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Revision Application No. 25 of 1955, decided on 2nd March 1959,
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Charged by Shipping Com panies on cargo, over and above freight‑Not refundable ‑'Terms explained.
S. 32 Ground for interference by High Court‑Error in law‑Lower Court's failure to consider "very relevant material on record".
S. Nasir‑ud‑Din for Applicants.
Jan Muhammad for Respondents.
Dates of hearing : 16th and 17th February 1959.
This judgment will dispose of 14 revision applications Nos. 25‑33 and 49‑53 of 1955 filed under section 32 of the Karachi Small Causes Court Act against the decrees passed by the Chief Judge, Court of Small Causes, Karachi in 14 connected suits which had been consolidated and tried together because of the identity of the questions involved. The plaintiffs in these suits were persons who had shipped their cargo by three ships i.e. "Al Husaini", "Al Murtaza" and "Kong Shavon" from Karachi to Chittagong in the month of May 1952. "Al Murtaza" and "Al Husaini" belonged to the Muhammadi Steamship Company Ltd. who are defendants in 9 out of the 14 suits and "Kong Shavon" belonged to the Trans Oceanic Steamship Co. Ltd. who are defen dants in the remaining 5 suits. The ship owners had in all these cases charged Rs. 61 per ton as freight and had at the same time received Rs. 20 per freight ton for what was described as lighterage and demurrage. The claim in all these suits was for refund of the amount of Rs. 20 per freight ton charged as lighterage and demur rage on the ground that this amount had been realised by the shippers on the understanding that it was to be utilized for meeting the expenses of lighterage and demurrage and the balance was to be refunded, and no expenses for lighterage and demurrage had been incurred. The substance of the pleas of both the defendants was that although the amount was called lighterage and demurrage it was indended to meet the loss caused to the ship‑owners on account of the ships not getting a berth soon after their arrival at Chittagong and that the amount was not a refundable deposit but an additional charge which was really a part of the freight.
The issues framed which are relevant for the present discussion are the following:‑
"Issue No. 2.‑Are the amounts in suits received by the defen dants is refundable deposit
Issue No. 3.‑Are the lighterage and/or demurrage charges refundable deposits and do they not form part of the total freight "
Before discussing the evidence it would be proper to state the procedure which is‑adopted when cargo is shipped. After there is an oral agreement for the carriage of the goods there is drawn up a document called "Shipping Order". This document is a direc tion by the shipping company to the Commanding Officer of the ship on which the cargo is to be loaded to receive the goods but it contains at the same time some of the conditions that have been settled between the parties. The Shipping Order is shown to the Master of the ship by the agent of the shipper who receives the goods and issues what is called a Mate's Receipt'. This receipt is taken by the agent of the shipper to the office of the ship‑owner and then there is prepared the document which is admittedly to embody the contract between the parties i.e. the Bill of Lading'. It states the amount of freight and other charges received, the cargo shipped and all the terms of the contract between the parties. It is signed by the representatives of both the parties.
A ship remains standing in outer anchorage till it is allowed a berth or a jetty by the Port authorities. The time for which it is to stand at the berth is limited and if it exceeds that time demur rage is charged by the Port authorities. Cargoes are generally loaded and unloaded when the ship is standing at its berth. But when the ship reaches the port of destination it may discharge its cargo even when standing in the outer enchorage. In that case it uses small vessels called lighters and the expense thus incurred is called lighterage.
