1993 PLP 1587 (MLD)

(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‑‑‑ (m) any claim in respect of the construction, repair or equipment of a ship or dock charges or dues. (q) any claim arising out of bottomry or respondentia . According to the learned counsel for the plaintiff under the agreement dated 8‑11‑1991 the loan was taken by the defendant No.2 from Nafin for repairs of its vessels as such the claim for the amount of US $ 371.175.88 is covered by section 3(2)(m) of the said Ordinance. Under the loan agreement dated 8‑11‑1991, the purpose of the loan has been specified as under: "

4. Purpose of loan: ‑‑The total amount of this loan will be used for the DALMATINSKA PLOVIDBA internal current repairs expenses." Mr. Iqbal Siddiqui, learned counsel for the defendant No.l has submitted that in this clause the purpose of loan has been specified as "internal current repairs expenses" of Dalmatinska. Neither the expression "repair of the vessel" has been used nor the name of any vessel has been specified. It has been further pointed out by him that according to the statement of account filed by the plaintiff alongwith the plaint, the amount of loan was transferred by United Overseas Bank Geneve to M/s. Dalmaplov Shipping Co. Ltd. and not to the defendant No.2 and it has nowhere been shown that the alleged loan was in fact used for carrying out repairs of the vessel and if so which vessel. He has further emphasised that in any case, it has not been shown that the alleged loan was at any time used for the repair of defendant No.l vessel. He has further submitted that under section 3(2)(m) claim in respect of, repair of a ship can be entertained but not a claim based on a loan said to have advanced for carrying out the repairs of vessels generally. Learned counsel for the defendant No.l has further submitted that the jurisdiction of this Court under the said Ordinance is limited and restricted to the nature of the claims specified under the said Ordinance and it cannot be enlarged by adding words which do not find place in the statute. Mr. Hassan Zafar, learned counsel for the plaintiff has, however, in this connection referred to the following passage from Law Lexicon by Mukherjee, Vol. I, p. 865: "The words "in respect of " admit of a wide connotation: Lord Geene M.R. In Cunard's Trustees v. Inland Revenue Commissioner (1946) 174 L.T. 133 calls them colourless words. The Supreme Court in S.S. Doab Sugar Mills Ltd.'s case (1960) 2 S.C.R. 926: AIR 1960 SC 695 construing these words in section 3(14) of the Indian Railways Act, 1890 has held that they are very wide:" In the context of section 23(IB) Foreign Exchange Regulation Act, 1947, in respect of has been used in the sense of `being connected with. In this connection he has also relied upon PLD 1992 Kar. 444, wherein after considering PLD 1986 Kar. 447, (1985) 1 AER 695 and 1983 CLC 886, it was held as under:‑‑‑ "The result of the above authorities is that the expression "arising out of in paragraph (H) of subsection (2) of section 3 of the Ordinance of 1980 is the equivalent of the expression "connected with" and a claim, whether founded in contract or tort, notwithstanding that there is no contract directly between the parties to an action, would fall within the Admiralty jurisdiction provided that it arises out of, in the sense of being connected with, an agreement of the kinds specified in paragraph (H) viz. an agreement relating to the carriage of goods in a ship or to the use or hire of a ship." In view of above‑noted decisions, learned counsel for the plaintiff has contended that the expression "in respect of" in para. (m) of subsection (2) of section 3 of the said Ordinance should also be considered as equivalent of the expression "connected with". Even if the submissions made by the learned counsel for the plaintiff B are accepted and the expression "in respect of" in para. (m) of subsection (2) of section 3 of the said Ordinance is treated as equivalent of the expression "connected with", even then the fact will remain that the claim made by the plaintiff for US $ 371..175.88 in this suit is based upon a loan agreement and it s neither in respect of repairs nor connected with the repairs of a vessel. As regards the remaining claim for French Francs 59.839.89, for commission on sale of vessel, it is totally outside the scope of the provisions of the said 8 Ordinance, because this claim is not even based on the alleged loan agreement. Mr. Hassan Zafar, learned counsel for the plaintiff has further argued that the claim of the plaintiff in this case is in any way covered under section 3(2)(q) of the said Ordinance, which relates to a claim arising out of bottomry. According to the learned counsel, the defendant No.2 and its sister concern M/s. D.P. Shipping Company Ltd. had executed two letters of guarantee which are in the nature of bond and quite similar and akin to "Bottomry Bonds". The said 2 letters dated 8‑11‑1991 reads as under:‑‑‑ "In respect of the loan you allowed to us in the amount of US $ 440.000.00 in accordance with the LOAN AGREEMENT dated 8th November, 1991 we hereby irrevocably guarantee that we shall duly repay the loan in 3 two‑monthly instalments, the first instalment being due 12th January, 1992, out of the earnings