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Petitioner: Spectre Consulting Limited VS Respondent: MT "Everrich 6" & others
Court Name: Sindh High Court Judge(s): Muhammad Ali Mazhar Title: Spectre Consulting Limited vs MT "Everrich 6" & others Case No.: Admiralty Suit No. 05 of 2017 Date of Judgment:2017-10-12 Reported As: 2017 SHC 330 Result: Application Dismissed
Judgment Muhammad Ali Mazhar, J: This lawsuit has been brought under the Admiralty jurisdiction of the High Court Ordinance 1980. The plaintiff has entreated for the decree in the sum of US$ 874,161/- against defendant No.3 with a further request to pass directions that the LPG cargo on board defendant No.1 vessel may not be discharged till adequate security for the plaintiff?s claim is furnished to the satisfaction of Nazir of this court. 2. The evanescent facts of the case are that the plaintif fs are duly incorporated company under the laws of UK and they are engaged in the business of Liquefied Petroleum Gas (LPG). The defendant No.1 is a vessel which carried a cargo of LPG to Port Qasim. The defendant No.2 are defendant No.1 vessel?s owners and the defendant No.3 is Charterer of the vessel. The plaintiffs entered into a Contract on 02.06.2017 with defendant No.3 to purchase 7000-8200 M/T to ship the CFR to Aden, Yemen within 30-35 days. The plaintiff made advance payment of US$ 874,161/- to the defendant No.3 whereas the outstanding amount was to be paid upon issuance of Notice of Readiness ("NOR") at the Discharge Port by defendant No.1. The plaintiffs came to know that instead of arranging for the cargo to Aden, Yemen, the defendant No.3 planned to carry it to a Pakistani Port and sold the cargo. 3. The learned counsel for the plaintif f argued that clause 14.1 of the contract articulates that if the contract does not go through the deposit will be returned, however he candidly admitted that no arbitration proceedings have been initiated against the alleged breach. According to the contract, a Notice of Readiness by Master of defendant No. 1 vessel was sent to the plaintif f which indicated the cargo would be loaded on board the vessel MV Everrich 6?. This was also accompanied by a certificate of quality of cargo. According to Section 3 (2) (h) the phrase "any agreement" is wide enough to include even a contract of carriage which is not betw een the parties to the suit that is to say all that is required is that the claim should arise from a contract of carriage. In this case the vessel Everrich is the particular ship under a charter party between Defendant No. 2 and Defendant No. 3 and examination of the charter party would show that the cargo of plaintif f was to be carried to Yemen and plaintif f?s claim arises from the
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breach of this contract of carriage. He further argued that the plaintif fs have not filed this suit in rem at all but this is a suit in personam for the recovery of deposit paid to defendant No. 3. A perusal of the prayer in the plaint would show that the plaintif fs have not sought the arrest of the vessel at all nor the plaintif fs have filed any application for arrest of the vessel under Rule 731 of Sindh Chief Court Rules. The record shows that cargo was loaded on 10t July 2017 but the defendant No. 2 cancel led the bill of lading in favor of plaintif f unilaterally and issued fresh bill of lading on 29t August 2017 and also mentioned different Port of Loading to that of Bandar Abbas. He further argued that the plaintif fs are entitled to injunction under Section 94 CPC which is similar to Mareva Injunction and hence the restraint of the vessel from sailing from Karachi is fully within the ambit of the law . Judicial precedents quoted by the plaintiff 1. PLD 1990 Karachi 1 (Balagamwala Oil Mills (Pvt.) Ltd vs. Shakarchi T rading A.G. and others). 2. PLD 1986 Karachi 447 (Compagnie Continentale (France) S. A. vs. Pakistan National Shipping Corporation and others). 3. 2012 SCMR 1267 (C.V . "Lemon Bay" and others vs. Sadruddin and others). 4. [1988] 1WLR 1 145 (Mitsui & Co. Ltd. & another Vs. Flota Mercante Grancolombiana S.A.). 4. The learned counsel for the defendant No.1 and 2 argued that the suit does not fall under Admiralty Jurisdiction of High Courts Ordinance. Reliance of section 3(2)(h) of the Ordinance by the Plaintiff is irrelevant; the suit does not disclose any cause of action? against the defendant No. 1 or 2 and therefore, the said defendants are liable to be struck off; the interim order dated 31.08.2017 amounts to arrest? of the vessel, which relief can only be availed by the plaintiff in an action in rem and not in action in personam. Admittedly, there is no agreement relating to carriage of goods or use or hire of the ship. Clause 3(2)(h) of the Ordinance clearly states that the claim should arise out of agreement relating to the carriage of goods. The plaintiff has not produced or even alleged that any agreement ? e.g. bill of lading was issued in favour of the plaintif f and that the defendant No.1 or 2 have breached any of its obligation under the said bill of lading. The first bill of lading was issued naming the Defendant No.3 (charterer) as the consignee, there was no agreement for carriage between the plaintif f and the defendant No. 1 & 2. 