MUSHIR ALAM, J.--- Instant suit has been filed by the plaintiff for the recovery of Rs.41,22,00C/- from the defendant No. 1, a Partnership Firm and its partners i.e. Defendants Nos. 2 and 3 respectively.
Facts relevant for the disposal of this suit are as follows: 2.. The plaintiff appointed the defendant No. 1 as Custodian to store the Sugar imported by the plaintiff. It is claimed that, from February, 1988 to July, 1988, plaintiffs imported and entrusted High Quality 26,735 metric tons of Sugar, to the defendant No. 1 for storage and deliveries to the plaintiffs or their nominees against the delivery Orders.
According to the plaintiff out of the total quantity entrusted to the defendant 432.200 metric tons of Sugar was short delivered. The Surveyors of the plaintiff and their Insurance Company confirmed such short delivery. Plaintiff averred that, the defendants did not disputed the short delivery but, attributed short delivery, damages or loss due to flood and rain. According to the plaintiffs, in terms of clause 10 of the Agreement dated 13/7/1987, the defendants are liable to make good the losses. It was further pleaded that, such losses could be set-off against the pending bills and/or bank guarantees in terms of Clause 10 of the Agreement. It is the case of the plaintiffs that, defendant No. 1, being bailee of the goods, had not taken good care of the entrusted goods, as required under law. According to the plaintiffs, the defendants, to avoid the liability have asserted loss on account of heavy rainfall. It is further the case of the plaintiff that, the shortage was not covered under the Insurance Policy, as such, difference for the short delivery 'could not be claimed from National Insurance Corporation. Plaintiffs also" refuted the assertion of the defendants that, actual weight difference are minimal or that it occurred owing to piecemeal handling of the consignment and the quantity of shortage, falls within the permissible limit of tolerance allowed by the plaintiff. The plaintiffs have claimed the value of short delivery in Para. 10 of the plaint as follows:-.
"That the plaintiff is entitled for the loss/shortages suffered by it and to collect and recover from the defendants the market value/price of the aforesaid quantity of Sugar short delivered to the plaintiff. The plaintiff is, therefore, entitled to recover and receive fro the defendants the following amounts: Total shortage 432,200 M/Tons @o Rs.10,000/- Per M/Tons Rs. 43,22,000.00 Less the Bank Guarantee Rs.02,00,000.00 Amount Recoverable Rs.41,22,000 defendants filed joint the written-statement and so als made Counter claim for Rs.3,38,162.00.
3. Defendants denied that, they were appointe 'Custodian in terms of Agreement dated 13.7.1987. I was asserted that, the defendants were awarded Custodianship in respect of sugar stored at Rashid Godown, vide letter dated 20.1.1998, and in two other godowns of (i) Usman Textile Mills, and
(ii) Dost Muhammad Cotton Mills, through another letter dated 4.7.1988.
4. Defendant asserted that the plaintiffs without consulting the defendants hired the above godowns. It was pleaded that, the choice of the godowns was not proper, more particularly, Rashid Godown beside situated in low-lying area was unproduced against flood-water. It was asserted that, the quantity entrusted to the defendants was short. It is the case of the defendants that, shortage in Rashid Godown was negligible i.e. 1.6% of the total quantity stored. As regard Dost Muhammad Godown, shortage was barely 0.17% which percentage, according to defense is permissible limit of tolerance. It was further pleaded that the sugar stored in the Rashid Godown was affected by rain and flood and the negligible shortage was on account of frequent handling bursting and re-stitching of bags with the resultant spillage which loss is unavoidable and accepted as per trade usage. It was further claimed that the plaintiffs though entered into an agreement to engage the defendant as Clearing and Forwarding Agent but his services as a Clearing Agent were not availed. Instead, suit consignment was got cleared and forwarded for storage by plaintiff through other Clearing and Forwarding Agents. It was pleaded that, damage/loss to the bulk of goods stored, occurred due to Act of God. According to the defendants, they took all precaution and care as a person of ordinary prudence would have taken, of his own goods under the given circumstances.
