Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: EASTERN FEDERAL: UNION INSURANCE COMPANY LIMITED VS Respondent: AMERICAN JUDGMENT
Court Name: Supreme Court of Pakistan Judge(s): Sajjad Ali Shah, Saleem Akhter Title:EASTERN FEDERAL: UNION INSURANCE COMPANY LIMITED vs AMERICAN
JUDGMENT
Reported As: PLD 1992 Supreme Court 291 Result: Appeal dismissed Judgment JUDGMENT SALEEM AKHTAR, J.---This is one of those cases in which the claim amount is insignificant but the principle and question of law involved is of great importance. 2.The appellant is an Insurance Company which had issued policy of insurance in respect of goods imported by the consignee who has not been made a party as the claim was subrogated in its favour. M/s. Ishaq M. Sadro and Company imported 213 bales of second-hand clothing which were stuffed in two containers and carried on board vessel s.s. PRESIDENT TYLER under bill of lading issued by respondent No.l, the owner of the vessel of which respondent No.2 is the local agent at Karachi. The goods were transhipped on board s.s_ `PRESIDENT ROSEVELT' which arrived at Karachi on 8-10-1981 and discharged Karachi-bound containers including the containers in suit. At the time of taking delivery the clearing agent of the consignee noticed that two bales had short-landed and Karachi Port Trust issued a short-landing certificate, dated 6-8-1982 but also manifested goods of the same description under nil marks. The consignee made a claim for Rs.3,956, but as the respondents denied it, the appellant who had insured the carriage after obtaining letter of subrogation from the consignee riled suit against the respondents in the Court of Small Causes, Karachi. The respondents denied the claim pleading that the two containers as shown in the bill of lading were discharged at Karachi Port. They were inspected by the Surveyor M/s. G.B. Potts & Company Limited and the seals on the containers were found intact which were opened in their presence. It was further pleaded that in addition to the public notice published in `Dawn' the consignee's clearing agent viz. Sultan Enterprises were duly advised prior to arrival of the vessel to inspect the seal of the containers at the time of discharge from the vessel and to be present at the
---
## Page 2
time of destuffing of the containers. It was stated that the shipper had stuffed the goods in the containers in its own premises and had sealed them. The particulars in the bill of lading were inserted as declared by the shipper. The respondents denied that they were aware of the nature, number, value, quantity or quality of 'the goods. It was further submitted that the carriers having discharged the sealed containers in the same order and condition in which they were received at the port of shipment were not liable for the shortage of two bales which in fact were outturned under nil marks. The learned trial Court decreed the suit. The respondents then filed a revision petition against the said judgment and decree in the High Court which was allowed by the learned Single Judge by the impugned judgment, dated 7-12-1989 and the judgment of the learned Judge of the Small Causes Court was set aside. Leave to appeal was granted to the appellant to consider the question whether under the bill of lading issued by the carrier it was required to deliver two containers or 213 bales of second-hand clothing. Although the leave granting order refers to the contention regarding per package limitation of liability of the carrier under law this question is not at all relevant nor was it at any stage raised, pleaded or considered. 3.At the outset it may be clarified that in the present case the question of per package limitation of liability of the carrier is not at all involved. The main question is whether a carrier which carries the cargo in containers under bill of lading giving number of container loaded and also the particulars of cargo stuffed in it with qualifying remarks like CY/CFS and STC is bound to deliver only the number of container as shown in the bill of lading or the cargo as described in the bill of lading contained in the container. 4.Reverting to the facts and circumstances of the case and the question involved it is necessary first to examine the bill of lading which evidences the terms and conditions on which the parties had agreed carriage of goods. The relevant particulars in the bill of lading were mentioned as follows:-- Marks & relevant container No.No, of packages Description of packages Gross weight Measurement Geem Gaba Lahore PakistanTwo CONTAINERS PARTIALLY STC(CY/CFS 213 BALES SECOND- HAND CLOTHING (EXCLUDING TRAVELLING DUES) AS PER SUPPLIER'S PRO FORMA INVOICE DATED 13-7-1981. L/C NO.10053/0126. LADEN ON BOARD/FREIGHT PREPAID.26895 LES 12199 KGS1076 30.469 MS As is obvious abbreviated remakrs such as STC and CY/CFS have been mentioned in the bill of lading which require explanation before considering contentions of the parties. According to the Marine Encyclopaedia -Dictionary by Eric Sullivan, Second Edition, the following terms mean: "S.T.C. Said to contain CY/CY Container yard/container yard. Container is delivered from one yard to another. CF.S. Container Freight Station SL&C Shippers load and count. 5.Where CY/CFS--is mentioned it means that the goods were stuffed in the container. By the shipper in his yard and that the container is to be delivered at container's freight station. There is no dispute on the fact that the containers belonged to respondent No.l and they were supplied to the shipper who had taken them to its Yard and stuffed the goods in it without any association, participation or supervision of the carrier. After stuffing the goods they were sealed by the shipper
---
