P L D 1988 Karachi 515 (PLP)

The plaintiffs have filed this suit under the Admiralty Jurisdiction for recovery of Rs.15,96,511.30. Alongwith the suit they have also filed an application under Rule 731 of the Sind Chief Court Rules for arrest of defendant No.l. By order dated 26‑11‑1987 the ship was arrested but it was to be released without further orders, if security for the amount of Rs.11,27,038.50 and the cost of suit for Rs.17;500 was furnished to the satisfaction of the Nazir of this Court. Security was furnished in terms of the order and the defendant No.l has sailed away. The defendants have filed counter‑affidavit and contended that the suit in rem under the Admiralty Jurisdiction of this Court is not maintainable. To appreciate this contention it would be necessary to state the facts briefly. The plaintiffs had entered into a contract for sale of 1,05,000 yards of African prints which were shipped in 174 bales under bill of lading No.00366 issued to. the plaintiffs for shipment aboard defendant No.l. The bill of lading was issued at Karachi on behalf of defendant No. 2 by their agents; The bill of lading was handed over by the plaintiffs to their bankers namely Habib Bank Limited, Faisalabad being the consignees which endorsed it to Banque Mauritanienne pour le. De Development et le Commerce. The defendant No.3 who was to take delivery of the goods could have obtained it only after payment of the sale consideration to Banque Mauritanienne and unless the original bill of lading was presented the defendants Nos.l and 2 were not obliged to give delivery of the cargo. It is alleged that the plaintiffs came to know that the defendant No.3 may make attempt to take delivery without obtaining bill of lading and thus avoid payment. ?hey therefore; addressed a telex instruction to the local agent of defendants Nos.l and 2 not to deliver any consignment without surrendering original bill of lading or on furnishing bank guarantee. However, the defendants Nos.l and 2 in breach of agreement instead of taking the goods to Nouakchot took them to Dakar and after several reminders the consignment was sent by road on 21‑1‑1987 to port of destination. is alleged that the defendants Nos.l. and 2 acting fraudulently and in collusion with defendant No.3 delivered the goody to the defendant No.3 without receiving the duly endorsed copies of bills of lading from him. On coming to know about it the plaintiffs served a notice by telex on defendant No.2 claiming cost of consignment and damages and the defendant No.2 replied that their claim had been passed to their Principal. The defendant No.2 apprehending that the Bank will demand payment and he may be prosecuted, set up one Ahmed Salem Bobott a Mauritanian national who filed a frivolous suit against Africa Trade and Development Corporation alleging that the plaintiffs and Africa Trade Development Society are linked with each other who had committed breach anti failed to supply bakeries to Babott. in this proceeding the plaintiff were not a party and injunction was sought restraining the Banque Mauritanienne not to transfer the sale proceeds to the plaintiffs. After securing the injunction and assured that the sale proceeds will not be transferred by the Banque Mauritanienne he negotiated the bill of lading from Banque on 3‑8‑1987. The Banque Mauritanienne has informed Habib Bank Limited that the payment has been held up due to the aforestated suit instituted at the instance of defendant No.3. The plaintiffs' effort to obtain the money has failed and the defendant No.2 has refused to pay it. The plaintiffs therefore, filed this suit. For the purposes of the present application the relevant facts alleged in the counter‑affidavit filed by the defendants Nos.l and 2 are stated here. It has been contended that action in rem against the defendant No.l is not maintainable as she is under a time charter party entered into between the owners of defendant No.". anti the defendant No‑

2. The vessel is owned by GEBR PATERSON SCHIFFAHRTESGELISCHAFT WESTERLAND K.G. It was also stated that the defendant No.l is not beneficially owned by the defendant No.2 nor any share of the defendant No.l is owned by them. It was denied that the plaintiffs had entered into any agreement or the agreement was for the use and hire of defendants No.l or that there teas any collusion between the defendants Nos.l, 2 and 3 as alleged or otherwise, It was pleaded that the bill of lading was endorsed by Habib Bank tcj Banque Mauritanienne and the said endorsee ultimately endorsed it. in favour of Eminou Duld Ahmed Fall the notifying party mentioned in the bill of lading. After negotiating the said bill of lading the plaintiffs have no right to sue. It has been stated that the delivery was given to the notifying party on furnishing a bank guarantee as the original bill of lading had not been produced by him. The notifying party ultimately surrendered the original bill of lading and as soon as it was surrendered the guarantee given by him stood cancelled. The claim of the plaintiffs has been denied. The question which arises at this stage is whether an action in rem against the defendant No.l Hub. According to Mr. Makhdoom Ali Khan, the learned counsel for tire plaintiff, the case is covered by section 3, subsection (2)(h) of the Admiralty Jurisdiction of the High Court Ordinance, 1980 which provides that the Admiralty Jurisdiction of the High Court is to decide and determine the claim "arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of ship". However, on the basis of section 4, subsection (4) of the Ordinance it has been