5. In paragraph 4(i) to (viii), of their point written- statement. Defendants outlined the measure and steps take by them to avert and mitigate the loss. It was pleaded that, damaged was caused due to heave rainfall with hailstorm and overflow of drain-water at the entrance gate. Nearly 3 to 4 lower layers of stacks of sugar bags were damaged due to flood-water and, the top-layers of sugar bags were damaged by the leakage of rainwater from the ceiling and broken ventilators.
Defendant without loss of time on the following date i.e. 18.7.1988 reported the situation to the plaintiffs.
Resultantly, National Insurance Corporation (NIC) on the instruction of the plaintiff appointed their Surveyors to assess the loss. At the same time, plaintiffs also directed the Godown owners to, repair the Godown. It is further pleaded that the Insurance Surveyors, to assess the damage separately, desired for separation of the bags damaged by floodwater and rainwater but, the plaintiff declined such exercise. Instead, the plaintiffs settled the claim with the Insurance Company on or about 31.8.1989.
6. Further defence of the defendants was that, in fact, no actual weighing was done at the time when the goods were received in defendants custody. It was asserted that, the plaintiff had alleged negligence after almost one and a half years from the date of actual loss. It is also asserted that loss, if any were to be made good by the Insurance Company and since the plaintiff had already settled whatever loss they suffered from the Insurance Company therefore, there appears to be no justification to claim any further loss from the defendants.
7. As regards counter claim, it was asserted that, the plaintiffs have illegally encashed the Bank Guarantee, which were not given in respect of subject contract. Secondly, the defendant No. 1 have not been paid rental for, three (3) months amounting to Rs.75,000,00@ of Rs.25,000/- per month.
Defendants also claimed mark-up on counter claim amount from the date of suit till payment.
Following consent issued were adopted on 4.41993:-
(1) Whether defendant No. l's appointment by the plaintiffs as 'Custodian' of plaintiffs' good was made under Agency Agreement dated 13.7.1987 and letter dated 20.1.1988?
(2) Whether letter dated 20.1.1988 is independent of Agency Agreement dated 13.7.1989 and whether the said letter alone determines rights and obligations cf parties to suit?
(3) Whether damage/loss to 'goods occurred due to negligence of the defendant No. 1 as alleged?
(4) Whether damage/loss to goods stored in Rashid Godown occurred due to alleged heavy rains and leaking roof and due to its location in law lying area in the circumstances alleged in para. 4 of the written-statement?
(5) Whether loss in goods stored in 4 Godown of Dost Muhammad and Usman was caused due to alleged frequent handling and bursting and re-stitching of bags and was allegedly negligible and acceptable by trade usage as alleged in para 7 of the written-statement?
(6) Whether the plaintiff failed to take Alleged steps as stated in para 6 of the written-statement?
(7) Whether plaintiff's settlement with insurer was premature and collusive?
(8) Whether the plaintiff's unlawfully encashed bank guarantee of Rs. 2 lac as alleged?
(9) Whether the plaintiffs failed to pay custodianship charges for the months of January, February and March 1990 to the defendant No. 1 as alleged?
(10) To what amounts, if any are the plaintiffs entitled against the defendants?
(11) To what amount, if any are the defendants entitled against the plaintiffs in respect of their counter claim?
(12) What should the decree be?
Plaintiff in support of its claim examined its manager DSP, Mr. Manzar Saleem. The defendant examined Muhammad Sami-ul-Haq one of the partner of defendant No. 1 Firm.
Findings on the afore-mentioned issue ad-seriatim are recorded as follows:- Issues Nos. 1 and 2: Both the issues being inter-related are decided together.
9. It is the case of the plaintiffs that defendant No. 1 was appointed under an Agreement dated 13.7.1987 (Exhibit No. P-5/1). Mr. Mamnoon Hassan, learned counsel for the plaintiff, contended that in terms of the Agreement (Exhibit No. P-5/1) the defendant No. 1 was appointed as a Clearing Agent and under the terms of the agreement defendant No. 1 was also responsible to provide storage facility for the imported consignment and give delivery to the plaintiffs' Representative.