5. The learned counsel for the defendant No. 3 and 5 argued that the plaintiff cannot possibly have any in personam claim against the defendants. The plaintiffs have conceded in the Rejoinder that they have invoked the admiralty jurisdiction in personam and not in rem. A vessel, which is not a legal person, cannot be impleaded as a defendant except in a suit filed in rem. The plaintiffs have submitted in their Rejoinder to CMA No.60/2017 that they have not moved any application for arrest under Rule 731 of the Sindh Chief Court Rules. However, the prayer restraining the movement of the vessel is for all intents and purposes and effectively an arrest of the vessel. The Plaintiff has sought to establish territorial jurisdiction of this court solely on the basis that the defendant No.1 vessel is in the territorial waters of Pakistan. However, the presence of the vessel in the territorial jurisdiction of the court only establishes territorial jurisdiction if the claim is in rem. It is an admitted fact that defendant No.3 is a company incorporated in the United Arab Emirates and does not have any office in or any other form of presence in Pakistan. Furthermore, the contract was admittedly not executed in Pakistan and the performance thereof was not supposed to take place in Pakistan. The plaintiff is a company incorporated in the United Kingdom; pursuant to the contract the LPG was to be delivered in Yemen. Advance payment was made by the plaintiff to defendant No.3 in UAE. The plaintif f alleges that the contract was breached by defendant No.3 which is denied by defendant No.3 in fact the plaintif f repudiated the contract for causing losses to defendant No.3 in excess of the amount of advance payment. The bill of lading was never issued in favour of the plaintif f but it was issued in favour of defendant No.3 and cancelled. So far as notice of readiness is concerned such Notice of Readiness was not addressed to plaintif f; a Notice of Readiness is a unilateral document and therefore cannot be a contract and in any event the Notice of Readiness was notice that vessel was ready for loading of cargo and not for discharge. It was further averred that pursuant to claus e 14 of the Contract, the plaintif f and defendant No.3 had agreed that all disputes and claims arising out of or relating to this agreement or the alleged breach thereof shall be submitted to the UAE High Court. Furthermore, under clause 15.1 of the contract, the plaintif f and defendant No.3 had agreed that all disputes arising in connection with the contract shall be broughth h
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for final settlement under the rules of Conciliation and Arbitration of the Dubai, UAE Chamber of Commerce and the place of arbitration shall be Dubai, therefore, this court also does not have jurisdiction because the plaintif f itself contractually agreed to adjudicate disputes arising under the contract in UAE. So far as the merits of the case, the learned counsel argued that under the contract, the content of propane in the LPG was supposed to range from 25- 35% and the content of butane from 75-65%. The plaintif f tried to force defendant No.3 to change the specification to maximum 30% propane. Emails evidencing this conduct of the plaintif f are annexed to defendant No.3 ?s Counter Affidavit. The plaintif f represented the intended port of discharge could handle a ship having a length of 159 meters but the defendant No.3 later found out that the maximum length of ship that could be berthed at Aden Port was 150m. The plaintif f after the vessel had been loaded changed this stance and started requesting cargo split in 2-3 ships as Port of Aden could not handle 8,000 MT cargo. Had the defendant No.3 sent by means of single LPG shipment of 8,000 MT, the ship would have to spend over a month discharging, leaving the Port terminal and going to outer anchorage until amount discharged taken up. This entire process would have required the vessel to remain at Aden for 90 days, and cause defendant No.3 incur over US$ 1,000,000 in freight and charter hire charges. Judicial precedents cited by the counsel for defendant No.3 and 5 (1). [1995] V ol.1 Q.B.54. The "Lloyd Pacifico. (2). 2002 CLD 936 (Messrs Masoomi Enterprises Pakistan (Pvt.) Limited. and others Vs. Messrs Ping Tan Fishery Company and 5 others). (3). 2002 CLD 926 [Karachi] (Jaffer Brothers (Pvt.) Limited Vs. M.V . Eurobulker II ?). 