of the vessels which are in our ownership or, out of the earnings of the vessels which are on Time Charter or Management with us. Simultaneously, we hereby confirm that only one DAUGHTER COMPANY actually, D.P. SHIPPING CO. LTD. PANAMA exists in our ownership and under our control. In respect of the loan you allowed to DALMATINSKA PLOVIDBA VELALUKA (our mother company) in the amount of US $ 440,000.00, we hereby irrevocably confirm that, in case DALMATINSKA PLOVIDBA is not able to repay all the obligations taken over according to the quoted LOAN AGREEMENT, we bind ourselves to take over ourselves performance of the obligations as described in the LOAN AGREEMENT dated November 8, 1991, out of the earnings of the vessels which are in our ownership." He has further pointed out that in the letters dated 8‑11‑1991 the defendant No.2 and M/s. D.P. Shipping Co. Ltd. have guaranteed the repayment of the amount of loan "out of the earnings of the vessels which are in our ownership, or out of the earnings of the vessels which are on time charter or management with us". According to the learned counsel for the plaintiff this amounts to creating a charge on the vessel and as such it is in the nature of a bottomry bond. The concept of bottomry has been explained by Giant Gilmore in the Law of Admiralty, Second Edition at page 632 as under:‑‑‑ "Bottomry and respondentia bonds.‑‑‑These once important maritime financing devices have passed out of use; most probably no living admiralty lawyer has ever seen an example of either. They are mentioned here out of a sense of history and deference for the past. A bottomry bond was a loan on the security of the vessel, and its importance lay in the fact that it did create a maritime lien, while a mortgage did not. A respondentia bond was a loan on the security of cargo. Both bottomry and respondentia bonds were conditioned on the successful completion of the voyage (i.e. if the ship foundered, the loan was discharged). Thre feature, obviously unattractive to lenders, no doubt explains their disappearance." Thomas in British Shipping Laws, Volume 14, page 207 has explained the concept of bottomry as under:‑‑‑ "Over the years bottomry has been consistently viewed by the judiciary as a maritime agreement where under a representative of a ship, in most instances the master, in circumstances of distress and necessity, and in the absence of any other source of finance or credit, hypothecates the ship (or cargo in the case of respondentia) with a view to meeting the necessary expenditure or obtaining credit and so facilitating the safe continuation or completion of the voyage. In brief, both bottomry and respondentia represent methods of dealing with emergencies encountered by the master in the course of a voyage when no other means are available." In The Atlas Lord Stowell expounded upon the concept of bottomry in the following terms: . "The definition of bottomry bonds which I find in all the writers that have adverted to the subject, are contracts in the nature of mortgages of a ship on which the owner borrows money to enable him to fit out the ship, or to purchase a cargo for the voyage proposed, and pledges the keel or bottom of the ship, pars pro toto, as security for repayment. It is moreover stipulated, that if the ship is lost in the course of the voyage, by any of the perils enumerated in the contract, the lender also shall lose his money; but if the ship shall arrive safe, then he shall be paid tack his principal, and also the interest agreed upon, called marine interest, however this may exceed the legal rate of interest." Mr. Hassan Zafar, Advocate for the plaintiff on the question of interpretation of Bottomry Bond has relied upon the following passages from the said book Maritime Liens by Thomas, Volume 14 at pages 223 and 224: "Any instrument put forward to the Court as a bottomry bond will be readily received, liberally construed and every fair presumption will be made in its favour. Confronted with contention the Court refuses to observe the presented instrument with a pedantic "nicety" or to disallow the bond on technical and trivial grounds. Throughout, the Court looks to the broad substance and effect of the instrument, which is to be deduced from the instrument taken as a whole and circumstances surrounding it. The particular label by which the instrument is described is not conclusive of its legal nature. The onus of proving the hypothecatory nature of any instrument rests with the lender. The particulars usually set out in a bottomry bond are the parties to the agreement, name of the ship, the occasion of the necessity, the principal loan and the interest (premium) payable thereon, details of the voyage during which the advance is to be at risk, a statement that the lender is to bear the maritime risk, and finally the fact of hypothecation. Given the readiness with which the Court receives written instruments as bottomry bonds it is difficult to specify the' extent to which individual particulars are essential to the validity of a bottomry bond. It is however firmly determined that the validity of a bottomry bond is unaffected by the absence of a specified premium or by the omission of an express reference to a maritime risk, if the fact of such a risk may