The plaintiffs produced no evidence whatsoever except for the receipt for the money which had already been produced and admitted' by the defendants. On behalf of the defendants Kazi Abdul Kadim, Incharge of the Freight Department of the Muhammadi Steamship Co. produced copies of the Shipping Orders and the originals of the Bills of Lading. He stated that "Al Husaini" had reached Chittagong waters on 10th June 1952 and allowed berth on 14th June 1952. It left Chittagong on 5th July 1952. "Al Murtaza" reached Chittagong waters on 11th June 1952, berthed on 26th June 1952 and sailed from ' Chittagong on 18th July 1952. Abdul Qadir, Accountant of Brigstocks Eduljee & Co. who are agents of the Trans Oceanic Steamship Company stated that intending shippers came to him for shipping space and for negotiating shipment of goods. It was he who had prepared the shipping order and received the amount. Rs. 20 per freight ton was charged as an out‑right payment and not as a refundable deposit. The terms 'lighterage and demurrage' were used to show and cover all detention charges. This amount was paid with the full agreement of the shippers. "Kong Shavon" had reached Chittagong on 14th June 1952 and had got a berth on 26th June 1952. Ahmad an employee of the firm Messrs Tar Muhammad who were Clearing and Forwarding Agents and who had acted as agents of one of the plaintiffs i.e. Messrs Dada Limited, was produced by the defendants. He stated that he did not know who had settled the conditions of the shipping order. He was the Sole Clearing Agent of Messrs D4da Limited. Ghulam Abbas Mooraj, Officer lncharge of the Freight Department of the Muhammadi Steamship Co. stated the procedure observed in shipping a cargo. He accepted that no extra charges had been levied in the case of " Al Mprtaza" and "Al Husaini" by the Port Authorities of Chittagong. He admitted that previously the rate was Rs. 46 per ton but was raised by the Ministry of Com merce to Rs. 61 partly in view of the congestion at Chitta gong Port.
The learned Sub‑Judge in decreeing the suits based his decision on the ground that as the amount had been paid for lighterage and demurrage it necessarily meant that it was a deposit which was to be used for the purposes of meeting lighterage and demurrage charges and any balance after deduction of those charges was to be returned. The learned Judge also referred to the fact that according to the statement of Ghulam Abbas Mooraj, Officer Incharge of the Freight department of the Muhammadi Steamship Co. freight had been raised by the Ministry 'of Commerce from Rs. 46 to Rs. 61 and one of the considerations for raising the freight was that ships had to stand for long times in the outer anchorage of Chittagong before they were allotted berths.
After going through the record I have come to the conclusion that the learned Judge erred in law in not taking into consideration very relevant material on the record. The particular errors which he committed Y will state at the end of my discussion of the evi dence. On a consideration of evidence I have myself reached a conclusion against the plaintiffs.
The exact contention of the defendants should be first appre ciated. Lighterage and demurrage which I have already explained are expenses which may be incurred by a ship which has to discharge its cargo. Ordinarily a ship‑owner will simply charge freight and will take a deposit for the purpose of meeting the expenses which may be incurred for lighterage and demurrage, or he may not receive a deposit and may, before delivery of goods, demand the amount which he has spent. The contention of the defendants is that loss was being caused to them by their ships standing for long times in the outer enchorage and therefore they decided to have a lump sum in lieu of lighterage and demurrage so that if they had to pay less they would retain the balance and if they had to pay more the shippers would not be liable for any amount.
At first sight it does appear to one that lighterage and demur rage refer only to expense which is to be incurred and if an amount was received by a ship‑owner as lighterage and demurrage he should refund whatever remained with him after meeting the expenses. While I was hearing the arguments I did find it difficult till a late stage to determine as to what was the truth of this matter for there were considerations both ways. But at the end of the arguments my mind became absolutely clear and now I have not the slightest doubt that the stand taken up by the petitioners is true on facts and that the respondents are only trying to take advantage of the fact that they have got a receipt for what is called lighterage and demurrage. I proceed now to state my reasons for the conclusions.
