2014 PLP 1327 (CLD)

MUNIB AKHTAR, J.

The instant suit is an action in rem against the defendant vessel, m.v. Aviona ("the Vessel") under the Admiralty Jurisdiction of the High Courts Ordinance, 1980 ("the Ordinance"). The application presently before me was filed for the arrest of the Vessel. On 18-1-2008, an ad interim order was made in this regard. On 23-1-2008, a letter of undertaking was filed on behalf of the Vessel, which was subsequently replaced with a bank guarantee in the sum of Rs.18,672,038, and the Vessel was allowed to sail. The said security remains in place. Thus, if the application is to be allowed (as contended by learned counsel for the plaintiff) the order of 23-1-2008 shall stand confirmed and the surety will continue for the duration of the suit. If the application ought to be dismissed (as contended by learned counsel for the Vessel, the defendant No. 1) then of course, the surety will stand discharged. This application was earlier heard once on 16-12-2008 and reserved but judgment could not be rendered, and it was ordered to be fixed for hearing afresh on 25-7-2009. It has remained pending since that time.

2. Learned counsel for the plaintiff submitted that the plaintiff had acquired Russian milling wheat and the consignment, comprising 38,186.550 MT, was shipped in bulk on board the Vessel from Novorossiysk in Russia to Karachi. A bill of lading, showing the Russian seller as the shipper and the plaintiff as the notify party, and made out to order of consignee, was issued on or about 25-12-2007. The bill was issued at Novorossiysk by the master of the Vessel. When the Vessel arrived at Karachi, the consignment was off-loaded by the plaintiff taking direct delivery. Learned counsel submitted that on such delivery, the consignment was found to comprise of only 37,641.134 MT. In other words, the plaintiff's case is that there was a short delivery/landing of 545.416 MT. The plaintiff claims that this has resulted in loss in the sum of Rs.18,672,038.60, for the recovery of which the present suit has been filed. Along with the suit, the present application was also moved. Learned counsel submitted that all the ingredients for interim relief existed in favour of the plaintiff. It was also submitted that the case put forward by the Vessel (i.e., its owners), that at the relevant time it had been on time charter with the defendant No. 2 did not in any manner affect the Vessel's liability to an action in rem under the Ordinance. The bill of lading was signed by the master of the Vessel. There had been a short delivery of the consignment, for which the owners and hence the Vessel was liable. Learned counsel submitted further that in any case the question of exactly what amount had been delivered was a question of fact that had to go to trial. The plaintiff at this stage had only to make out a prima facie case, which threshold had been successfully crossed. Learned counsel also referred to certain cases in support of his submissions.

3. Learned counsel for the defendant No.1, the Vessel, strongly contested the present application. Learned counsel submitted that an action in rem did not lie in the present facts and circumstances. It was not in dispute that the Vessel was on time charter to the defendant No. 2 at the relevant time. The said defendant was not at any time (and certainly not at the time of the filing of the present suit) the beneficial owner of the majority of the shares in the Vessel. Referring to section 4(4) of the Ordinance, learned counsel submitted that this meant that no action in rem lay against the Vessel since, at most, the plaintiff only had a claim in personam against the defendant No.

2. This was the primary submission by learned counsel, in support of which both Pakistani and English case-law was referred to. As regards the claim of short delivery, learned counsel submitted that that was also not warranted. It was submitted that when the Vessel arrived at Karachi, two surveys were carried out before discharge of the consignment. Both of these showed that the shipment was in fact in excess of the claimed quantity of 38,186.550 MT. It was submitted that the cargo also suffered from inherent vice in the sense that it was a bulk shipment of wheat and it was in the nature of such shipment that there would be some loss. Learned counsel further submitted that admittedly the plaintiff had taken direct delivery of the cargo, which would inevitably have resulted in loss and wastage on account of spillage, etc. during the discharging. All of this was to the plaintiff's own account. It was also contended that the loss, if any (which was denied), was well within the permissible and tolerable limits (amounting, even as per the plaintiff's own case, to no more than 1.4%). Learned counsel also submitted that the alleged short landing was only ascertained after delivery had been taken by the plaintiff, in an exercise of which the Vessel had no notice and in which the owners did not participate. Thus, no reliance could be placed on the same. For all these reasons, it was contended that the plaintiff had failed to make out any case for interim relief by way of arrest of the Vessel. The present application ought therefore to be dismissed and the surety discharged.