contended by Mr. Kazmi, the learned counsel for the defendants Nos.l and 2 that as the defendant No.2 are not the owner of the defendant No.l nor any share in it is held by them the defendant No.l cannot be arrested. The main ground for such contention is that contract for carriage of goods as evidenced by the bill of lading is not between the plaintiffs and the owners of the vessel, but it is between the plaintiffs and the time charter i.e. defendants No.2 who are not beneficial owner of any share of defendant No.l and therefore action in rem will not lie and the ship cannot be arrested. In this regard both the parties have referred to the bill of lading to substantiate with whom the plaintiffs have the contract of afraightment. A copy of the bill of lading has been filed which is on the form of Maersk Line and at the bottom on the right hand side it has been signed by "Volkart Pakistan Limited Karachi" as agents for the carrier". Mr. Kazmi has contended that the bill of lading has been signed by Volkart on behalf of Maersk Line who are carriers i.e. the defendants No.2. The defendants Vo.2 are time charterers and not the owners. However, Mr. Makhdoom Ali Khan has contended that at this stage without disputing the present contention of the defendants Nos.l and 2 the plaintiffs still maintain that the contract of affraightment is between the plaintiffs and the owners . of the vessel and not with defendants No.2 or the Charterers. In case where ship has been chartered and bill of lading has been issued by the charterer or his agent or the Master or under his authority, the question whether the Shipper has a contract with the charter or the owner is intriguing and difficult one. The learned commentators and Judges have devised rules to solve it but its solution; depends upon the facts. The rules may differ according to tire mature of the charter party and the person signing the bill of lading. A charter by demise is a charter‑party under which the charterer gets the possession of the vessel with a right to use her carrying capacity and the Master is charterer's Servant. In such cases if the bill of lading is issued by the Master or the charterer or his agent then the contract is between the shipper and the charterer. But where there is an .ordinary charterer the position is quite different. This charter may be a voyage charter‑party i.e. hire of ship for a certain. voyage or time charter‑party i.e. hire of ship for a certain period of time. Under an ordinary charter the charterer has the right of use of the ship, but the owner retains her control and possession. In such cases the shipper who obtains bill of lading from the Master in ignorance of the charter, the contract is with the owner, who can be sued for breach of contract of affraightment. In this regard reference can be made to Sandeman v. Scum (1866) L.R.2 Q.B.86 where it was observed:‑ "We think that so long as the relation of owner and master continues, the latter, as regards parties who ship in ignorance of any arrangement whereby the authority ordinarily incidental to that relation is affected, must be taken to have authority to bind his owner by giving bills of lading." But in cases where the shipper is aware of the charter and bill of lading has been signed by the Master or owner's authorised agent same rule will apply unless the charter provides expressly or impliedly that the Master shall not contract with the shipper and it is within the knowledge of the shipper at the time of shipment. The aforestated principles find support from the observations made in Baumwell v. Gilchrest (1892] 1 Q.B.25:s (258). The learned counsel for the plaintiffs has referred to Carriage of Goods by Sea by Payne and Ivarny 12th Edition at' page 71 where it has been observed: "Where the charterer is also the shipper, the rights of the shipowner and the charterer as such will be governed by the charter‑party alone. The bill of lading cannot vary or add to the terms of the charter‑party unless it contains an express provision to that effect. But where the charterer puts the ship up as a general ship, the contract of carriage will in each case be evidenced by the bill of lading given to each shipper, irrespective of the terms of the charter‑party, except where there is an express agreement to the contrary. Further, in the case of a general ship, if a shipper knew of the existence of a charter‑party, he is taken to have contracted with the charterer and can sue or be sued by him; if he did not, his contract is with the ship‑owner." The learned counsel has contended that the plaintiffs were not aware of the fact that the defendant No.2 were the charterers at the material time, nor from the bill of lading it is anywhere indicated that the defendant No.l was on a charter hire with the defendant No.2. In the definition clause of the bill of lading the 'career '' has been defined as the party on whose behalf the bill of lading has been signed i.e the defendant No.2. It is also completely silent about the ownership. Therefore, according to the learned counsel the contract was between the plaintiffs and the owners, mainly because they obtained bill of lading in ignorance of the fact that the defendants No.2 are charterers. The principle that if the shipper in ignorance. of the, ordinary charter has shipped the goods under a bill of lading tire contract is with the owner, applies in cases where it is signed by the Master or under his authority. Mr. Makhdoom Ali Knarmtaw referred to THE BERKSHIRE (1974) 1 LI.L. Rep.185. In this case bill of lading was issued by the agent of the time‑charter. A clause of