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Petitioner: METAL CONSTRUCTION OF GREECE S.A. (MEKTA S.A.), ATHENS through Attorney VS Respondent: OWNERS OF THE VESSEL m.v. LADY REA
Court Name: Sindh High Court Judge(s): Munib Akhtar Title:METAL CONSTRUCTION OF GREECE S.A. (MEKTA S.A.), ATHENS through
Attorney vs OWNERS OF THE VESSEL m.v. LADY REA Case No.: Suit No,35 of 2008 Date of Judgment:2012-11-12 Reported As: 2013 CLD 1829 Result: Application allowed Judgment ORDER ' MUNIB AKHTAR, J.---The instant suit is an action in rem against the defendant vessel, m.v. Lady Rea ("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 29-8-2008, an ad interim order was made by which the Vessel was ordered to be detained but was allowed to sail if surety in the sum of Euro 550,000 was furnished with the Nazir of the Court. The required surety was provided and remains in place. Thus, if the application, which has remained pending since that time, is to be allowed (as contended by learned counsel for the plaintiff) the order of 29-8-2008 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 defendant) then of course, the surety will stand discharged. 2. Learned counsel for the plaintiff submitted that the plaintiff is a Greek company, which entered into a contract with Karachi Electric Supply Company Ltd. For purposes of the contract certain plant and machinery and other material had to be imported into Pakistan by the plaintiff. Learned counsel submitted that for such purpose a contract of affreightment was entered into whereby the plaintiff s cargo was to be shipped on board the Vessel. The port of loading was Volos in Greece and the port of discharge was of course Karachi. Loading of the cargo commenced on 15-9-2008 and the Vessel sailed on 18-9-2008. It was expected to reach Karachi on 30-9-2008. Two bills of lading, both dated 18-9-2012, were issued in respect of the cargo, which showed the plaintiff as the consignor, i,e,, the shipper.
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3. Learned counsel submitted that at the time the cargo was loaded on board the Vessel, it was on time charter with Messrs Worldwide Shipping Company Ltd. (registered in the Seychelles), although the plaintiff was not aware of the terms thereof. The charterparty between Worldwide Shipping Company ("the Charterer") and the owners of the Vessel, Messrs Rea Navigation Inc. ("the Shipowner") was executed on or about 23-8-2008 and was in the New York Produce Exchange form. It was subsequently placed on the record by learned counsel for the defendant-vessel. As will shortly be seen, the principal issue that falls for determination is whether the bills of lading were issued by the Charterer or the Shipowner. Learned counsel for the plaintiff submitted that as per the contract of affreightment, the Vessel was to proceed straight to Karachi from Volos. However, it stopped at Jeddah in order to discharge some cargo, and learned counsel submitted that this was a deviation from the voyage. It was submitted that this was a clear breach of the contract of affreightment. Learned counsel further submitted that the Vessel was due for an annual survey at the time that it sailed from Volos, and entirely on account of the negligence and failure on the part of the Ship-owner, this was not completed with the result that by the time the Vessel arrived at Jeddah, its certification had expired or was about to do so. The result was that the Jeddah port authorities refused to allow the Vessel to leave until the appropriate certificate was in place, which meant that the Vessel's survey had to be completed. This required that all the cargo, including that of the plaintiffs, had to be off-loaded and then reloaded once the survey had been completed. It was only then that the Vessel Mwas allowed to sail. In this regard learned counsel relied in particular on certain correspondence between the Shipowner's agents and the concerned authorities, which will be considered below. Learned counsel submitted that in such circumstances, the Vessel was not seaworthy. He emphasized the fundamental nature of the duty that a shipowner has in this regard (i,e,, to provide a seaworthy ship), and contended that there had been a clear breach of the same in the present case. As a result of the foregoing, the plaintiff claims to have suffered loss and damage, the details of which are given in the plaint. 4. Learned counsel referred in detail to various clauses of the charterparty and submitted that when these were read along with the bills of lading, there could be no doubt that the latter had been issued by the Shipowner. The contract of affreightment was between the plaintiff as shipper and the Shipowner as carrier and there had been a clear breach of the same and hence the plaintiff was entitled to bring a suit in rem against the Vessel and have it arrested. In this regard, learned counsel strongly and emphatically reiterated the absolutely fundamental nature of a shipowner's obligation to provide a seaworthy vessel. He prayed that the application be allowed. 