4. Learned counsel for the defendant No.2 submitted that the Vessel had indeed been on time charter to this defendant when the consignment was shipped, but contended that the contract of affreightment was between the plaintiff and the owners of the Vessel. There was no liability of the defendant No.

2. I may note that although written statements were filed by both these defendants, neither filed the charterparty (although of course a copy of the bill of lading was placed on record). At the conclusion of the hearing, I gave permission to learned counsel to file written synopses and learned counsel for the Vessel did so, annexing therewith a copy of the charterparty.

5. I have heard learned counsel as above, examined the record with their assistance and considered the case-law relied upon. The first question that requires consideration is whether there can be a claim in rem against the Vessel in the facts and circumstances of the case, since this serves as a preliminary objection to the present application. Now, the plaintiff's claim is based squarely on the contract of affreightment and nowhere else. Sections 3 and 4 of the Ordinance, as presently relevant, provide as follows:-- "

3. Admiralty Jurisdiction of the High Court.

(1) The Sindh High Court ... shall have and exercise ... Admiralty jurisdiction as is in this Ordinance provided. (2) The Admiralty jurisdiction of the High Court shall be as follows, that is to say, jurisdiction to hear and determine any of the following causes, questions or claims- ... (h) 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; ...

4. Mode of exercise of Admiralty jurisdiction.

(1) Subject to the provisions of section 5, the Admiralty jurisdiction of the High Court may in all cases be invoked by an action in personam. . . . (4) In the case of any such claim as in mentioned in clauses (e) to (h) and (j) to (q) of subsection (2) of section 3, being a claim arising in connection with a ship, where the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possession or in control of the ship, the Admiralty jurisdiction of the High Court may, whether the claim gives rise to a maritime lien on the ship or not, be invoked by an action in rem against- (a) that ship, if at the time when the action is brought it is beneficially owned as respects majority shares therein by that person; or (b) any other ship which, at the time when the action is brought, is beneficially owned as aforesaid." Section 3, in its subsection (2), lists the causes, questions or claims in respect of which the Admiralty jurisdiction can be exercised and the contract for the carriage of goods can give rise to such a case, as provided in clause (h). Section 4 provides, generally, that the admiralty jurisdiction can always be exercised in personam. Insofar as actions in rem are concerned, there are however certain limitations. Subsection (4) allows for the filing of an action in rem in respect of a case to which section 3(2)(h) applies, but subject to certain limitations, which can best be expressed by adopting (in slightly modified form) Lord Denning's words in the I Congreso del Partido [1981] 1 All ER 1092, 1099: you have first to consider the position at the time when the cause of action arose in connection with the offending ship. You have then to discover a person who would be liable on the claim in an action in personam. Having discovered him, you have to consider the position at the time when the action is brought. You have then to enquire whether that person at that time beneficially owned the majority shares in the offending ship (section 4(4)(a)) or any ship (a sister ship) besides the offending ship (section 4(4)(b)). If he is such a person, you can invoke the Admiralty jurisdiction of the High Court against the offending ship or the sister ship. Now, in the present case, the principal question is this: whether there was, as claimed by the plaintiff, a breach of the contract of affreightment within the meaning of section 3(2)(h)? Since this contract was between the shipper and the carrier, the latter would be liable in personam to the plaintiff. That leads to the crucial question: who was the carrier, the owner of the Vessel or the time charterer (the defendant No. 2)? If the carrier was the owner, then the requirements of section 4(4) are met and an action in rem is maintainable. If however, the carrier was the time charterer, then an action in rem is not maintainable. It is crucial to keep these points in mind at all times.