10. It was asserted by Mr. Mamnoon Hassan that, when the consignment arrived at Karachi, it was entrusted to the defendant under separate letter dated 20.1.1988 (Exhibit No. P.5/2). According to him such entrustment was in continuation of the Agreement Exhibit P.5/1.
11. Mr. Hamza I. A.I, learned counsel for the defendants controvert the stance of the plaintiffs. It was urged that the appointment as a Clearing Agent is entirely different from the appointment as a custodian of the subject goods. He contents that, the plaintiff did not engaged the services of the defendant No. 1 as Clearing Agent. Subject consignment was got cleared through other Clearing Agents. He therefore, argued that terms and conditions of the Exhibit P-5/1 cannot be invoked. Mr. Hamza, stressed that defendants' services were availed only as custodian of sugar, in terms of Exhibit P.5/2. The plaintiffs hired the Godowns of their own choice, without consulting the defendants. He, therefore, argued that, had the appointment as a custodian been in terms of the Agreement dated 13.7.1989 (Exhibit No. P.5/1) then subsequent appointment through (Exhibit No. P.5/17) would have. Referred to the above Agreement. Whereas, in Exhibit No. P.5/17 reference is made to a letter dated 20.1.1988 i.e. Exhibit No. P.5/2. It was therefore, asserted that the defendant was appointed and acted as custodian in terms of Exhibit No. P.5/2, dated 20.1.1988 and Exhibit No. P.5/17, dated 4.7.1.988.
Heard the arguments and perused the record.
12. In order to appreciate the arguments of both the learned counsel examined of Agreement dated 13.7.1987 (Exhibit No. P.5/1) would be beneficial. The recital reads as WHEREAS the TCP has decided to award its contract in connection with the clearance of the imported goods to the Clearing Agents named above'. In Clause (1) it was required that the 'Clearing Agents should be in lawful possession of Godown space of not less than 10.00 square feet'. It was further provided in Clause (2) that, 'Godown for storage space shall being conformity given in Annexure I. Specification as per Annexure I gives standard specifications for various categories of goods. For the category of sugar the specifications were, covered space ensuring complete protection, against sun and rain'.
13. Under Clause 4, thereof, it is provided that the Clearing Agent shall remove the goods to Godown or KPT warehouse......... For storage as and when required by TCP's ....... And give delivery to the nominee......... Other terms and condition required clearing agent to main. Avery Weigh scales, fire-fighting equipment obtain bonded warehouse. Obtain insurance cover for the risk of damage to the Godown ACQUIRED by Him. Clause 10 reads 'The Clearing Agent shall be liable to indemnify the TCP against all damages/shortage occurring IN HIS GODOWN for any reason whatsoever shall be assessed by. TCP....
It has come on record that, the plaintiffs did not engage the defendant No. 1 as their Clearing Agent in respect of subject goods, nor the goods were stored in the warehouse of the defendant No. 1. In cross-examination, witness of the plaintiff had stated that, "1 see Ex.P.5/2 and say that this was a bonded warehouse. It is correct that the defendants were appointed custodian in respect of sugar cargo only". The witness further admitted.
"We appointed Shadab Corporation, as our dealing and forwarding agents. It is correct to suggest that two other vessels had subsequently arrived at the Karachi Port with sugar cargo, which was imported by us. Those were M.V. Belley and M.V. Bahia. The clearing agent of former was Mobco and of the later was Shandab Corporation."
The witness, further deposed that:- "It is correct to suggest that initially we appointed defendants as custodian of the sugar cargo which was to be stored in the Godown of Rashid Textile Mills Limited. I see Ex,P-5/17 and admit its contents".
Recital in the Agreement, Exhibit P-5/1, specifically provided that, the agreement relates to the appointment of defendant No. 1 is as clearing agent only. Clause (2) of the said Agreement prescribe s the specifications for the godowns. Clause (10) encompasses the indemnity clause against all damages/shortages/losses occurring in HIS godowns, for any reason whatsoever and recovery of such damages/shortage/loss against the Bank Guarantee and pending bills.