## Page 3
and such sealed containers were delivered to respondent No.l for carriage which issued the bill of lading without examining or checking the cargo stuffed in the containers. 6.The learned Judge of the Small Causes Court came to the conclusion that containers supplied by the carrier were no better `than the one where the goods are stowed in one of the holds of the ship itself and held that the bill of lading was prima facie evidence of the goods mentioned in it and the respondents were liable to deliver the same goods viz. 213 bales in the same order and condition as mentioned in the bill of lading. The suit was accordingly decreed. However, the learned Single Judge in revision application did not agree with the treatment that CY/CFS `entries in the bill of lading do not mean that actually the bales or cartons were stuffed inside the containers'. The observations in (1979) MU 220, (1981) 2 MU 315 and (1981) 1 LLR 206, were followed where according to the impugned judgment it was held that by mentioning the number of cartons/packages in the bill of lading (with CY/CFS) the carriers did not admit the correctness of the statement,. It was further observed:---- "I have also adverted to above that the bills of lading (Exhs. 8, 8 and 9 respectively) are also no admission of the carriers about the number of bales/cartons having been stuffed in the containers. They only indicate the bales/cartons were stuffed in the containers. These do not mean that cartons/bales were stuffed in the containers." Finally it was concluded: "For the reasons mentioned above, disagreeing with the Judge, Small Causes Court, I hold that there is no legal evidence of the actual quantity of bales of second-hand clothing and cartons of infant milk stuffed in the containers. The documents relied upon by the trial Court in coming to the conclusion that bales/cartons were stuffed in containers are not such documents from which such a conclusion can be legally arrived at. Since there is a want of legal evidence on this point, I hold that the plaintiffs/respondents have failed to prove that there was short delivery of two and one bales of second-hand clothing and eight cartons of infant milk." 7.Mr. Muhammad Ali Sayeed, the learned Advocate Supreme Court for the appellant and Mr. A.A. Shariff, the learned Advocate Supreme Court for the respondents have ably argued the case and put forth their viewpoints and referred several authorities particularly the American decisions in support of their arguments. It is an admitted position that the case is governed by the United States Carriage of Goods by Sea Act, 1936 (COGSA), which with minor modification is identical to The Hague Rules which were enacted as Carriage of Goods by Sea Act, 1924, in England and Carriage of Goods by Sea Act, 1925, in the Indian Sub-Continent and is now applicable to Pakistan. In Britain 1924 Act has been repealed and replaced by Carriage of Goods by Sea. Act, 1971, which incorporates the provisions of Hague/Visby Rules. With this background we have only to restrict ourselves to the provisions of the US Act but assistance and guidance can be sought from the judgments from other jurisdictions having similar law. 8.Mr. Muhammad Ali Sayeed, the learned Advocate Supreme Court contended that the respondents were legally bound to deliver 213 bales of second-hand clothing to the consignee. Mr. AA. Shariff, however, contended that the shipper had received two sealed containers which were delivered to the consignee in the same order and condition in which they were received, therefore, the respondents have discharged their liability as they were not bound to deliver 213 bales. According to the learned counsel for the respondents each container should be treated as a package and the carriers were responsible to deliver two packages only as the particulars of the contents of the containers were mentioned in the bill of lading on the declaration made by the shipper which in the circumstances of the case could not be verified and was not binding. It is on the basis of this contention that the entire argument drifted to a channel where the parties from the High Court up to this appeal wrestled whether container can be called a package. The carriage through containers has become an accepted, viable and more convenient mode of transportation
---
## Page 4
of goods by Sea, for the last more than two decades. Since then this package problem with reference to limitation of liability of carriers as provided by The Hague Rules enactment has attracted the attention of the' Courts and shipping world. The Courts are engaged in resolving this knotty question by interpreting the provisions of law and in USA till late conflict of decision has surfaced in the judgments of District Courts and Courts of Appeal of various States. The dust now seems to settle down but the final verdict from the apex Court is yet to come. On the other forum the shipping world and maritime nations showed their anxiety and concern with the fluid state in determining per package liability of the carriers caused due to `Container revolution' as it was felt that The Hague Rules could not meet this problem adequately and determinatively. This led to a diplomatic conference at Brussels in 1967 to consider various maritime conventions including amendments in The Hague Rules. Finally the Diplomatic Conference on Maritime Law held at Brussels in February 1968 adopted limitation of liability equivalent to $ 66,200 per package or unit or 90 cent per pound whichever is higher. It also passed the following provision to solve the container problem:--- "Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units for the purposes of this paragraph as far as these packages or units are concerned. Except as aforesaid, such article of transport shall be considered the package or unit." The Brussels Protocol, 1968, known as Visby Rules amended Brussels Convention 1923 (Hague Rules) and has attempted to provide a determinative solution of container problem and perhaps relieving the Courts of embarrassing situations which were required to offer a solution by interpretation for a revolutionary situation which was new and perhaps not contemplated when Hague Rules were framed. However, the difficulty still persists as the Visby Rules are yet to find legislative enactment by several countries. Britain has already incorporated it in its Carriage of Goods by Sea Act, 1971. US and Pakistan have not. The following provisions of US Carriage of Goods by Sea Act, 1936, have been referred and require interpretation:--- "Section. 3. Responsibilities and liabilities of carrier and shiv (1) (2) (3)Contents of bill .--After receiving the goods into his charge the carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things: (a)The leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage. (b)Either the number of packages or pieces, or the quantity or weight, as the case may be, as furnished in writing by the shipper. (c)The apparent order and condition of the goods: Provided, that no carirer, master, or agent of the carrier, shall be bound to state or show in the bill of lading any marks, number, quantity or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received or which he has had no reasonable means of checking. (4)Bill as prima facie evidence .--Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described in accordance with paragraphs (3)(a)(b) and (c) of this section Provided, that nothing in this chapter sha"' be construed as repealing or limiting the application of any part of sections 81 to 124 of Title 49.
