1988 PLP 299 (CLC)

My findings on these issues with reasons are as follows:‑ Issues Nos. 1 and 2: Issues Nos. 1 and 2 were dropped as per order, dated 25‑10‑1984 of this Court. Issues Nos. 7, 9 and 10: Suit against Insurance Company was dismissed by this Court by its order, dated 3‑4‑1985. Hence these issues already stand decided. Issues Nos. 3 to 6, 8, 11 and 12:. All these issues are interconnected and are, therefore, taken together. It is an admitted position that the consignments in question were not delivered at Chittagong but were brought back to Karachi and the plaintiffs were compelled to take their delivery at Karachi. The question which requires consideration is as to whether this was due to any negligence on the part of the defendant No.l or it was because of an act of war. The plaintiffs have examined Abdul Latif Exh. 6 who has himself admitted that the ship sailed from the Port of Karachi in the end of November, 1971 but could not proceed to Chittagong due to war conditions with India and returned back to Karachi Port on or about 25/26th December, 1971. It is, therefore, clear from the pleadings as well as the evidence of the plaintiff himself that the contract had frustrated due to war between India and Pakistan. Mr. M.A. Bhatti, Advocate for the plaintiff realized this factual and legal position. He also realized the fact that in Suit No. 334/72 my learned brother Ajmal Mian, J. between the same parties, of a similar nature had held that the plaintiff was not entitled to claim damages as the contract was frustrated due to an act of war and it was not due to any negligence of the defendant No.

1. That judgment was upheld by the D.B. Mr. M.A. Bhatti obviously, therefore, did not press his claim for damages and requested that the suit be decreed only for the amount of freight which was paid by him to the defendant No.l. In this connection he relied upon section 56 with particular reference to illustration (d) and section 65 of the Contract Act. The relevant provisions read as under:‑ "

56. A n agreement to do an act impossible in itself is void. A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non performance of the promise ....... Illustration (d) A contracts to take in cargo for B at a foreign port. A's Government afterwards declare war against the country in which the port is situated. The contract becomes void when war .is declared. "

65. When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it." Section 56 is based on the well‑known doctrine of frustration of contract of the English Law. The plain reading of this section with particular reference to illustration (d) makes it quite clear that under the circumstances of this case the contract of carrying goods E in question to Chittagong was frustrated and, therefore, it had become void. The plaintiff was not entitled to claim compensation for breach of such contract.

5. Section 65 of the Contract Act however, makes it obligatory upon the party having received any advantages under such contract which is discovered to be void or becomes void to restore such advantages or make compensation to the party from whom he had I received it. Hence defendant No. 1 was liable to return the freight charged by them for carriage of such goods to the plaintiff. Reliance in this connection has been placed in the case of Province of West Pakistan v. Messrs Asghar Ali Muhammad Ali reported in P L D 1968 Kar. 196 where a D.B. of this Court held that principle of restoration as contained in section 65 of the Contract Act was equitable principle which is applied notwithstanding the agreement or the contract and in fact in spite of it. It was further held that obligation under section 65 to restore the advantage or to pay compensation received under a void agreement or a contract which has become void is completely different from that under the agreement or the contract itself. That obligation is like of phoenix that can be raised again by one of the parties from the dead ashes of its former self.

6. Reference in this connection can also be usefully made to the recent decision of this Court in the case of Ali Mohammad v . Karachi Metropolitan Corporation reported in 1985 C L C 1730 where it was held by Saleem Akhtar, J. that the party to an agreement which is not enforceable under the law to whom any service had been rendered or goods have been delivered under such agreement must return or compensate the party who has rendered such service or delivered such goods. In the latest ruling on this point reported in 1986 MLD 1410. Hyderabad Municipal Committee v. Javaid Murtaza. Zahoorul Haq, J. has also taken the same view and has held that where an agreement with Municipal Committee was not enforceable due to non‑compliance of statutory provisions and, therefore, void, the party to whom any service had been rendered or goods had been delivered under such agreement must return the same or compensate the party who had rendered the services or delivered the goods.

7. Mr. Nasimuddin Shaikh, who appeared for the defendant No.l conceded to this general principle but contended that advance freight paid for transport of goods cannot be recovered from the ship owner on frustration of voyage. In this connection he relied upon para. 779 of Carver's Carriage by Sea 13th Edition 1st Volume which reads as under:‑ "