5. Learned counsel for the defendant submitted that a suit in rem did not lie in the facts and circumstances of the present case and hence the Vessel could not be arrested. He submitted, relying principally on the bills of lading but also on the charterparty, that the contract of affreightment was between the plaintiff as shipper and the Charterer as carrier. In other words, the Shipowner was not party to the contract of affreightment. Since the charterer admittedly did not own the ship, learned counsel, relying on sections 3(2)(h) and 4(4) of the Ordinance, contended that an action in rem did not lie. As regards the absolute duty of the shipowner to provide a seaworthy ship, learned counsel submitted that this was an implied term of the contract of affreightment and since no such contract existed between the plaintiff and the Shipowner, no such duty was owed. Learned counsel further submitted, relying on the Hague-Visby Rules (as to which see below) that even the carrier (which, according to him, was the Charterer) was not liable on the facts as alleged, since under the aforesaid Rules, the carrier had only to exercise due diligence and such duty was complied with. All allegations of unlawful breach, whether by way of deviation or of the Vessel not being seaworthy were emphatically denied. In the circumstances, learned counsel submitted that the application merited dismissal and prayed that the surety be discharged.
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6. I gave permission to learned counsel to file written synopses and both did so. Learned counsel for the defendant relied on one English decision, and four Pakistani decisions and these are considered below. Learned counsel for the plaintiff relied on a mass of material, in particular extracts from a number of treatises and text books on shipping law and I will refer to the same as and to the extent relevant and necessary. 7. 7. I have heard learned counsel as above, examined the record with their assistance and considered the case-law and other material relied upon. The principal question that falls for determination is one familiar to shipping lawyers: were the bills of lading charterers' or owners' bills? (Since the two bills are identical in all material respects, it is necessary to refer to only one and for convenience I will henceforth normally use the singular.) Before proceeding to consider the issues involved, it will be pertinent to make certain preliminary observations. The international carriage of goods by sea is the subject of a number of conventions and agreements. I am concerned with the International Convention (of 1924) for the Unification of Certain Rules of Law relating to Bills of Lading. The rules agreed upon by this convention were subsequently amended in certain respects by a protocol of 1968, both by way of substitution as well as addition. The rules, contained in the 1924 Convention are known as the Hague Rules, and those rules as amended by the 1968 Protocol are known as the Hague-Visby Rules. The Hague-Visby Rules were incorporated into English law by means of the Carriage of Goods by Sea Act, 1971 ("the UK 1971 Act"), the rules being appended as a schedule to the said Act. Now, the reverse side of the bill of lading in the present case has printed thereon (in the typical small print resorted to for such purposes) the "Conditions of Carriage". These provide in clause 1 inter alia that the terms and conditions, and in particular "the Law" and Arbitration Clause", of the charterparty stand incorporated in the bill of lading. Clause 45 of the charterparty expressly provides that disputes are to be referred to arbitration and such arbitration is to be governed by English law. Additional clause 90 in relation to "speed claims" also expressly provides that these are to be settled in accordance with English law. There was not however, any express submission to the jurisdiction of English courts. The aforementioned references could indicate that English law was to apply to the bill of= lading and therefore the UK 1971 Act and hence the Hague-Visby Rules as incorporated therein are applicable. However, the reverse side of the bill of lading also contains, as clause 2 thereof, a typical "general paramount clause" (of the sort considered in The Bukhta Russkaya [1997] 2 Lloyd's Rep 744, 746-7) and this expressly refers to the Hague Rules. In The Komninos S [1991] 1 Lloyd's Rep 370, where there was an express submission to "British Courts" but no express choice of law, the Court of Appeal- concluded that while the relevant bills of lading were governed by English law, the UK 1971 Act and hence the Hague-Visby Rules did not apply. After having considered the matter, I of the view that