The first point to consider is the fact that these receipts are not receipts of deposits. There is no explanation as to why this fact did not appear in the receipts. In the case of Muhammadi Steamship Co. the amount is entered in the Bill of Lading under the column of freight. I reproduce below the relevant entry :‑
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" H S H M 500 Bags rapeseed Chittagong Each :‑Mds. 2 seer 1 @ Rs. 48 ner ton of 15 cwts. Rs. a. p. Five hundred only 2,380 10 0 * *sic Rs. 20 per freight ton for lighterage and demurrage. All bags subjected frequent handling before shipment 991 14 0 Ship not responsible for shortage of contents. Freight pre‑paid Total ...3,372 8 0"
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It will be observed that the freight is pre‑paid and this refers to the whole sum of Rs. 3,372‑8‑0. There is no mention here of the sum being paid as deposit. The shipping order affords even stronger evidence. The actual shipping order which was produced in this case has been lost but I have been supplied a shipping order by the petitioners which has been accepted by the respondents as a correct copy of the terms of their own shipping order and I have marked this as Exh. A. . Beneath the printed matter appear the following words in types:‑
"Rs. 20 per freight ton for lighterage and demurrage will be levied."
The word levied' is significant. It cannot mean a mere deposit. It means that which the company is going to charge.
A very important consideration is that under clause 16 of the Bill of Lading it was open to the ship‑owner to discharge the cargo while the ship was standing in the outer anchorage clause 16 runs
"16. The Company is to have the option of delivering these goods, or any part thereof, into receiving ship or boat, or craft, or landing them at the risk and expense of the shipper or con signee as per scale of charges to be seen at the Agents' office and is also to be at liberty until delivery to store the goods or at any part thereof in receiving ship, godown, or upon any wharf, the usual charges thereof being payable by the shipper or consignee. The company shall have a lien on all or any part of the goods against expenses incurred on the whole or any part of shipment."
In the present case the ships had been standing for a number of days in the outer anchorage. As already stated
"Al‑Murtaza" stood in the outer anchorage for 15 days, "Al- Husaini" for 4 days and " Kong Shavon" for 12 days. According to clause 16 they could discharge their cargo on the day when they reached Chittagong or on any subsequent day. In that case they could take cargo from Chittagong and be back for another voyage. All the time that they were standing in the outer anchorage they were incurring expense and wasting time. If they discharged their cargo while in the outer anchorage they would use lighters but the whole of the expense of the lighters would be borne by the respondents. In the present cases no lighter was used at all. The ship‑owners preferred that their ships should remain waiting rather than they should use lighters. Unless the agreement with the respondents was that they were to pay only lump sum this conduct is inexplicable. There was no reason why the ship‑owners, should just in order to save expense on lighters to the shippers incur expenses as well as damage by keeping standing in the outer anchorage.
It was not observed by the learned Judge that in some cases i.e. of the Trans Oceanic Co. payments had been made some days after the ship started and in one case even after the ship had left Chittagong harbour. In the suit filed by Tar Muhammad & Co. there are two receipts, one is dated 9th June 1952, and the other is dated 2nd August 1952. The ship had left the Chittagong Port on 7th July 1952, and as such the amount of the last receipt was paid long after it had left Chittagong Port. At that time it was very well known to the parties that no expenses had been incurred and yet Rs. 20 per ton were paid. There is no explanation at all of this on behalf of the respondents. In a number of cases the receipts are of a date later than that on which the ships left Karachi and such payment is more consistent with the case put forward by the defendants.
It is stated in the judgment of the lower Court and it is alleged before me by learned counsel who appears for the respondents that both the defendants Companies had taken concerted action in demanding Rs. 20 per freight ton but this concerted action becomes meaningless unless the Companies were actually charging this amount. The fact that the Companies were charging a uniform rate also supports their case.
The onus of the issues was on the plaintiffs‑respondents. It was their case that this amount was paid on the understanding that it was to be refunded after deducting expenses incurred for lighterage and demurrage. They produced, however, no evidence whatsoever. They did not produce the persons who entered into the contracts in dispute with the defendants. It is true that the words 'lighterage and demurrage' do refer to expenses. But the amount could very well have been paid as a lump sum towards meeting the expenses. Lighterage is an expense which the defendants may not have incurred if they chose to wait at the outer anchorage. Therefore there could very well be an agreement between the parties , that a sum was to be paid to the defendants on account ‑ of lighterage and it was left to them whether they use lighters or incur expense by standing in the outer anchorage. There was thus a duty case on the plaintiffs to lead evidence as to the understanding between the parties with respect to this sum and their failure to do so, particularly when the onus of issues was on them is a ground for an inference against them. On the other hand the defendants led oral as well as documentary evidence which does support their case. They even produced the agents of the plaintiff's agent themselves and those agents instead of supporting the case of the plaintiffs simply stated that they had not settled the terms.
