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Petitioner: PREMIER INSURANCE COMPANY OF PAKISTAN LTD. and another VS Respondent: KARACHI JUDGMENT
Court Name: Sindh High Court Judge(s): Muhammad Faisal Kamal Alam Title:PREMIER INSURANCE COMPANY OF PAKISTAN LTD. and another vs KARACHI
JUDGMENT
Reported As: 2017 YLR 1551 Result: Suit decreed Judgment JUDGMENT ' MUHAMMAD FAISAL KAMAL ALAM, J.---Both the Plaintiffs are Insurance Companies and as per their pleadings, the Plaintiffs in course of their business had insured a vessel, viz. M.V. "SAFINA-E-SIAHAT" (subject ship) owned by Pan-Islamic Steamship Company Limited {the shipping company). According to averments of the plaint, subject ship was insured for a total sum of Rs, 4.8 Millions in the following proportion: i.70% by Plaintiff No,1, and, ii. 30% by Plaintiff No,2. ' The Insurance Policy has been ,exhibited as Ex. 8/24. 2. The . Defendant No,1 (Karachi Shipyard and Engineering Works Ltd) is engaged in building and repairing of Ocean going vessels, whereas, Defendant No .2A. E. G Tele funken Pakistan Limited, for reference sake be referred to as AEG, was also associated with Defendant No,1 in carrying out the repair work of subject ship, which included over hauling of generator(s). 3. The incident of fire occurred when the subject ship was dry docked at the premises of Defendant No,1, that is, the subject vessel/ship was in a dry dock a basin like structure which is large enough to admit a ship for repairs. Eventually the above ship was sold as it did not remain sea worthy. 4. The Plaintiffs settled the insurance claim of above named Shipping Company, which had insured the above ship with the Plaintiffs. However, when the present Defendants were called upon to make good the loss, they denied the liability while refusing to accept the claim of the Plaintiffs, which led to filing of the present action against Defendants.
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5. The Plaintiffs in the present suit have pleaded that being insurers of the subject ship they had paid jointly a sum of Rs,26,00,000/[rupees twenty six hundred thousand]. Subsequently, in terms of letter of subrogation dated 16.7.1971, Plaintiffs lodged a claim against the present Defendants for their purported negligent acts, which resulted in extensively damaging the subject ship. The Plaintiffs also invoked the famous doctrine of 'Res Ipsa Laquitur'. (the things speak for themselves) Following relief is claimed in the present proceedings by the Plaintiffs against Defendants jointly and severally: "(a) Rs, 27, 96, 446.30 together with interest thereon at the rate of 10% per annum with monthly rests from the date of the suit till payment to be divided between the Plaintiffs in the ratio mentioned in paragraph (3) herein above; (b)Costs of the suit; and, (c)Any other/further/additional relief or reliefs, which this Honourable Court may deem fit and proper in the circumstances of the case". 6. The present suit has been contested by the Defendants who have filed their separate written statement. In addition to this, Pakistan Insurance Corporation also filed its written statement in the capacity of third party. From the divergent pleadings of the parties, following consent issues were framed by the court vide order dated 07.08.1974:-- "1. Is the suit as framed not maintainable and do the plaintiffs have no right to sue? 2.Are the Plaintiffs partners in the venture (as per para 2 of the written statement of defendant No,1, if so, is the plaintiffs' claims vitiated by Section 69 of the Partnership Act? 3.Had the co-plaintiff No,2 not validly issued cover in respect of the risk in question? 4.Was the vessel at risk while dry docked with defendant No,1? 5.Whether the findings of survey are sufficient to entail acceptance of the claim by the Plaintiffs? 6.Did the owner of the vessel had no clear title at the time of fire? If so, to what effect? 7.Was the ship in suit delivered by its owner to defendant No,1 and if so, on what terms and conditions or did the owners remain in control of the ship which it was dry docked with the defendant No,1? 8.How many fire incidents took place on the ship and who was responsible for them? 9.Was the loss actual or exaggerated and was it vitiated by lack of uberima fide? If so, to what effect? 10.Are the defendants or either of them liable for the claims in suit? If so, to what extent? 11.Whether any restoration work was carried out, if so, to what effect? 12.If the defendant No,1 is held liable to pay any damages to the plaintiff is such a decree liable to be passed against the third party because of the insurance policies alleged by the defendant No,] to have been issued in, their favour by the third party? 13.What ought the decree be?" 7.The evidence was led by the parties and in all ten witnesses were examined; seven witnesses adduced their evidence from the Plaintiffs side, whereas, three witnesses testified on behalf of Defendants. 8.Findings on the issues are as follows: ' ISSUE NO.1: Affirmative. ISSUE NO.2: Negative. ISSUE NO.3: As under. ISSUE NO.4: Affirmative. ' ISSUE NO.5. As under. ISSUE NO.6. Affirmative. ISSUE NO.7. Affirmative. ISSUE NO.8. As under. ISSUE NO.9. As under. ISSUE NO.10 Affirmative. ISSUE NO.11 Negative. ISSUE NO.12 As under. ISSUE NO.13 Suit is decreed. ISSUE NO.1. 9.Mr. Ikram Ahmad Ansari along with Mr. Ayaz Ahmed Ansari, the learned counsel representing Defendant No,1 (Karachi Shipyard) argued that if at all any cause of action arose, then the same could have been in favour of the Shipping Company, viz. Pan-Islamic Steamship Company Limited,