---
## Page 5
(5) .................................................. (6) .................................................. (7) .................................................. (5)Limitation of liability for negligence -- Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods, arising from negligence, fault or failure in the duties and obligations provided in this section, lessening such liability otherwise than as provided in this Chapter, shall be null and void and of no effect. A benefit of insurance in favour of the carrier, or similar clause, shall be deemed to be a clause relieving the carrier from liability. 46 US Code Appendix 1303. (5)Section 4. Rights and immunities of carrier and ship.- (1) (2) (3) .................................................. (4) .................................................. (5)Amount of liability: valuation of cargo --Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $ 500 per package, lawful money of the United States, or in case of goods, not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. (6)By agreement between the carrier, master or agent of the carrier and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, that such maximum shall not be less than the figure abovenamed. In no event shall the carrier be liable for more than the amount of damage actually sustained. (7)Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading. (6)---------. (8)The issue involved in the case attracts section 3 of COGSA while reference to section 4(5) and the judgments cited at the bar seem to be relevant for understanding the meaning of the word `package'. The question of per package limitation of liability of carriers does not arise as even if each bale is treated as a package the amount claimed by the appellant is much less than the maximum limit fixed by law. First we will examine the judgments of US Courts on question what is a package. 9. In Standard Electra SA. v. Hamburg, Sudamerikanischc (1967) 2 LLR 193, the entirc shipment consisted of nine pallets each containing six card-board cartons of 40 tuners. In the shipping documents number of package was given as `9' pallets'. Seven pallets were not delivered and the carrier admitted its liability. The only question to be decided was the liability of the carrier in terms of Carriage of Goods by Sea Act, 1936, which under section 4(5), 46 U.S.C. Section 1304(5) limits recovery to $500 per package. The question arose when a container is to be considered a `package' for the purposes of that limitation. Chief Justice Lumbard of the Court of Appeal (Second Circuit) speaking for the majority held that each pallet was a package for the following reasons:-- (1)The parties regarded and characterised each pallet as a package, which was proved from the shipping documents and claim letter of the shipper. (2)The shipper and not carrier chose to make cartons into pallets. The number of insured cartons was not mentioned in shipping documents and, thus, no notice of the number of cartons was given to the carrier.