6. Heard the arguments. In essence, the confrontation congregated in the midst of plaintif f and defendant No.3 is the alleged contravention and breach of the contract for sale and purchase of Liquid Petroleum Gas (LPG) signed on 02.06.2017. The contractual quantity of commodity sold and purchased under this agreement was between 7000 to 8200 tons with variation of 10% minus-plus. The port of delivery of the cargo was Aden, Yemen. The plaintif f has filed this suit under Admiralty jurisdiction and for the purposes of determining the jurisdiction of this court, it is pleaded that the defendant No.1 vessel under the charter of defendant No.3 thus the lawsuit encompasses the provisions of Section 3(2)(h) of Admiralty Jurisdiction of High Courts Ordinance, 1980. Though this lawsuit in its extant and structure seems to have embedded for an action in rem but after filing the counter affidavit by the defendants, the plaintif f in their rejoinder filed to CMA No.61/2017, self-confessed that they have not set up this suit for an action in rem but for an action in personam which is permissible under Section 4(1) of the Ordinance. It is further avowed that the plaintif f has not pursued the arrest of the vessel under Rule 731 of the Sindh Chief Court Rules (O.S.). The record reflects that the plaintif f has filed two interlocutory applications i.e. CMA No.60/2017 under Order 39 Rules 1 and 2 read with Section 94 C.P.C with the prayer that the defendant Nos.1, 2 and 3 be restrained from discharging the cargo on board defendant No.1 vessel and the vessel itself be restrained from leaving territorial waters of Pakistan till a decision in this suit or upon furnishing adequate security for plaintif f? s claim. Whereas in CMA No.61/2017 moved under Order 38 Rule 5 read with Section 151 CPC the plaintif f concomitantly prayed that the LPG cargo on board defendant No.1 vessel be attached till further orders of this court. Nevertheless, the plaintif f in the rejoinder endeavored to express that this is a suit in personam and no application moved for the arrest of the vessel but if the injunction application is envisioned at one fell swoop, the plaintif f has in fact prayed for restraining orders against the vessel not to leave territorial waters of Pakistan till decision in the suit or upon furnishing adequate security for plaintif f?s claim. 7. Although the nomenclature of the application is not under Rule 731 of the Sindh Chief Court Rules (O.S.) but making a request for restraining the vessel not to sail is analogous and consonant to the virtual effect of its arrest which the plaintiff strived in this case. Anyway, under Section 3 of the Admiralty Jurisdiction of the High Courts Ordinance, 1980 this court has been conferred jurisdiction to determine the cases, questions or claims mentioned in clauses (a) to (r) likewise under Section 4 it is envisaged by what means the Admiralty Jurisdiction is to be exercised. It is clear from letter of the law that the Admiralty jurisdic tion of the High Court may also be invoked by an action in personam but it is subject to provisions of Section 5. In Subsection (4), it is further provided that in the case of any such claim as is mentioned in clauses (e) to (h) and (j) to (q) of Subsection (2) of Section 3, being a
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claim arising in connection with a ship, where the person who would be liable on the claim in an action in personam was, when the cause of action arose, the owner or charterer of, or in possessio n or in control of the ship, the Admiralty jurisdiction of the High Court may, whether the claim gives rise to a maritime lien on the ship or not, be invoked by an action in rem against that ship, if at that time when the action is brought it is beneficially owned as respects majority shares therein by that person or any other ship which, at the time when the action is brought, is beneficially owned as aforesaid. Under the same Ordinance, Section 5 deals with jurisdiction in personam of courts in collision and other similar cases. For the ease of reference, Section 5 of the Admiralty Jurisdiction of the High Courts Ordinance, 1980 is reproduced as under: "Jurisdiction in personam of Courts in collision and other similar cases.- (1) No Court shall entertain an action in personam to enforce a claim to which this section applies unless- (a) the defendant has his ordinary residence or a place of business within Pakistan; or (b) the cause of action arose within the internal or territorial waters of Pakistan; or (c) an action arising out of the same incident or series of incidents is procee ding in the Court or has been heard and determined in the Court. (2) No Court shall entertain an action in personam to enforce a claim to which this section applies until any proceedings previously brought by the plaintiff in any Court outside Pakistan against the same defendant in respect of the same incident or series of incidents have been discontinued or otherwise come to an end. (3) The preceding provisions of this section shall apply to counter claims, not being counter-claims in proceedings arising out of the same incident or series of incidents, as they apply to actions in personam, but as if the references to the plaintiff and the defendant were respectively references to the plaintiff on the counter-claim and the defendant to the counter-claim (4) The