be deduced from a construction of the entire instrument. A bottomry bond may be given by a shipowner when on board by a master or a substitute master in; the absence of a master by a mate; by a British counsel, and possibly also by a ship's agent." The learned counsel for the plaintiff has therefore submitted that two letters of guarantee given in this case by the defendant No.2 and its sister concern should be construed liberally and favoufably. On the other hand Mr. Iqbal Siddiqui, learned counsel for the defendant No.l has submitted that these letters cannot be treated as bottomry bond because neither any charge has been created nor the name of any vessel has been specified in these two letters. He has further submitted that merely because the defendant No.2 and its sister concern had guaranteed to make repayment of the loan out of the earnings of the vessels which are in the ownership of the said defendants No.2 or which are on time charter or management with them, it will not be deemed that a charge has been created on the vessel itself. He has also pointed out that M/s. D.P. Shipping Company Ltd. who had executed the second letter of guarantee have not been joined in this suit. From the text of the 2 letters of guarantee quoted above it is apparent that these two letters cannot be treated as bottomry bonds because the to essential requirements of a bottomry bond are missing. Mr. Iqbal Siddiqui, learned counsel for the defendant No.l has also denied that the defendant No.2 are the bare boat charterer of defendant No.l. He has submitted that the defendant No.2 neither have any proprietary interest in the ownership of the, vessel nor they beneficially own the said vessel. According to him M/s. Germania International Corporation, Panama City, Panama are the owners of the vessel, defendant No.l and all the 100 issued shares are owned by them only and none else. According to him even the said shares are already mortgaged With Christiana Bank OG Kreditkasse. He has further submitted that the said owner of the vessel had entered into a time charter with defendant No.2 and the defendant No‑2 had no proprietary interest in the vessel of whatsoever nature. Moreover subsequently even the said charter party arrangement was also terminated by the owners which was also accepted by the defendant No.2 and on 11‑12‑1992 the vessel was redelivered and necessary intimation in this connection was also given to the crew members through the then Master. From the copies of documents filed by both the parties, it is an admitted position that M/s. Germania International Corporation are the owners of 100% shares of defendant No.l. However, the learned counsel for the plaintiff has submitted that the defendant No.2, being "Bare Boat Charterers" of the defendant No.l, will be deemed to be the beneficial owner of the vessel on the date of the filing of the suit and as such the suit filed by the plaintiff is maintainable under section 4(4) of the said Ordinance. Learned counsel for the plaintiff has in this connection relied upon Andrea Ursula case (1971) 1 Lloyds' Law Reports 145 = (1971) 1 All E.R. 821 = (1971) 2 WLR

681. On the other hand the learned counsel for the defendant No.l has, as stated above, submitted that defendant No.2 was time charterer for some time, but that arrangement was terminated in December, 1992. He has further submitted that even as a time charterer the suit filed by the plaintiff against the defendant No.2 is not maintainable. In this connection, the learned counsel for the defendant No.l has placed reliance on 1984 CLC 1553 M/s. Sun Line Agencies Ltd. v. m.v. Psiloritis, wherein after considering several judgments including the judgment in Ursula case, Saeeduzzaman Siddiqui, J. (as he then was) disagreed with the conclusions of Brandan, J. in Ursula case and agreed with the following conclusions of Robert Goff, J. m lcongreso del Partido's case (1978) 1 All E.R. 1169 Q.B.D. as the same were more in accord with the plain language of the statute. The expression "beneficially owned as respect all the shares therein" refers only to cases of equitable ownership, whether or not accompanied by legal ownership and are not wide enough to include cases of possession and control without ownership, however full and complete such possession and control may be." It was further held by Saeeduzzaman Siddiqui, J. as under:‑‑‑ "A time charterer or a charterer by demise, however, in my opinion, do not fall in the category of a person who beneficially owned as respect majority shares of the ship, as they only beneficially possess the ship for the time being subject to the validity of the Charter Party p Agreement and by that reason they do not acquire any right of ownership in the majority shares of that ship." The findings given in the judgment referred above are applicable in the present case and fully support the contentions of the learned counsel for the defendant No.l. In the circumstances stated above, I am of the view that the plaintiff has failed to make out a prima facie case for the prohibitory order against defendant No.l. Accordingly the interim order dated 27‑2‑1993 restraining the K.P.T. authorities from giving clearance to the ship i.e. defendant No.l is hereby vacated. AA./D‑114/K Order accordingly.