---
## Page 6
(3)Under section 4(5) of COGSA shipper could have obtained full coverage by declaring nature and value of goods, and (4)Since `package' fairly intended pallets in the case it is not relevant that section 4(5) might not have seen that application when enacted. (9)Analyzing section 4(5) COGSA it was observed that its `purpose was to describe a unit that would be fairly uniform and predictable in size and one that would provide a common sense standard so that the parties could easily ascertain at the time of contract'. 10. The same Court later considered the same question in the Leather's Rest Inc. v. The MOR-MA- CLYNX and OTHERS (THE MORMA-CLYNX') (1971) 2 LLR 476 in which the shipper/seller's employee loaded 99 cartons of leather in the container supplied by the carriers and sealed in the presence of the truck driver of carrier's agent. In the bill of lading under column member and kind of packages the particulars were given as:_ "1 Container STC 99 bales of leather" As at the time of delivery the container was found empty, the carriers were sued which pleaded that their liability was limited to $ 500 for the entire container. Referring to Standard Electra (supra), it was observed that the fact that there was nothing in this case to show that the parties had agreed to treat container as package (as in Standard Electra) was not a satisfactory distinction and it was observed: ---the purpose of section 4(5) COGSA was to. Set a reasonable figure below which the carrier should not be permitted to limit his liability and that `package' is thus more sensibly related to the unit in which the shipper packed the goods and described them than to a large metal object, functionally a part of the ship, in' which the carrier caused them to be `contained' The s.s. Mormaclynx (The Leather's Best) propounded the view that the nature and use of containers makes them functional part of the ship but Article 4(5) of COGSA refers to shipper's own packaging which is an integral part of his shipment. Thus, the carrier owned or supplied containers should not be considered a package as it is against the spirit and language of this provision. And further where shipper's own packing units can be shipped in their original packing even if they are stowed in a container, the presumption would be that container is not a package and it is for the carrier to rebut it. 11. This .Judgment was followed in Shinko Bolki Co. Limited v. s.s. Pioneer Moon and United States Lines Inc. (1975) 1 LLR 199. The shipper had filed 24 tanks supplied by the carriers with liquid latex in the presence of their representative. In the bill of lading number of packages were shown as 24 and the particulars and description were given as `lift on lift off tanks synthetic latex said to weigh 359, 170" lbs: The freight was charged on the basis of this weight. The bill of lading provided that `package' included containers, van, trailers, pallatized units------------.. On arrival 11 tanks were found damaged and contents totally lost. In the suit filed by the plaintiff the carriers pleaded limitation of liability to $ 500 per tank. The District Judge accepted this plea but the Court of Appeals for the Second Circuit allowing the appeal observed:--- . "Shipment in the 2,000-gallon tanks furnished by the ship is more closely analogous to shipment in its deep tanks than to transportation in the shipper's drums. The tanks were the carrier's property, used on voyage after voyage, not included in computing the freight charges, and apparently filed while under the supervision of a representative of the carrier. In practical effect they were a smaller and movable version of the deep tanks. They were `functionally part of the ship' every bit as much as the metal container holding 99 bales of leather on the Mormaclynx, sup. (1971) 2 Lloyd's Rep. At page 486; 451 G.. 2d at 851. If, as we hold, the tanks furnished by the carrier were not packages, the quoted provision from the bill of lading could not make them so, 46 USC s. 1303(8); in any case, we believe the liquid latcx was within the exception for `goods shipped in bulk'.
---
## Page 7
Our decision is not inconsistent with Royal Typewriter Co. v. MIV Kulmerland, 483 F. 2d 645 (2 Cir. 1973); (1973) 2 Lloyd's Rep. 428, on which the defendant relies. The bill of lading in that case read only `1 container said to contain Machinery', 483 F. 2d at pp. 646 and 430, and gave the carrier no notice of the number of cartons contained therein for which the shipper sought to collect $500 each. Here the weight was clearly stated. Moreover, the `functional economics test' there announced affords little help with respect to the bulk shipment of a liquid." This question had come up for consideration earlier in Royal Typewriter Co. Division Litton Business System Inc. v. m.v. Kulmerland and Hamburg Amerika Line (The Kulmcrland) (1973) 2 LLR 428. The plaintiff's 350 adding machines in cartons were stowed by its agent in his container at West Berlin which was sealed by him and transported to Hamburg where it was loaded on defendant's m.v. Kulmerland. The bill of lading read "one container said to contain machinery but the number of packages stowed in it were not mentioned. As at New York contents were found missing the carriers conceded their liability to compensate the plaintiff but pleaded that it was limited to $500 per container which was a package. This plea was upheld by the District Judge and affirmed by this judgment. The main consideration being that the container was intended by the shipper to be the basic cargo unit and the carrier was not notified as to the nature and value of goods transported. The following observation illustrates the view point with reference to other judgments on this issue. "The statutory purpose here leads us to suggest what for want of a better term we will call the functional economics test. In this regard, the first question in any container case is whether the contents of the container could have feasibly been shipped overseas in the invididual packages or cartons in which they were packed by the shipper. Here it is plain that they could not feasibly have been shipped in those individual cartons; adding machines are a delicate product--their little cardboard cartons, stapled and proper taped, had never been shipped, as such, in the days before containers they were shipped in wooden crates or cases containing 12 to 24 each. The metal containers in which the cartons were shipped in lots of 350 per container are essentially to be likened to the wooden crates or cases of days past; the use of the metal container of convenience to shipper and carrier alike was selected by the shipper and used without carrier's objection. This Court, in a different factual context in Nichimen Co. v. m.v. Farland, 462 F.2d 319, 334 (2d Cir 1972) referred to Black's Law Dictionary 1262 (4th Edn. 1951) which defines a package as a `bundle put up for transporatation or commercial handling ....Thing in form suitable for transportation or handling'. Until the adding machine cartons were packed in the container in question they were not suitable for oceans transportation or handling. We suggest that underlying Leather's Best…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.