatever "bail" may mean in other contexts, in our Admiralty Rules"bail" does not have the restricted meaning of security for the release
SC MV "KALYANI" and Another v. Mutiara Shipping Company N.Y.
(Fernando, J.)125
of property. In my view, our 1883 rules used that term in the widersense of security: thus rules 128 and 150 referred to "bail for costs"and "bail for costs of appeal", respectively. Accordingly, the sureties'obligation under a bail bond – in Form 16 – arose, inter alia, if theplaintiff:
"shall not pay what may be adjudged against him in theaction, with costs (or for costs if bail is to be given only forcosts) …"
"Bail" could thus be ordered for costs only, or for the amount ofthe judgment, even if there was no question of the release of propertyfrom arrest. The current rules, too continue to use the term "bail" inthe wider sense of security. Form 13 is similar to the old Form 14,but goes on to add a reference to plaintiffs, "in the case of a counter-claim", not paying what may be adjudged against them in the action,with costs. Although rule 114 now refers to security (and not bail)for costs, "bail" elsewhere in the Rules continues to be used in thesame sense as before. But all this only shows that bail can be givenfor a monetary counter-claim: it is not helpful as to when the Courtcan order such bail.
Mr. Sinnatamby correctly pointed out that the two cases cited byMr. de Silva were collision cases, for which English Law long hadspecial provision (such as section 34 of the Admiralty Court Act, 1861,and R. S. C. Order 75 rule 25). However, I find that in an old case,The D. H. PerP'*, it was held that a foreign plaintiff will be requiredto give security for costs, but not for damages for wrongful arrest ofthe vessel although the defendant filed an affidavit that the plaintiffhad arrested his vessel mistaking it for another. Although the noteof this decision in the Empire Digest states: "Sembie : cases mayarise in which the security would be extended", the English reportsmake no mention of any such observation. This decision was followedin The Mary (or Alexandra)132*, an action instituted by the United States.Counsel for the defendant referred to three other cases instituted bythe United States, involving vessels belonging to the samedefendant, in which the Court "during the vacation said it would nothear the United States unless they gave security for both damagesand costs". It was held:
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‘On behalf of the defendants it is argued that, this being a cause of possession,in which by the practice of the court the vessel is not released, damages mustaccrue to them from the institution of the cause – that is, supposing the causeto have been improperly instituted; that the reasons for requiring a plaintiff outof the jurisdiction to give security for costs apply a fortiori to his giving securityfor damages; and I was referred also to the practice of the Court of Chanceryin granting injunctions. I do not deny that there is force in these arguments: but,on the other hand, it has not been the practice of this court to require from aplaintiff out of the jurisdiction security for damages (D. H. Peri). The only caseto the contrary is a recent one decided in the vacation. I must decline to changethe settled practice of the court, and least of all in a case like the present, wherethere is no reason to suspect the solvency or good faith of the plaintiffs.*
The Bazias 3, The Bazias 4,{33) is to the same effect.
However, neither our 1983 Act, nor our rules – old and new containanything similar to Order 75, rule 25. It might perhaps have beenargued that this was a casus omissus, which made the Englishprovision applicable by virtue of section 12 of our Act, but the followingnew Rule 182 – to which I will return in a moment – of our 1991Rules gives wider powers to the Court ;
"Nothing in these rules shall be deemed to limit or affect theinherent powers of the Court to make any order as may benecessary to prevent injustice or to prevent an abuse of the processof the court." I
I will first dispose of the submission that the power to order securityfor a counter-claim is so extra-ordinary that it must be presumed tohave been outside legislative contemplation. Let me recall that aplaintiff bringing an action in rem can obtain – by means of the seizureof the defendant's property through an ex parte Court order – apre-judgment security for his claim. That is certainly unusual. Butchapter 47 of the Civil Procedure Code does provides for sequestrationbefore judgment, giving the plaintiff a similar pre-judgment security.To deter and to remedy an abuse of that process, section 654 providesthat the Court must require the plaintiff (and that is without thedefendant even asking for it) to enter into a bond to pay all damagesthat may be sustained by such sequestration – obviously becausea subsequent award of damages may be futile if the plaintiff had givenno security.