6. The cases cited by learned counsel in support of his preliminary objection may now be considered. I begin with V.N. Lakhani & Co. v. m.v. Lakatoi Express and others PLD 1994 SC 894 (on appeal from a judgment of a Division Bench of this Court; the decision of the learned single Judge being reported at 1994 CLC 1498). The appellant had its goods shipped on board a ship (the Commandante Revello) on a bill of lading on which the ship owner was liable as carrier. Although transshipment was prohibited, the carrier had them transshipped on the respondent vessel (the Lakatoi Express). At the relevant time, the carrier was not the owner of the respondent vessel, but it was on time charter to it. The appellant sought to have the respondent vessel arrested. It was contended that the Lakatoi Express was not the sister ship of Commandante Revello since the person liable (i.e., the carrier of the latter ship did not beneficially own the majority of the shares in the former. The fact that it was the time charterer of the Lakatoi Express was irrelevant for purposes of section 4(4). An action in rem did not therefore lie against the respondent vessel. The objection was accepted by this Court and the application for its arrest was dismissed. The appellant petitioned the Supreme Court, which upheld the decision and refused leave to appeal. The Supreme Court cited with approval the relevant passage from Lord Denning's judgment in I Congreso del Partido (noted above with some modifications). The Supreme Court also expressly approved two earlier single Bench decisions of this Court in which the same view had been taken. One of these decisions, Sun Line Agencies Ltd. v. Psiloritis and others 1984 CLC 1553, was relied upon by learned counsel for the Vessel. This case also involved an attempt to arrest a ship claimed to be a sister ship, which was on time charter to the owner of the offending ship.

7. In my view, and with respect, these decisions are not of any direct relevance in the facts and circumstances of the present case. The issue here is not whether the Vessel is a sister ship of some (other) offending ship. Here, it is contended that the Vessel is itself the offending vessel, which is liable to be arrested because the carrier in respect of the contract of affreightment is its owner, and not the time charterer (defendant No. 2). As is obvious, the nature of the question that requires resolution is different from that raised in the cited cases.

8. Reliance was placed on Atlantic Steamer's Supply Company v. m.v. Titisee and others PLD 1993 SC

88. In this case the plaintiff (whose suit had been dismissed and who was therefore the appellant before the Supreme Court) had supplied certain necessaries to the defendant vessel, which remained unpaid for, and hence a maritime lien was claimed on the latter. The plaintiff-appellant pressed its claim (as held by the Supreme Court) under clauses (l) and (m) of section 3(2) of the Ordinance. Neither of these clauses is relevant for present purposes nor is this a case involving a maritime lien. Furthermore, it was an admitted position that the ownership of the vessel had already changed by the time the suit was brought. This decision is therefore, with respect, clearly inapplicable to the facts and circumstances of the present case.

9. Learned counsel for the Vessel also relied on a Division Bench decision of this Court reported as Khadija Edible Oil Refinery (Pvt.) Ltd. v. m.t. Galaxy and others 2011 CLD 1329, which was on appeal against a decision of a learned single Judge (reported at 2011 CLD 709 and also cited before me). The relevant facts were as follows. The appellant had a consignment of crude palm oil shipped on board the Prosperity under more than one bill of lading. It was alleged that there was a short landing/delivery. Subsequently, the appellant sought to have two other ships, the Galaxy and the Horizon, arrested by filing two suits in rem under the Ordinance against these vessels. The claim that these ships were the sister ships of the Prosperity within the meaning of section 4(4). This claim was resisted in both cases on the ground that their beneficial owners were wholly different. In rejoinder, it was contended that the various owners were part of the same group of companies and that the different ownerships shown for the three vessels were a mere "sham". The appellant's case was not accepted by the learned single Judge, who held that on the facts before him, the owners of the three vessels were separate and different. The Galaxy and the Horizon were not therefore the sister ships of the Prosperity and hence could not be arrested by means of an action in rem. As noted, this decision was upheld by the learned Division Bench. Again, with respect, it is clear that these decisions involved issues materially different from the case at hand. Reliance was also placed by learned counsel for the Vessel on The Evpo Agnic [1988] 2 Lloyd's Rep 411, a decision of the English Court of Appeal. This case was considered by the learned Division Bench (2011 CLD at 1343-44). This also involved the question of the arrest of a sister ship. These decisions do not therefore advance the preliminary objection taken by learned counsel.