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which is not a party to the instant proceeding, and hence, the suit is not maintainable. Secondly, the present suit is also bad for non-joinder of party. These arguments were rebutted by Mr. Mansoorul Arfin, the learned counsel for Plaintiffs, inter alia, by inviting Court's attention to the Letter of Subrogation dated 16.6.1971 which has been exhibited as 8/23 and available at page No,317 of the evidence file, in which the above Shipping Company while acknowledging the payment of insurance claim by the plaintiffs in the sum of Rs,2.6 million, against a total insurance coverage of Rs,4.8 million, had assigned its rights, interest and claim in respect of the damaged ship, namely, "SAFINA-E-SIAHAT", to plaintiffs. The authenticity of this Letter of Subrogation is not in dispute. Scope and extent of such type of letter of subrogation has been explained by the Hon'ble Supreme Court as well as Division Bench of this Court in their decisions reported in PLD 1963 SC 663 (East and West Steamship Company v. Queensland Insurance Company) and 1991 CLC page 1270 (Pakistan through Secretary Communication, Islamabad v. Habib Insurance Company Limited, Karachi). It has been held, inter alia, that a marine insurance policy is assignable under section 130-A of Transfer of Property Act 1882, whereas, in terms of Section 135-A whereof, an Insurance Company after being subrogated, can sue the tortfeasor in its own name. Consequently, Issue No,1 is answered in affirmative by holding that the present suit is maintainable. ISSUE NO.2 10.The subject Insurance policy as Ex. 8/24, where under the subject Vessel/ Ship was jointly insured by two different Insurance Companies which are present plaintiffs, in the ratio of 70% (by plaintiff No,1) and 30% (by plaintiff No,2), respectively, which was subsequently settled by the plaintiffs by paying out an insurance claim of Rs,2.6 million to the above named insurant, and merely latter was insured by two different insurance companies/plaintiffs, but through a single Insurance Policy, does not mean that some partnership had come into existence. Prohibition contained in Section 69 of the Partnership Act, 1932, that a partner/ person of an unregistered firm cannot sue in the name of partnership firm, unless it is a registered one, does not apply in this case, as both the Plaintiffs are admittedly an independent corporate legal entities incorporated under the then Companies Act, 1913. Consequently, Issue No,2 is answered in Negative. ISSUE NO.3 11.PW2 [Adam Rangwala] and PW4 [Khan Sohail Sultan], the then senior officials of afore named Shipping Company in their deposition has categorically stated on oath that the subject Vessel was insured and the Insurance Policy is already on record as Ex. 8/24, which is for the entire fleet of the said Shipping Company including the subject ship/vessel. This Exhibit 8/24 comprises of a set of documents wherein names of both the present Plaintiffs are mentioned as Assurers [Insurance Companies] together with the proportion of risk they have undertaken, that is, 70% by Plaintiff No,1 and 30% by Plaintiff No,2. In addition to this, the unimpeachable testimony of said PW2 and PW4 proves the fact that the subject insurance policy was validly issued by the Plaintiffs. The above evidence was further corroborated by witnesses of Plaintiffs, viz. PW6 and PW7 respectively, whose statements about insurance coverage could not be outweighed by the Defendants. These witnesses who were officials of Plaintiffs, had specifically deposed that premium was duly paid by the Shipping Company, inter alia, in respect of the subject ship and when the latter was damaged by the fire incident, its insurance policy was subsisting. Nothing has come on record to show that issuance of the Insurance Policy by Co-Plaintiff No,2 was not valid. Hence, Issue No, 3 is answered accordingly. ISSUE NO.4 12.Mr. Yawar Farooqi representing the Defendant No,2 [AEG] has raised serious objections about the scope of subject insurance policy and contended that the fire incident in question was not covered as an insurance risk. He further argued that the subject insurance Policy was only effective when the subject vessel/ship was in the high seas and not when it was dry docked for repairs and