SC MV "KALYANT and Another v. Mutiara Shipping Company NY
(Fernando, J.)127
Apart from such pre-judgment security, when a party obtains -before the final adjudication – an enjoining order or an interiminjunction which is detrimental to the rights and interests of theadverse party, section 667 CPC empowers the Court to award rea-sonable compensation if there was no probable ground for applyingfor the injunction; and despite the absence of any express provision,in the exercise of their discretion, Courts often order the party askingfor an injunction to give security.
An order that security be given for a counter-claim for damagesfor a wrongful arrest, where a pre-judgment security has been obtainedex parte, may be unsual, but I do not think it to be fundamentallycontrary either to principle or to practice. Here we are consideringan arrest which is alleged to be not merely wrong, but also malicious- i.e. to be an abuse of the process of the Court. On a questionof procedure and practice such as this, if there is an omission oran ambiguity, I must lean in favour of an interpretation which permitsan order for security.
Rule 182 recognises the inherent powers of the Court to makeorders to prevent injustices and abuses of the process of the Court.It would appear from Mr. Sinnatamby's submission that the rationalefor the rule in English Law, in collision cases, was to prevent theunfairness which results when the plaintiff has arrested the defendant'svessel and thus has security for his claim, by the defendant is unableto obtain a similar security. In view of article 12 (1) of the Constitution,such concepts of fairness – of equality before the law and the equalprotection of the law – must pervade the interpretation of the rulesgenerally, and accordingly there is no reason why the power to ordersecurity for a counter-claim should be limited to collision cases. I holdthat rule 182 gives the Court a discretionary power to order securityfor a counter-claim for malicious arrest.
I must now consider how such security is to be calculated. Thatdepends on what heads of damge or compensation the Court cantake into account in a claim for malicious arrest.
The decisions I have cited above show that losses, charges,demurrage, and expenses caused can be recovered. The decisionsin The George Gordon, The Collingrove, The Numida, (supra), and
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Soleada SA v. Hamoor Tanker Inc, 1341 indicate that damages includethe costs and expenses (including commission paid) of finding bail.
In ordering security in a sum of US$ 300,000 the learned HighCourt Judge appears to have been influenced by the value of thevesel and/or the amount of security provided by the defendant forthe release of the vessel. Since the defendant is in possession ofthe vessel, the value of the vessel is not relevant. I therefore consider,that sum to be excessive. Taking into consideration the possible lossoccasioned by detention during the short period which elapsed beforethe Court ordered the release of the vessel, and the costs of findingbail, the security ordered should not have exceeded US$ 30,000. Ofcourse, looking at the matter today, the defendant has incurred thecosts of finding bail for over two years, but that delay would not havebeen then anticipated; and if I were to order increased security onaccount of that delay, I must for the same reason, in all fairness,order an appropriate increase in the security which the defendant hadto provide.
As for the consequences of not providing security, our attentionwas not drawn to any provision of the Act or the rules, or to anydecision, dealing with the question whether the High Court coulddismiss, or stay, a plaintiff's action for failure to provide security fora defendant's counter-claim; nor was any submission made on thatquestion.
Answering the second question, I hold that the High Court hadpower to order the plaintiff to give security for the defendant's counter-claim for damages for malicious arrest, but that the amount fixed wasexcessive.
ORDER
For the above reasons, I allow the appeal, set aside the orderof the Court of Appeal, and restore the order of the High Court, subjectto a reduction in the amount of security. The plaintiff shall providesecurity in the High Court in the sum of US$ 30,000 by depositingthat sum or by means of a bank guarantee, in accordance with theusual practice and procedure in that Court, and upon such terms andconditions as that Court shall determine. If such security is not providedwithin one month from the date of this judgment, or such extended
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Jayaratne and Others v. Chandrananda de Silva, Secretary,
'Ministry of Defence and Others
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period – not exceeding a further two months – as the High Courtmay allow, fairness demands that the defendant be forthwith releasedfrom his obligation to provide security, and the High Court shall soorder, but without prejudice to the plaintiff's right to proceed with theaction without security.
I make no order for costs.
DHEERARATNE, J. – I agree.
WADUGODAPITIYA, J. – I agree.
Appeal allowed.
Amount of security reduced.