the express provisions of the general paramount clause would prevail rather than any indirect incorporation by reference to the 1971 UK Act, and hence it is the Hague Rules (rather than the Hague-Visby Rules) that apply to the bills of lading before me. 8. How does English law deal with the issue of whether a particular bill of lading is a charterer's or shipowner's bill? Learned counsel for the defendant placed primary reliance on Sunrise Maritime Inc. v. Uvisco Ltd. ("The Hector") [1998] 2 Lloyd's Rep 287, a Judgment at first instance of Rix, J. (as he then was). It was submitted that the defendant's case was on all fours with this decision. Learned counsel also relied on certain Pakistani decisions. These are, in chronological order, Sun Line Agencies Ltd. v. The Psiloritis 1984 CLC 1553 (SHC; SB), Atlantic Steamer's Supply Company v. m.v. Titisee and others PLD 1993 SC 88, V.N. Lakhani & Co. v. m.v. Lakatoi Express PLD 1994 SC 894 and (in particular) Jaffer Brothers (Pvt.) Ltd. v. m.v. Eurobulker II 2002 CLD 926 (SHC; DB). It will be convenient to first consider the Pakistani case-law. 9.
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9. In the first mentioned case, the plaintiff therein had provided certain agency services to the defendant No,2 for purposes of handling the ships belonging to the said defendant when they visited Karachi. The claim was that such services were duly rendered but no payment was made for the same by the said defendant. It was to recover the claimed amount that an action in rem was started in respect of the defendant vessel, which was then on time charter with the defendant No, 2. On behalf of the vessel, it was contended that the defendant No, 2 was not the owner of the vessel within the meaning of section 4(4) of the Ordinance (since it was only the time charterer) and hence an action in rem did not lie. This contention was accepted and the learned single Judge dismissed the application for the arrest of the ' vessel. It will be seen that the basis on which the claim was made was different from the claim on the basis of which the present suit is proceeding. Therefore, with respect, the cited decision is distinguishable on the facts. In the second mentioned 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 (1) 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. In the third mentioned case, the plaintiff-appellant's cargo was shipped on board a certain vessel and the bill of lading was issued by the shipowner in respect thereof. It appears that although transshipment was prohibited, the cargo was in fact transshipped on board the defendant vessel, which was at the relevant time on time charter with the shipowner of the first vessel. The cargo owner (the plaintiff-appellant) brought a suit in rem against the second vessel and sought to have it arrested. The defence was that the plaintiffs claim lay against the shipowner of the first vessel, who was not the owner of the second vessel, being only the time charterer thereof. This defence was upheld and the suit dismissed. The appeal before the Supreme Court also failed. The Supreme Court considered a number of decisions and approved the decision of the learned single Judge of this Court in The Psiloritis (supra). It was held that the term "owner", as used in section 4(4) of the Ordinance, did not include a time charterer. It was for this observation that learned counsel for the Vessel relied on this decision (as also The Psiloritis). However, it will be appreciated that the question in issue before me is whether the bill of lading is a charterer's or owner's bill. If the answer to this question (which was not the matter in issue before the Supreme Court or the learned Single Judge) is that the bill of lading is the Shipowner's bill, then obviously a suit in rem will lie against the Vessel. Therefore, with respect, the decision of the Supreme Court is distinguishable on the facts. 10. As noted above, the last mentioned decision was particularly relied upon by learned counsel for the Vessel. The appellant therein had brought a suit in rem against the respondent vessel and filed an application for its arrest. That application was dismissed by a learned Single Judge, and the appeal was against such dismissal. It appears that certain cargo was being shipped on the respondent vessel for which a bill of lading had been issued to the shipper, who had endorsed it to the appellant. It was alleged that there had been a deviation in the voyage and other cargo had also been loaded on to the respondent vessel, which was in breach of contractual obligations and as a result, the plaintiff-appellant had suffered loss and damage. The claim for the action in rem Was made in terms of clause (h) of section 3(2) of the Ordinance, which is the provision invoked in the present case. It appears that in fact the respondent vessel was on time charter with another party, which had entered into a sub-charter (by way of a voyage charter) with the shipper. Thus, in respect of the voyage in question, the shipper was itself the carrier. The learned Division Bench held as follows (pg. 931):-