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maintenance. This submission however, is disputed by Plaintiff side. The evidence has been examined to decide this Issue; the testimony of P.W6 and PW7, namely, Fazal-ur-Rehman who was Chief Manager of plaintiff No,1 and Mohammad Ilyas [Manager Claims] of Plaintiff No,2 are of relevance. In their evidence, they have specifically deposed that in terms of Clause 23 of the Insurance Policy {Ex.8/24}, risk of fire was covered. The said P.W6 has also denied the suggestion that the subject insurance policy was only effective when the subject ship is sailing the high seas. Above witnesses were extensively cross-examined by defendants as well as third party, viz. Pakistan Insurance Corporation, but their testimony could not be shaken. In addition to this, the deposition of P.W-2, namely, Adam Rangwala who was the officer of the above named shipping line (Pan Islamic Steamship Company Limited) as well as the said P.W4 (Khan Sohail Sultan) who was the then General Manager (of aforesaid shipping company) have corroborated the deposition of above witnesses, - inter alia, by categorically stating that when the subject Vessel was dry docked at the premises of defendant No,1, it [the subject vessel] was insured. Additionally, the said witness(PW-4) has also produced relevant portion of ledger of his employer (Pan Islamic Steamship Company. Limited) and the entries dated 23.12.1970 in respect of payment of Rs,69,170.25 by cheque No,0879 drawn on National Bank of Pakistan in favour of plaintiff No,1, which has been exhibited as Ex.10/1 and payment voucher of same date which has been exhibited as Ex.I0/2, to corroborate his deposition by way of documentary evidence that the premium was also paid in respect of the insurance policy when the same had fallen due. 13.On the other hand, Mr. Mansoorul Arfeen has argued that witnesses P.W6 and P.W. 7 were lengthily cross-examined on this particular fact in issue, that the subject Vessel was insured when it was dry docked at defendant No,1, and no contradiction surfaced in their deposition that can go in favour of Defendants. It was further argued that the above named witnesses were not cross- examined on the above referred material part of their testimony and hence, the same goes unchallenged. Additionally, the documentary evidence produced has also negated the stance of Defendants. These documents were maintained by the said shipping company in the ordinary course of its business, and hence, Article 46 of the Qanun-e-Shahadat Order, 1984, inter alia, which relates to statements made in the ordinary course of business, is attracted to the instant case. In support of his contention , reliance was placed on a decision of Hon'ble Supreme Court reported in 2001 SCMR (Supreme Court Monthly Review) page 1700. 14.The subject insurance policy (Ex.8/24) is available in the case record and if the same is carefully perused, it can be concluded that the subject Insurance Policy in fact covered the risk in question. The subject insurance policy, as argued by plaintiff Counsel is a time policy and in this regard with his written arguments he has relied upon the research material contained in book of Marine Insurance, wherein the terms "time policy" is mentioned in the following words:-- <i>"A 'time policy is one which expresses the insurance as being for a specified period of time, as, for example, for twelve months commencing at noon 1st. January, 1980. It is usual also to define the time zone, as for instance, G.M.T. (Greenwich Mean Time). This kind of insurance is generally used in the case of hulls, etc. of vessels, though in exceptional cases a shipowner may prefer to insure his vessel for a particular voyage, under a voyage' policy."</i> Templeman on Marine Insurance (5th. Ed.) Its Principles and Practice (by R.J Lambeth) (From Page 2 of the book) ' Arnould. ' Law of Maritime Insurance and Average (16th. Ed) ' Vol. 1-page 356 - para(s) 511, 512 "511 - A time policy is one in which the period of risk is limited by time alone. ' In time policies the risk insured is entirely independent of the voyage of the ship (iter navis), and the policy covers any voyage whatever which the ship may make, and any loss or damage
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sustained within the space of time limited in the policy. (under lining for emphases). 'The above discussion on the Issue No,4 results in answering the same in Affirmative. ISSUES NOS.5 and 6 15. Lloyds Shipping is a well-recognized international entity and its witness. PW-1 (Qaiser Mirza Rizvi) produced a detailed survey report in respect of fire incident in question. The said report which is marked as Ex. X/1 (available at page 95 of the evidence file), was disputed by the defendants, primarily on the ground that it was prepared by one Mr. M.A.K. Lodhi but was signed by other surveyor J.F Crawford. The said PW1 explained that since said Mr. Lodhi the person who conducted the survey, had died in a road accident, therefore, another surveyor signed the report, who also was not available in Pakistan and gone abroad. Even otherwise, the survey was conducted by legal entities; Lloyds through its local agent Mackinnon Mackenzie Pakistan Limited. If one of its employees