the bill of lading provided that if the ship is not owned or chartered by demise to the company which issued the bill of lading then it shall take effect as a contract between the shipper and the owner or ~ demise charterer. As the bill of lading was issued on behalf of the charter which was not a demise charterer, the bill of lading in view of its express terms was held to be a contract between 'the shipper and the owner. This case is therefore, distinguishable on facts. In cases of ordinary charter where the bill of lading is signed by the Master the question arises with whom the shipper contracts. This question is not free from difficulty but the consensus seems to be that in such cases the contract is with the owner. The relevant passage from Ivamy quoted above on heavily relied upon by the plaintiffs' advocate is based on two authorities viz. Sandeman v. Scurr (1866) LR 2 QB 86 and The Berkshire (1974) 1 LI.L.Rep 185_ In the first case the bill of lading was signed by the Master. In the second case as stated above in view of a specific clause in the bill of lading the contract was held to be between the owner and the shipper. The ,general proposition that where the bill of lading has been issued by the ordinary Charterer or his agent and the Shipper has accepted it in ignorance of the charter, the contract will be between the shipper and owner does not seem to be well founded. This proposition will be correct if the bill of lading has been signed by the Master or a person authorised by the Master because in ordinary charter Master is the agent of the owner. In this regard reference can be made to the Baumwell Manufacture Von Carl Scheiler v. Furness (18133) A. C.8. In my humble view the clear and correct analysis has been made by Scrutton on Charter parties 12th Ed. at P.68 in the following words:‑ "When a bill of lading is issued for goods on a chartered ship, the question whether the bill of lading, in the hands of a shipper other than the charterer or of a bona fide holder for value is a contract with the ship owner or the charterer is one of some difficulty and it is difficult to lay down general rules. In most cases, however, the position is as follows:‑ (i) If the charter is a demise, so that the Captain is the servant of the charterer and not of the owner, a bill of lading signed by the captain or by the charterer is a contract with the charterer, not the shipowner. (ii) If the charter is not: a demise a bill of lacing signed try the Master or by the charterer as authorised agent of the Master is usually a contract with the shipowner. The contract may be with the owners even though the charter contains a clause that the Captain shall sign bills of lading as agent for the charterers, if the holder of the bill of lading does not know of the clause. If the bill of lading imposes terms on the shipowner which are more onerous than those under the charter, the shipowner may be able to look to the charter for an indemnity." In the present case the bill of lading has been issued on the form of defendant No.2 and signed by its agent and not by the Master or his authorised agent. Therefore, on the basis of the documents produced so far at the interlocutory stage, prima facie the contract of affraightment is between the plaintiffs defendants No.

2. The next question is whether the case falls within any of the claims which can be entertained under the Admiralty Jurisdiction. Section 3 (2) (h) of the Ordinance provides that the claim arising out of any agreement relating to the carriage of gads' to a ship or to the use or hire of a ship can be heard and determined by the Admiralty Court, The provision is wide enough covering any claim or dispute which arises out of agreement relating to carriage of goods by sea in a ship. The grievance of the plaintiffs as stated in the plaint is that the defendant No.2 has illegally and unauthorised by delivered the cargo without production of the bill of lading and after obtaining the cargo the defendant No.3 manoeuvred such legal proceeding which has deprived the plaintiffs from recovering the sale proceeds. The defendant No.2 has pleaded that there is practice to deliver cargo without production of the original bill of lading on furnishing bank guarantee. Such exceptional cases are no doubt in practice, but they do not absolve the carriers from their responsibility under law. The bank guarantee is obtained by the carriers for their own security. If the defendants No.2 would have encashed the bank guarantee and paid the sale proceeds to the plaintiffs perhaps there would have been no dispute. In the present case after obtaining the delivery under a legal proceeding the bank hits been restrained from paying the money to the plaintiffs and the defendants No.2 have also discharged the bank guarantee after accepting the original bill of lading much after the delivery of cargo. The result is that the cargo has beets delivered, without payment of money to the plaintiffs. The plaintiffs allege breach of contract of carriage of goods by Sea in a ship as evidenced by the bill of lading. The provisions of section 3 (2)(b) of the Ordinance will apply to the present case. However, the plaintiffs have contract with the defendant No.2, the charterers which have not been shown to have or hold any share of the ship. Therefore, in view of the provisions of section 4(4) of the Ordinance action against the ship will not lie. The interim order dated 27‑11‑1987 is vacated and the bank guarantee furnished by the defendants is discharged. Both the applications stand disposed of. A.A./A‑367/K Interim order vacated.