preceding provisions of this sections shall not apply to any action or counter-claim if the defendants thereto submits or has agreed to submit to the jurisdiction of the Court. (5) Subject to the provisions of subsection (2), the High Court shall have jurisdiction to entertain an action in personam to enforce a claim to which this section applies whenever any of the conditions specified in clauses (a) to (c) of subsection (1) are satisfied. (6) The claims to which this section applies are claims for damage, loss of life or personal injury caused by ships or arising out of collision between ships or out of the carrying out of or omission to carry out a manoeuvre in the case of one or more of two or more ships or out of non-compliance, on the part of one or more of two or more ships, with the regulations made under section 214 of the Merchant Shipping Act, 1923 (XXI of 1923)." 8. A significant peculiarity of an action in rem is that the plaintif f is allowed to commence the proceeding by going after specific piece of property , the ship or the cargo or certain other associated property . It is not a proceeding against any one person or another , nor does it deal with this or that man?s title to the thing (res) but is a legal device employed for satisfying, under conditions of seafaring life and exige ncies of international maritime transactions and the claim of a person who has suffered damage or injury . The proceeding commences by issuing the process on the ship and taking steps to arrest it, so that it may not move out of jurisdiction. The distinguishing feature of the action in rem has always been the ability of the maritime claim to proceed against the ship directly , which was regarded as the defendant, the ship being personified. Whereas the action in personam in Admiralty jurisdiction is of the same nature as ordinarily common law action commences by summons served on a defendant which is a person, natural or juridical and not thing (res). If the technical object of the suit is to establish a claim against some particular person, or to bar some individual claim or objection, so that only certain persons are entitled to be heard in defence, the action is in personam although it may concern the right to or possession of a tangible thing. An action in personam is an ordinary action as in common law courts. The judgment of the court is a personal one in the nature of a command or prohibition against the unsuccessful party . For exercising jurisdiction in action in personam, English statutes have engrafted certain restrictions in respect of collision in similar cases. The restriction applies to claims for damage, losses of life or personal injury caused by ships arising out of collision between ships, or out of the carrying out of or omission to carry out a manoeuver by one or more of two or more
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ships or out of non-compliance with the collision regulations. The action may be initiated either as action in rem or as action in personam, depending on conditions specified in the Admiralty law for each form of action. These forms of actions are not mutually exclusive; if conditions for both the forms of actions are satisfied, a plaintif f may take recourse to either of them or both of them, as he may find expedient. [Ref: Maritime Jurisdiction and Admiralty Law by Samareshwar Mahanty]. At this juncture I would like to quote an excerpt from the book "Admiralty Jurisdiction and Practice" Fourth Edition by Nigel Meeson and John A Kimbell" Paragraph 3.7- Page 88 as under: "The decision in The "Longford " was considered by the Court of Appeal in The "Burns" where the court had to consider whether a claim in rem against a ship owned by the London County Council was a claim against the London County Council which by statute had a limitation period of six months. Again this was a claim for damages arising out of a collision between two ships which gave rise to a maritime lien. Collins MR described the decision in The "Longford" in the following words: "It seems to me that that case in substance decides that there is a real, and not a mere technical, distinction between an action in rem and an action in personam....". Fletcher Moulton LJ said: "The very able argument of a counsel for the appellants rests upon the contention that the process of arrest of a vessel.... is merely a method of enforcing an appearance in an action. In other words, that an action in rem in no way differs in its nature from an action in personam; save that there is attached to it a means of compelling the appearance of the defendant by the arrest of the vessel. I am of the opinion that this view cannot be supported. The two cases upon which counsel have chiefly relied--The Dictator ' and The Gemma '--appear to me, when closely examined, to negative and not to support that proposition. They both of them treat the appearance as introducing the characteristics of an action in personam. In other words, it is not the institution of the suit that makes it a