who later had met with a fatal accident, had prepared the Report which was subsequently signed by another qualified surveyor, did not vitiate the said Report. In my considered view it is a proper case, where Article 46 of the Qanun-e-Shahadat Order, 1984 provides a solution, and therefore, the said report cannot be discarded. Secondly, the defendant side did not dispute the contents of the above Survey Report nor any of its witnesses pointed out any misreporting or some other error in the said survey report, therefore, the same is to be taken into account being issued by an independent surveyor. According to this report, for making the subject vessel again operational, an estimated cost came to Hong Kong Dollar 3.67 million. Question here is not only of this survey report, which could be the basis for settling the insurance claim, but, even the Quotation given by defendant No,1 was also around Rs,4.2 million, which has been annexed with the covering letter of shipping company dated 4.2.1971(Exh.7/23). Most significant are the pleadings of the parties hereto; defendant No,1 (Karachi Shipyard) in paragraph 8 of its written statement has admitted the corresponding paragraphs of the plaint relating to the extent of damage and cost of repairing the subject ship, which came to Rs,2.8 million [at that relevant time]. 16.Onus is on the defendants to prove that aforementioned shipping company did not have a valid title in respect of subject vessel when the fire incident occurred. The voluminous documentary evidence and the deposition of various witnesses from both sides endorsed this fact that the shipping company was actually the owner of the subject vessel, even at the time of fire incidents. In this regard credibility of the testimony of PW-2 and PW-4 could not be impeached by the defendants, besides the fact, the above mentioned shipping company subsequently sold the subject ship to Hardware Manufacturing Corporation Limited. It is only defendant No,2 which questioned the ownership of shipping company vis--vis the subject vessel, though somewhat half heartedly, as appeared from its written statement, but eventually failed to prove this fact in evidence. Consequently, the Issue No,5, is answered accordingly, whereas, the Issue No,6 is answered in negative and against the defendants. ISSUE NO.7 17.In their respective written statement(s) both Defendants have narrated the fire incident, while tacitly acknowledging that employees of Shipping Company were not present there when the incident occurred. Primarily the Defendants in their pleadings have shifted blame on each other by pleading technical reasons, which fact also show that employees of both the Defendants were doing the job independently, but without being supervised by staff of the Shipping Company. It has been acknowledged by defendant No,1 in paragraph No,4 of its written statement that when the subject ship caught fire it was dry docked in the premises of Defendant No,1, but, in second part of its pleadings and also argued by Mr. Ikram Ahmad Ansari, that the subject ship always remained under the Effective possession, controland supervision of its owner (the said Shipping Company), however, this was categorically disputed by the Plaintiffs side. 18.The PW2 (Adam Rangwala) who was the then employee of the shipping company has
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specifically deposed that the subject ship was delivered to defendant No,1 for under water repairs and fitting of generator No,4. The said witness in his reply to a question from defendant's side has reiterated that ship was under the control of Karachi Shipyard, that is, defendant No,1. In his deposition, the witness remained consistent in his stance, inter alia, that in the generator room where repair work was going on, no employee of the ship was present. The said witness in reply to a question has further clarified that defendant No,1 did not allow the ship staff to be present on the ship when the repair work was going on. In addition to this the DWI (Iftikhar Ali Khan, the then senior supervisor of defendant No,1) did not dispute the suggestion that employees of subject ship could not have entered the premises of defendant No,1 without having been issued gate passes. On this specific issue the said witness (DW1) did 'not dispute when confronted with the gate passes issued by the Management of defendant No,1 to different employees of subject ship on different occasions. These gate passes and list of ship employees/crew are exhibited as Exh.15 to 16/A. 19. After evaluation of the evidence it can be concluded that it was not proved that the crew/staff of the shipping company was supervising the repair work. Rather it has been disproved that the crew of the subject ship was present at the time of fire incident. In this view of the matter, the Issue No,7 is answered in affirmative by holding that the subject vessel/ship was delivered/entrusted to defendant No,1 by its owner Pan-Islamic Steamship Company Limited and when the fire incident occurred on the subject