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"In the instant case, the shipper who is also voyage or sub-charterer had endorsed the Bill of Lading in favour of the plaintiff/appellant, where the shipper himself is the .Charterer then the Bill' of Lading in hand of the charterer is merely a receipt for goods and such receipts, even if endorsed, as in the present case in favour of the consignee it will not change its complexion and will remain a receipt of a goods. In fact the endorsee in such case will step in shoes of the Shipper and will be liable and entitled for all such obligation and rights in relation to affreightment contract as may be available to the shipper who incidentally in this case is also charterer of the vessel." ' It was further observed (at pg. 932 and relying on The Rewia (1991] 2 Lloyd's Rep 325) that while there was a presumption that a bill of lading signed by the master of the vessel had been issued on behalf of the shipowner, this was rebuttable and not attracted in the instant case for the reasons discussed above, as admittedly the plaintiff/appellant himself has relied upon and filed the copy of charter-party which authorizes the Master to sign a Bill of Lading for the charterer. In case where the charterer himself is the shipper as in the present case then as discussed above, such Bill of Lading is reduced merely to a receipt of goods shipped and such receipt when endorsed will only entitle the holder in due course to all rights of the shipper/charterer. By whatever angle case is attended, one cannot establish any nexus in affreightment contract between the holder of such receipt and the owner of the vessel". ' In my view, with respect, this case is also distinguishable on the facts since the charterer was itself the shipper, which meant that the status of the bill of lading when in its hand was that of a receipt for the goods. Furthermore, the contract of affreightment was contained in the charter party itself and the suit was filed by the endorsee (the plaintiff-appellant) on grounds of a breach of the terms thereof. This is in sharp contrast with the facts and circumstances of the present case and therefore, despite any apparent similarity, the two situations are actually quite different. In my view, with the utmost respect, the Pakistani decisions relied upon shed no decisive light on the principal issue raised in the present proceedings. 11. I turn therefore to consider The Hector, the English decision so strongly relied upon by learned counsel for the defendant. The owners of the Hector had time chartered her to US Express Lines ("USEL"), an American company. USEL had in turn sub-chartered the ship to an English company by way of a voyage charter. The bill of lading involved contained on its front or face, and in a prominent position, the following typed words: "CARRIER: U.S. EXPRESS LINES". Its attestation clause was in standard form, and read as follows: "IN WITNESS whereof the Master of the said Vessel has signed the number of original Bills of Lading stated below ...". In the signature box, the bill was stated to have been signed by certain agents on behalf of the master of the vessel. The terms and conditions of the carriage were contained on the reverse side of the bill in the usual small print. One of the clauses was an identity of carrier clause. An identity of carrier clause is a standard feature in many bills of lading and its purpose is to specify who the carrier is in respect of the goods shipped under the bill of lading. The clause used in The Hector (clause 17) was a fairly typical example and read as follows: The Contract evidenced by this Bill of Lading is between the Merchant and the Owner of the vessel named herein (or substitute) and it is therefore agreed that said Shipowner only shall be liable for any damage or loss due to any breach or non-performance of any obligation arising out of the contract of carriage, whether or not relating to the vessel's seaworthiness...." 12. There was thus an apparent contradiction in the bill of lading. On its face or front side, it appeared to indicate that the carrier was the charterer. However, the identity of carrier clause on the reverse indicated that the shipowner was the carrier, and added to this was the fact that the bill had been signed by the master of the vessel. In a time charter (as in a voyage charter), the master continues to remain the servant of the shipowner (subject to the terms of the charter) and as Rix, J. Noted (at pg. 293) "it has for long been well established in English law that a bill of lading