proceeding in pers onam, but the appearance of the defendant. And further , I think that the contrary is conclusively established by the case of The Bold Buccleugh', supported and approved as it was by the House of Lords in the case of Currie v McKnight... I am, therefore, of the opinion that the fundamental proposition of the argument of the appellants? counsel fails, and that the action in rem is an action against the ship itself. It is an action in which the owners may take part, if they think proper, in defence of their property, but whether or not they will do so is a matter for them to decide, and if they do not decide to make themselves parties to the suit in order to defend their property, no personal liability can be established against them in that action. It is perfectly true that the action indirectly affects them. So it would if it were an action against a person whom they had indemnified... I do not think that we are entitled to suppose that there has been a change in the nature of the action in rem merely because the modern language of the writ by which it is now commenced is unsuitable to that which I think the authorities establish to be its real nature." 9. The starting point and or the nucleus of plaintif f's suit is encompassed Clause (h) of Section 3 of the Ordinance in which the jurisdiction confers likewise to this court to determine any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship. The agreement relied upon is fundamentally an agreement for sale and purchase of Liquid Petroleum Gas (LPG) in which certain modalities were settled between the parties for supplying LPG including the date of discharge of cargo at the designated port including the contractual quantity of commodity . On the contrary the learned counsel for the defendant No.3 pointed out certain lapses and breaches perpetrated by the plaintif f also. As a result, the cargo could not be shipped or discharged at the designated seaport. He also pointed out correspondence to put on view the controversy cropped up. It is an admitted fact that 23% payment has been made by the plaintif f in advance and balance 77% of the payment was to be made within 24 hours from the time of notice of readiness (NOR) by means of telex transfer to the seller's designated bank account. The plaintif f made much emphasis that NOR was issued on 10.07.2017 to all concerned parties though it did not convey the name of plaintif f but the name of ship was same with mentioned seaport Bandar Abbas. The certificate of quality dated 25.07.2017 is also attached with the plaint. The plaintif f pointed out nothing that the balance amount was paid to the plaintiff at the time of receiving notice of readiness. Nothing articulated by the plaintiff's counsel as to whether the balance amount was paid at the time of receiving NOR which
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was also one of the terms and conditions of the subject contract. Furthermore, the parties with their open eyes, volition and commercial wisdom agreed to other terms and conditions with regard to the nonperformance or breach of contract. Under Clause 15 it was unambiguously agreed that all disputes arising in connection with the contract shall firstly be settled amicably and should the parties reach no agreement then the case shall be brought for final settlement under the rules of conciliation and arbitration of the Dubai, UAE Chamber of Commerce. It is further mentioned in the same clause that findings as assessed by arbitration will be final and binding to both parties without any possibility of recourse and they also mutually agreed that the place of arbitration shall be in Dubai, UAE Court. In Clause 17.6 it is provided that in case of buyer's failure to comply with the payment schedule/terms or non- payment or non-receipt of funds by the seller on seller's nominated bank account as per clause 7.1(b), seller shall have the right, at its own discretion, to immediately without any notification to the buyer cancel the shipment and terminate the contract/sell the cargo to any third party. Though the counsel for parties attributed vice versa the breach of contract but they have not brought anything on record to show formal termination of contract by either side. The choice of forum with the arbitration clause in a particular country was made in an arm's length negotiations between the parties and absent some compelling and countervailing reasons it should be honored by the parties. The clause with regard to exclusive and non exclusive of the jurisdiction of the court of choice is not determinative but is most crucial factor and when question arises as to the nature of the jurisdiction agreed between the parties, the court has to decide the same on true interpretation of the contract. 10. According to Section 5 of the Ordinance, 1980, it is clearly provided that no court shall entertain an action in personam to enforce a claim to which this section applies unless the defendant has…
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