Demurrage may mean that which is to be paid to the Port authorities but it does not necessarily mean that. It can even refer to what is paid by the shipper to the ship‑owner. I reproduce below an extract from Carver's Carriage of Goods by Sea to show what the term means :‑
" Meaning of demurrage.‑The charter, in addition to allowing certain times for loading and unloading, very fre quently also allows the charterer to occupy additional days, up to a certain number; and provides that he shall pay for them at a specified rate. The payment for these additional days is called demurrage.
Damages for detention.‑And strictly, that only is the meaning of demurrage ; but the word is also commonly used to denote damages which become due to the ship owner for the detention of the ship, in breach of the char ter party, or bill of lading. Such damages may become due in addition to demurrage proper, as when the ship is detained during all the agreed days on demurrage, and longer. Or they may be payable without any demurrage proper being due, if the, charter party does not provide for days on demurrage."
The learned Judge relied on the statement of Ghulam Abbas Mooraj to the effect that previously the rate was Rs. 46 per ton and it was raised to Rs. 61 per ton in view of the congestion in Chittagong Port. But there is no reference to the time at which this took place and the statement does not negative the case put forward on behalf of the petitioners that there was further congestion after this and therefore they decided to charge Rs. 20 per freight ton extra. In any case we are here concerned only with what was the actual contract between the parties and there are good reasons for holding that the inten tion was to pay a lump sum in lieu of the expenses to be incurred for lighterage and demurrage. It had not been con tended before the learned Judge and it has not been contended before me that this charge was illegal. There is no doubt a .reference in the statement of Ghulam Abbas Mooraj to the B fixing of rate by the Ministry of Commerce but it has been alleged before me by the petitioner and not denied by the respondents that there was no order by the Government fixing any rate under the Shipping Act, 1947. The rate of Rs. 61 per freight‑ton referred to in the statement of Ghulam Abbas Mooraj was, in accordance with the allegation of the petitionors, a rate agreed to by the shipowners.
The findings of the learned Judge have been vitiated because (1) he did not refer to the contents of the shipping order wherein it is stated that this sum of Rs. 20 is being levied ; (2) he did 'not take into consideration the fact that in some cases money had been paid after "Kong Shavon" left Karachi and in one case even long after the ship hall left Chittagong ; (3) he did not take into consideration that it was open to the defendants to incur or not to incur the expenses of lighterage so that they could very well have taken a lump sum in lieu of lighterage; and (4) lie did not note in this connection that the shipowners had incurred no expenses whatsoever for lighterage thereby causing loss to themselves and gain to the plaintiffs (if the plea of the plaintiffs that this was a refundable deposit was correct).
It is urged on behalf of the defendants that the petitioners should have shown this amount as freight instead of lighterage and demurrage i.e. they should have added Rs. 20 per ton to the amount charged as freight if on account of congestion the ships had to wait at Chittagong at the outer anchorage for a long time. I do not agree that this was an altogether improper way of doing it because if they showed the whole of Rs. 81 as freight they may become entitled at the same time to any charges for lighterage. If they actually spent any amynt on lighterage they would under the law he entitled to realise this sum from the shipper in addition to the freight charged. It may also be that they did not want to show this sum as freight because they would be increasing their freight rate and as the rate of freight is subject to control by the Government it may be reduced. But the intention with which they made the charge in this form is not material because I am only concerned with what the contract was between the parties. There has been no attack on the legality of this contract before me.
In the result all these revision petitions succeed and I set aside the decrees passed by the learned Chief Judge of the Small Causes Court but leave the parties, under the circumstances, to bear their own costs throughout.
A. H. Petitions accepted.
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