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signed for the master is very likely to be an owner's bill: see, for instance, The Rewia [1991] 2 Lloyd's Rep 325, where the earlier authorities were fully investigated.... In the present case, the vessel was not demised but in the possession of her owners, the bill was expressly signed 'for and on behalf of the master'. After having considered the matter, Rix, J. Concluded as follows (pp. 294-296; emphasis supplied):-- "As a matter of construction, then, I have found the issue an intriguing one, largely I think because of the pressure created by the general rule that a bill of lading signed by the master is an owner's bill. There is also of course the powerful pointer of cl. 17. However, I have not been able to satisfy myself that the stipulation that the carrier is USEL is to be shrugged off as ambiguous. What does it mean, and why has it been inserted, unless it is intended to have effect as the definition of the carrier? The term "carrier" is a critical term. It is not like an expression which might merely indicate that USEL was the operator of the vessels or the owner of the line. "Carrier" is the expression in which the party with the obligations to carry out the bill of lading contract is clothed. That is made clear by the bill of lading terms as whole, and by cl. 17 in particular. It is also made clear by the Hague[-Visby] Rules, to which the bill of lading was made subject by c1.2. Thus Art. I(a) defines "Carrier" as including "the owner or charterer who enters into a contract of carriage with the shipper". The bill of lading therefore stipulates that the carrier under the bill of lading is USEL. Although the master may be the servant of the owners, and cl. 17 says that the owners are the carriers, the only party which is identified expressly by name in the bill of lading as the carrier is USEL. For all that anyone reading the bill of lading knows USEL are owners, and there is no conflict between the stipulation that USEL are the carrier on the one hand and the signature for the master and cl. 17 on the other. I accept that that does not apply to Uvisco, who were aware that USEL were not the owners, but only the charterers of the vessel: but that is to go beyond a matter of pure construction on the face of the bill. ' In my judgment, therefore, the matter can be looked at in two ways. Either the three elements of the bill-the USEL stipulation, the signature and cl. 17-can be regarded as being consistent with one another, on the basis that because it is stipulated that USEL are the carrier, it must therefore follow that they are owners too; or the typed stipulation of USEL as carrier on the face of the bill must be regarded as superseding the printed provisions of cl. 17. After all, that clause does at least contemplate that, despite its terms someone other than the owners may be adjudged to be carrier. In the latter case, the signature for the master will take effect on the basis that the owners have authorized the agents who have signed for the master to contract in those terms. If the owners have authorized it, then the fact that the bill is signed by agents for the owners'- servant, their master, cannot compel the bill to be construed as an owners' bill. The rule is only that in the ordinary way a bill signed by or for the master will be an owner's bill, not that it must be.. [pg. 2941 ' In this case, there is nothing on the face of the bill to say who the owners (and therefore the carrier) are, saved for the clause stipulating, that USEL are the carrier. That, therefore, becomes the critical provision [pg. 295]. ' I conclude therefore that as a matter of construction, the bill of lading contract is with USEL not owners. [pg 2961 13. Reference must also be made to the Starsin litigation (Homburg Houtimport BV v. Agrosin Private Ltd. And others ("The Starsin)) for the reason that this matter (unlike The Hector) went all the way to the House of Lords and thus provides authoritative and definitive guidance in respect of the present issue. The judgment at first instance (reported at [2000] 1 Lloyd's Rep 85) was that of Colman, J. It is pertinent to note that the claims of the cargo owners against the shipowners were based in contract, as breach of the carriage of affreightment, and in the alternative also in tort on account of negligence. The claims related to different parcels of timber and plywood being carried
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on the Starsin, which were damaged en route. The ship was time chartered to Continental Pacific Shipping Ltd. ("CPS"). The bills of lading (which were the same in all material respects) contained an attestation clause worded similarly to that in The Hector (see above). The terms and conditions of carriage on the reverse side included an identity of carrier clause (cl. 33) as well as a demise clause (cl. 35). A demise clause is also a standard…
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