ship, it was in the possession of Defendant No, 1. In addition to this factual determination, the rule applicable in the case of -Bailor and Bailee is also attracted here, as the said defendant No,1 had in fact was also acting as bailee, as admittedly, the subject ship was dry docked for repairs at its premises. Under these circumstances, the said defendant No,1 had an additional obligation to exercise due care and diligence while undertaking the task of repairing the subject ship. 20.In terms of Section 151 of the Contract Act, 1872, the bailee has to exercise due care and diligence in respect of goods bailed to him and under section 161, it is the bailee, who is responsible if the bailed goods are not returned, delivered or tendered on the proper time and if this default results in any loss, then it is the liability of bailee. In the Judgment of this Court-1988 CLC (Civil Law Cases) page 1381, the learned Judge besides holding that burden of proof is on bailee to show that he made appropriate arrangement for the discharge of his statutory duty, has also expounded principle of res ipsa loquitur (things speak for themselves). As an analogy, the learned Judge has also referred to Section 116 of the Customs Act, 1969, and held that the warehouse keeper shall be responsible for the custody of goods lodged in his warehouse. This concept of bailment was earlier explained in a Division Bench Judgment from the Indian Jurisdiction reported in AIR (All India Report) 1962 Madras page 244 (V 49 C 57) (Sri Narasimhaswami and others v. Muthukrishnalyergar). In the above case law reliance was placed on the principle laid down by English Courts, in which a distinction has been drawn between a gratuitous bailee, that is, involuntary bailee and bailee for reward or hire. The status of present Defendant No,1 in the instant suit is of bailee for reward. It has been held, that once a contract of bailment is proved and there is the entrustment of the goods with the bailee, then the loss of the subject matter of the bailment is a prima facie evidence of the negligence of the bailee. Conversely, in the present case onus is on Defendant No,1 to prove that the latter [defendant No,1] took all appropriate measures while carrying out the repair work and employed reasonable standard of care; but, in the instant case, the defendant No,1 could not discharge its burden of proof about not being negligent in performance of its contractual obligation towards the above named Shipping Company, which is subsequently subrogated by present plaintiffs. 21.In the above Judgment of Madras High Court, a relevant rule has been borrowed from Halsbury's Laws of England Vol. 2, 3rd Edition Page 117, which in my considered view would be beneficial to reproduce herein under, as the same is applicable to the present case:--
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"When a chattel entrusted to a custodian is lost, injured, or destroyed, the onus of proof is on the custodian to show that the injury did not happen in consequence of his neglect to use such care and diligence as a prudent or careful man would exercise in relation to his own property. If he succeeds in showing this he is not bound to show how or when the loss or damage occurred. If a custodian declines either to produce the chattel entrusted to him, when required to do so by the owner, or to explain how it has disappeared, the refusal amounts prima facie to evidence of breach of duty on his part, and throws on him the onus of showing that the exercised due care in the custody of the chattel and in the selection of the servants employed by him in the warehousing." ISSUES NOS.8 and 10 22.Since these issues are interconnected, therefore, the same can be disposed of by a common finding. Primarily these issues relate to cause of the fire incident that directly resulted in causing considerable damage to the subject vessel. On this particular fact exhaustive evidence was led by the parties. PW-2, PW-4 and PW-5 the then senior officers of shipping company were examined thoroughly. 23.In rebuttal by Mr. Ikram Ahmad Ansari, learned Counsel of defendant No,1, submitted that the present proceeding is collusive in nature for the reason that since at that relevant time subject vessel had already outlived its life, therefore, on one hand the employees of said shipping company and defendant No,2 (A.E.G) in league with each other intentionally caused the fire incident, and on the other hand, plaintiffs hastily paid the insurance claim, which otherwise was not payable. It was further argued by the learned counsel that evidence was recorded after many years of the incident in question and most of the depositions are hearsay, therefore, the evidence that has come on record lacks evidentiary value and cannot be relied upon. On the other hand, Mr. Yawar Farooqi on behalf of Defendant No,2 [AEG] has submitted that one of the most vital piece of evidence is the Report of Fazal who as a fitter was one of the team members of Defendant…
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