14. It has come on record that, the plaintiff acquired all the Godowns themselves. It is, therefore, not the case of the plaintiffs that, the Godowns were not of the specification, as provided in the Agreement (i.e. Exhibit P-5/1). Since, the plaintiff did not engaged the services of the defendant No. 1 as Clearing Agent (Recital). Nor the defendant removed the goods.To the Godown Clause 4. Nor the (defendant No. 1 Clause 9) obtained the insurance cover. Nor the damages/shortages/losses occurred in HIS godowns (Clause 10) as provided for under Agreement Exhibit P5/1.
15. As noted above, plaintiffs' witness admitted that, the defendant No. 1 was appointed as custodian in terms of Exhibit P-5/2, dated 20.1.1988 for Rashid Textile Mills SITE. In respect of Godowns of Usman Textile Mills and Dost Muhammad Cotton Mills Limited, as per Exhibit P-5/17, dated 4.7.1988.
16. Examination of last mentioned appointment of custodian i.e. Exhibit P-5/17 shows that, it makes a reference to the letter dated 20.1.1988 (Exhibit P-5/2). Such fact fortifies the contention of Mr. Hamza that, had the appointment of custodian been made in terms of Exhibit P-5/1 then, in subsequent appointment as custodian, reference should have been made to the agreement (Ex.P- 511) and not to Ex.P-5/2.
Issue No. 3:- Admittedly, damage to the sugar was caused due to rainwater and hailstorm. Short delivery is also not disputed.
"Section 151. Care to be taken by bailee.-- In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk; quality and value as the goods bailed.
Section 152. Bailee when not liable for loss etc. Of thing palled.-- The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed if he has taken the amount of care, of it described in Section 151."
From a bare perusal of above provisions, it is apparent that, the moment goods are delivered to the bailee, he assumes duty to take as much care of the goods bailed to him, as a man of ordinary prudence would have taken of his own goods. Unless, it is provided otherwise, by way of any special contract, a bailee cannot be held responsible for the loss, destruction or deterioration of the goods bailed. If the bailee is able to demonstrate that, he had taken as much care of the goods bailed to him as a man of ordinary prudence would have taken. Then even if the loss, destruction or deterioration has taken place, he gets statutory exoneration from any such liability by virtue of Section 152 of the Contract Act.
To foist the responsibility and impose liability as a bailee, it is to be shown that, there was .a contract of bailment either express or implied between the parties. That a loss, destruction or deterioration of the goods bailed has occasioned and lastly, the bailee had not taken as much care of the goods bailed to him as a man of ordinary prudence would have taken under a given circumstances.
As held above, the relationship between the parties was that of bailor and bailee. The contract of bailment was expressed i.e. In writing (Ex.P-5/2 and Ex.P-5/17). It is admitted position that loss had occasioned on account of rain and flood-Water.
Admittedly the plaintiff themselves acquired the godowns, where the subject sugar was stored. The specifications of the Godown as were considered suitable for the purpose of storage of the sugar are specified by the plaintiffs themselves in the Annexure 'I' to the Agreement (Exhibit No. P-5/1) i.e. Covered space ensuring complete protection against sun and rain. In all fairness, since the plaintiffs hired the godowns, it is but legitimate to presume that, the plaintiffs acquired the godowns as per their own specification . In terms of Section 151 of the Contract Act, the degree of care, which a bailee assumes is that of a man of ordinary prudence. No hard and fast rules could be outlined for fixing of such degree of care. It may vary from case to case. The degree of case, is also dependent on the nature, description, quality, and quantity of goods and so also nature of bailment contract.
17. Terms And conditions of bailment are recorded in Ex.P-5./2, which inter alia provide for receipt of the consignment,. Proper stacking, 'keeping account, storage of damage bags and sweeping, re- stitching and re-filling torn and -damaged sugar bags. Liaison with customs, submission of periodical reports, arrange security, notify and repairs, etc. Required in the Godown. To follow other direction as may be given by the TCP from time to time and remuneration for the services.