10. As noted above, the crucial question in the present case is whether the carrier was the owner of the Vessel or the time charterer (the defendant No. 2)? I have had occasion to consider this question earlier in another matter. The issue was whether the (two) bills of lading involved were the ship owner's bills or those of the time charterer. The decision (herein after referred to as the "Earlier Decision") is reported as Metal Construction of Greece SA v. Owners of the vessel m.v. Lady Rea 2013 CLD 1829. I considered in detail the Pakistani and English case law cited, which included some of the decisions noted above. In particular, I considered in some detail two English authorities, a decision at first instance reported as Sunrise Maritime Inc. v. Uvisco Ltd. ("The Hector') [1998] 2 Lloyd's Rep 287, and a decision of the House of Lords reported as Homburg Houtimport BV v. Agrosin Private Ltd and others ("The Starsin") [2003] 2 All ER

785. Reference may be made to paras 11-15 of the Earlier Decision. In the bills of lading involved there, it was prominently stated on the face of the bill that the carrier was the charterer (a company named Worldwide Shipping). This was also the position in The Hector. However, in The Hector, the bill of lading contained in the terms and conditions overleaf (the small print) an identity of carrier clause, which purported to identify the ship owner as the carrier. There was thus an apparent contradiction between what was stated on the face of the bill and on its reverse. The learned Judge concluded that the bill of lading was a charterer's bill and not that of the ship owner. This was also the result that obtained in The Starsin on substantially similar facts. On the facts before me in the Earlier Decision, I had concluded as follows (at pp. 1845-1848):-- "

16. Having considered the position at English law, I now turn to examine the features of the bills of lading in the present case. The first and most striking feature is that, like the bill in The Hector, these bills also on the face or front side prominently carry the following legend: "CARRIER: WORLDWIDE SHIPPING". There is a standard attestation clause (no different from that in The Hector). The signature box contains the signature of Captain Bashar Alnajjar, who has signed as "MASTER OF M/V 'LADY REA'". When the reverse side of the bill is examined, clause 1 provides as follows: "All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated". It is pertinent to note that the conditions of carriage contain neither an identity of carrier clause nor a demise clause. After having considered the matter in the light of the case-law referred to above, I am firmly of the view that as a matter of construction, the bills of lading in the present case must, prima facie, be regarded as charterers' and not owners' bills. It follows that in my view the contract of affreightment, as evidenced by the bills of lading was between the plaintiff as shipper and the Charterer as carrier, and not with the Shipowner. Learned counsel for the plaintiff placed reliance on various clauses of the charterparty to contend that the bills were Shipowners' bills. I cannot, with respect, accept this submission. It runs counter to the principles clearly laid down by the House of Lords in The Starsin. The observations of Lord Steyn (at para 45 quoted above) are particularly pertinent. Their Lordships were not willing to countenance that in the facts and circumstances of The Starsin, the reasonable person would even need to look at the reverse side of the bill, whereas if the present bills are to be regarded as owners' bills, the reasonable person would need to look not merely at the reverse side but at another and separate document altogether, namely the charterparty. This cannot be correct. Furthermore, in my view, learned counsel for the defendant is correct in asserting that the present case is akin to The Hector inasmuch as the front of the bill prominently carries a legend which purports to specifically identify the carrier. It is perhaps even stronger since there is no identity of carrier clause or demise clause on the reverse side of the bill. References to the clauses of the charterparty are also without substance. As already noted it is in a standard and well known form (that of the New York Produce Exchange). It has never been suggested that such a charterparty is decisive for purposes of determining the nature of the relevant bill of lading. No doubt under such a charterparty the master remains the servant of the shipowner, but that was also the position in the English cases referred to above and yet it was held that the bills involved were charterers' bills. Furthermore, even though the bills were signed in the present case by the master of the Vessel who was the servant of the Shipowner, the presumption that may arise in this regard is rebuttable, as noted both by the learned Division Bench of this Court in The Eurobulker II and Rix, J. in The Hector (see supra). The same point was made by Lord Bingham in The Starsin (at para [8], pg. 793). In my view, the presumption is clearly rebutted in the facts and circumstances of the present case.... . . .