779. Freight.‑‑ Freight contracts, however, are in a special position and were left unaffected by the last‑mentioned decision. Advance freight not reclaimable. Where freight due in advance has been paid it cannot be recovered again from the ship-owner upon the frustration of the voyage, although the goods be lost. This is regarded as an application of the general rule that freight payable in advance is never recoverable." He further supported his contention with the case of Queens Bench Division (Commercial Court) Lloyds Law Reports 19811. 559 (Compania Naviera General S.A. v. Kerametal Ltd.) in which it was held that the law in relation to advance freight was that if before the date of frustration advance freight had fallen due it remained payable despite the frustration of the contract. He then referred to the decision of the Court of Appeal in the same case reported in Lloyds Law Report 1983 Vol. 1 at page 373 wherein the judgment of the Commercial Court of the Q.B.D. was upheld and similar view was taken. Mr. Nasimuddin Shaikh also referred to para. 1691 of Carver's Carriage by Sea Vol. II 13th Edition where it was observed as follows:‑ "1691. Advance freight is not recoverable if the delivery of the goods is prevented by the act of God, perils of the seas or other excepted cause which excludes an action of damages. In Allison v. Bristol Marine Insurance Lord Selborne stated it to be 'the peculiar rule of English mercantile law, that an advance on account of freight to be earned is, in the absence of any stipulation to the contrary, an irrevocable payment at the risk of the shipper of the goods.' So, indeed, the law had been laid down by Saunders C.J. in Anon, (Case 271) in 1682 and has remained eversince. I may refer also to Byrne v. Schiller. In Oriental SS Co. v. Tylor one‑third of the freight was to be paid 'on signing bills of lading.' The ship sailed and was lot, with her cargo, before bills of lading had been signed. The chartrers sought to avoid payment of any freight by not presenting bills of lading for signature. But it was held that they were still bound to present them, and were liable in the amount of the freight payable in advance, as damages for not doing so. In Coker v. Limerick SS. Co. the charterparty provided that freight should be payable in advance 'on signing bills of lading.' A portion of the cargo was shipped under various bills of lading, but before the loading was completed, and consequently before all the bills of lading which would have been issued had been signed, the vessel sank in the dock, and the voyage was not proceeded with. It was held by the House of Lords that as and when each bill of lading was signed, a proportionate part of the advance freight became payable and could be recovered by the ship-owners from the charterers." The doctrine of advance freight becoming payable at once and. therefore, it being non‑refundable in spite of frustration of the contract is peculiar to English Law and in my humble opinion cannot be applied to Pakistan, in view of the fact that statutory provision has been made in section 65 of the Contract Act in this country wherein no exception has been made for not returning advance freight C in case of frustration of contract of carriage of goods. The principle having been codified in quite unequivocal and unambiguous words it is not necessary to import the principles of English Law into it which provide exceptions of that general rule. Indian High Courts have also taken the same view. In A I R 1960 AJ&K 91 Hari Singh and others v. Dewani Vidyawati it was held as follows:‑ "In order that the section 56 would apply the following conditions must be fulfilled: (1) that the act should have become impossible, (2) that impossibility should be by reason of some event which the promisor could not prevent and (3) that the impossibility should not be self‑induced by the promisor or due to his negligence. As the principle embodied in the section has been codified and the law on the subject as contained in section 56 is exhaustive, it is not necessary to import the principles of English Law into it. It has now been generally accepted as correct that the doctrine of frustration of contract would apply to cases, where the very foundation of a contract disappears by virtue of circumstances coming into existence and which were not within the contemplation of the parties to the contract." It was further held in the same ruling as follows:‑ "It is well‑settled that where a contract becomes void the principle embodied in section 65 of the Contract Act at once comes into play and a party who has reaped benefit under the contract is bound to restore it to the other party. This principle applies also to a case where the contract become void by frustration under section

56. A I R 1944 Mad. 239 and A I R 1955 Assam 33 and A I R 1950 All. 592 Rel. on Whether the contract has becomes void due to frustration, as a result of circumstances; beyond the control of the parties, the plaintiffs are not entitled to any damages but are entitled to be reimbursed only for so much of the benefit which the defendant had received from them. Moreover, where the contract has failed not due to fault of either party to the suit but because of circumstances, destroying the very foundation of the contract, none of the parties should be saddled with costs."

8. Even in the marginal notes of Carver's Carriage by Sea Vol. II 1691 it was mentioned that in the case of Watson v. Shankland (1871) Ct. Sess. 3rd series, 142, 153 in which Lord President Inglis said: "All the nations of the trading world, with the exception of England, concur in holding that an advance of freight by the charterers for ship's disbursements at the port of loading is, in the event of the loss of the ship and cargo, recoverable."

9. I am, therefore, of the clear view that whenever the contract of carriage of goods is frustrated the carrier is liable to return the freight even if he has received the same in advance in view of section 65 of the Contract Act.

10. In the present suit the plaintiffs had paid Rs.8,823.60 to the defendant No. 1 as freight, as is evident from the Bills of Lading. The Bills of Lading further show that this amount included an advance surcharge of 12$ taken on account of War Surcharge. The defendant No. 1 has not led any evidence to show that this amount was paid by him to defendant No.2. Hence I am of the opinion that defendant No. 1 is liable to return the amount of advance freight including surcharge to the plaintiff.

11. I, therefore, decree the plaintiffs' suit for Rs.8,823.60. However, looking to the special circumstances of the case I order that the parties shall bear their own costs. A . A . /A‑211/ K Suit decreed