18. In view of the foregoing, I am firmly of the view that the principles of English law enunciated in The Hector and the House of Lords in The Starsin should be regarded as also applicable in and part of the law of Pakistan. (It remains only to be said that the dissenting judgment of Rix, LJ in The Starsin also merits and repays close and careful study.) As discussed above, when these principles are applied to the facts and circumstances of the present case, there can, prima facie, be hardly any doubt that the bills of lading issued in respect of the plaintiff's cargo were the Charterer's and not the Shipowner's bills. Prima facie therefore, there was no contract of affreightment between the plaintiff and the Shipowner. It necessarily follows that on the contractual plane and to extent noted above the defendant succeeds and the plaintiff's case cannot be sustained."

11. It is to be noted that the bill of lading in the present case also, like those in the Earlier Decision, contains the following as clause 1 in the terms and conditions on the reverse side: "All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated". It is also pertinent to note that the conditions of carriage in the present case, like those in the bills in the Earlier Decision, contain neither an identity of carrier clause nor a demise clause. There are thus common features between the bill of lading now before me, and the ones considered in the Earlier Decision. Nonetheless, I conclude that in the facts and circumstances of the present case, the bill of lading must prima facie be regarded as the ship owner's bill and not that of the time charterer, the defendant No.

2. This is so because the present bill does not, unlike the ones in the Earlier Decision, The Hector and The Starsin, state on the face of it (i.e., the front side) that it is the charterer's bill. It is pertinent to note that in each of the three earlier decisions, the bills of lading expressly referred to the charterer by name in one way or another. In the present case, there is no such reference. In my view, this is the crucial factor, which ordinarily ought to be regarded as decisive. I note that on the front side of the bill in the present case, there is a printed, two-line legend at the top which reads as follows: "BILL OF LADING: TO BE USED WITH CHARTER PARTIES". It is also true that in the box relating to freight (again on the front side of the bill), the following words appear: "Freight payable as per C/P dated 30/11/2007". However, I am not satisfied that these statements are enough to cause the reasonable person reading the bill to conclude that it constituted a contract between the shipper and the charterer, the conclusion that I arrived at in the Earlier Decision or the result which obtained in The Hector and The Starsin. In this regard, I draw attention in particular to what Lords Steyn and Hoffmann said in their respective speeches in The Starsin, which I cited in the Earlier Decision (in para 15 thereof; pp. 1844-5). Lord Steyn observed as follows ([2003] 2 All ER at pg. 803; emphasis supplied):-- "[45] How is the problem to be addressed? For my part there is only one principled answer. It must be approached objectively in the way in which a reasonable person, versed in the shipping trade, would read the bill. The reasonable expectations of such a person must be decisive. In my view he would give greater weight to words specially chosen, such as the words which appear above the signature, rather than standard form printed conditions. Moreover, I have no doubt that in any event he would, as between provisions on the face of the bill and those on the reverse side of the bill, give predominant effect to those on the face of the bill. Given the speed at which international trade is transacted, there is little time for examining the impact of barely legible printed conditions at the time of the issue of the bill of lading. In order to find out who the carrier is it makes business common sense for a shipper to turn to the face of the bill, and in particular to the signature box, rather than clauses at the bottom of column two of the reverse side of the bill." Lord Hoffmann observed as follows ([2003] 2 All ER at pg. 812; again, emphasis supplied):-- "[82] I respectfully think that where the majority judgments of Sir Andrew Moffitt V-C and Chadwiek L.T in the Court of Appeal went wrong is that they conscientiously set about trying, as lawyers naturally would, to construe the bill of lading as a whole. In fact the reasonable reader of a bill of lading does not construe it as a whole. For some things he goes no further than what it says on the front. If the words there are reasonably sufficient to communicate the information in question, he does not trouble with the back. It is only if the information on the front is insufficient, or the questions which concern the reader relate to matters which do not ordinarily appear on the front, that he turns to the back. And then he calls in his lawyers to construe the document as a whole." In my view, prima facie, when the reasonable reader of the bill of lading in the present case would examine the front side of it, he would conclude that it was the ship owner's bill and not that of the charterer. This is so because his attention would inevitably (and for present purposes, decisively) be drawn to the fact that the bill has been signed by the Master of the Vessel without any express indication or reference to the defendant No. 2, the charterer. The other statements on the front side of the bill, which refer to charter parties, are not such as would lead the reasonable reader to a different conclusion.

12. I recognize that the conclusion I have arrived at in the present case may seem somewhat at odds with what I had concluded in the Earlier Decision. However, it must be kept in mind that much depends and turns on the facts and circumstances of each case. Legal principles must in the end be applied to the facts before the Court in each case, and such application may sometimes lead to divergent results. Having carefully considered the matter, I am of the view that prima facie, the present bill of lading must be regarded as that of the ship owner. Thus, the ship owner and not the defendant No. 2 was the carrier. It follows that the conditions of section 4(4) of the Ordinance were fulfilled and thus an action in rem against the Vessel is prima facie maintainable. Accordingly, the preliminary objection taken by learned counsel cannot be accepted.

13. I turn therefore to consider the merits of the case for purposes of the present application. As noted, the claim is of short landing/delivery of 545.416 MT. Learned counsel for the Vessel relied on the two draught survey reports, one of which according to him showed an excess amount of 407.88 MT and the other an excess amount of 357.13 MT. The plaintiff on the other hand relied on a document signed by the surveyors and also signed on behalf of the Vessel (by way of acknowledgement only and without admitting any liability) that according to it showed a shortfall. In fact, the document relied upon by the plaintiff is the concluding portion of the survey reports and contains certain general remarks made by the surveyors. I may note that the surveys were carried out jointly by surveyors acting separately for different parties. The difference referred to by the surveyors was with regard to Vessel's "constant", which is essential for purposes of the draught survey and hence a determination of the quantity carried, and hence discharged. The surveyors concluded as follows:-- "On the basis of above facts we cannot ascertain the exact discharged quantity by draught survey therefore we may rely on shore/landed/PQA out turn figure." It is of course the plaintiff's case that the landed quantity was less than that consigned. In view of the foregoing position taken by the surveyors, there is prima facie a question with regard to the quantity that was delivered to the plaintiff. This question cannot, on the surveyors' own showing, be answered definitively (or, it would seem, even tentatively) with reference to the draught survey reports. The other submissions made by learned counsel for the Vessel in this context, such as those relating to inherent vice or the method of delivery that could have resulted in loss or spillage and others, are either questions of fact or at most mixed questions of law and fact. Clearly, these also cannot be addressed at this stage in the facts and circumstances presently before the Court and the record as it stands. Their determination must also be deferred to, and depend on the outcome of, the trial.

14. I therefore conclude that the plaintiff has been able to make out a prima facie case with regard to its claim of short delivery/landing of the consignment. Such a case has been made out in terms of section 3(2)(h) read with section 4(4) of the Ordinance for an action in rem against the Vessel. The balance of convenience lies in favour of the plaintiff, and it may well suffer irreparable loss and injury, especially if the surety provided is discharged. Accordingly, the present application is allowed, with the result that the order dated 23-1-2008 is confirmed. The surety furnished pursuant to that order is to remain in place for the duration of the suit. MH/T-3/Sindh Application allowed.