18. Since the terms and conditions of bailment were reduced in writing, the responsibility and or liability of the bailee would be governed under the terms set out in Ex.P-5/2. No special terms and condition, as regard the consequences for the loss if any, were stipulated that may foist the liability for loss, destruction or deterioration on the bailee as required under Sectiol 152 ibid..
19. Ordinarily a bailee is required to ensure that, (i) all reasonable precaution has been taken to avoid a risk, which reasonably could be foreseen. (ii) in case where a contingency has arisen then, it is to be seen with what diligence and promptitude the bailee has acted to avert or minimize the loss. (iii) the promptitude he showed to apprise the bailor of the contingency encountered by him, to seek his opinion as to further course of action. (iv) To what extent bailee complied. With the directions of the bailor after the bailee notified the contingency encounters by him.
20. When loss, destruction or deterioration has occurred initial burden is on the bailee who is custodian of warehoused goods to prove that he had taken such care as was expected from a person of ordinary prudence in similar circumstances. Once such burden is discharged, then the burden shifts on the owner of the goods to prove that the custodian of the goods was negligent in discharge of his statutory duty to take care of the goods entrusted to him.
20. Before examining the degree of care and precaution taken by the bailee. It is to be seen as to what was the contingency or situation in which the baile3 was required to act, and then to see whether under such contingency he acted in a manner expected from a man of ordinary prudence.
21. It has also come on record that, on 17.7.1988, there was heavy rainfall in Karachi. The defendant, No. 1, on the very next day through letter dated 18.7.1988 (Exh.P.5/18) notified the plaintiff of damage caused by the rain and flood-water.
20. Now it is to be seen as to with what promptitude and prudence the defendants encountered and faced the contingency and how they acted to avert the loss and damage.
21. In this case, the bailee, defendant No. 1 asserted that on the fateful day, on account of heavy rainfall and gushing of water they acted as a person of ordinary prudence would have acted under the given situation. Defendants categorically stated in Para 4 of the written-statement that the damage/loss to the bulk of good stored occurred due to the Act of God and elements of nature namely rain and flood-water. Against which, the defective Rashid Godown provided wholly inadequate protection. It was asserted that defendant No. 1 having complied with all its obligations under the letter/contract of 20.1.1988 particularly and generally having taken as much care of the goods bailed as a person of ordinary prudence would under similar circumstances taken care of his own goods. Defendants detailed the steps taken by them in sub-paragraph (i) to (viii) of Para 4 of the written-statement.
25. One of the obligations of the bailee in terms of the Ex.P-5/2 as referred to above was "to intimate the bailor about any repair etc. Required in the Godown for proper storage/safety of TCP cargo".
26. Defendants caused the production of letter dated 11 February, 1988 (Ex.No. P-5/16) through the plaintiffs' own witness. Ex.P-5/16, recounts the telephonic conversation that the defendants had with the plaintiff who were informed, (1) the Godown has not properly been cleared, (2) the floor of Godown is damaged at 12 places, (3) 14 (Fourteen) windows panes are missing, and (4) service toilets are out of commission.
27. There is nothing on record to show that, the plaintiff paid any heed to the defects pointed out by the defendants, in the Godown or that, the plaintiff took any remedial measure to carry out the repairs or remedy the defects pointed out by the defendant No. 1.
28. On the very next day of natural calamity, the defendants through letter dated 18.7.1988 (Ex.P- 5/18) intimated the plaintiffs: "that as a result of heavy downpour yesterday afternoon during deliveries the rainwater entered into Rashid Godown through main gate damaging bottom layers of sugar bags. The roof of the Godown also leaked at various places.
Further, following the conditions prevailing in HYDERABAD and the situation in some of the areas of Karachi including S.I.T.E grew tense disrupting the normal activities, nevertheless all possible steps were taken to sweep out the water as far as and as quickly as possible to minimize the loss/damage".
"It has been brought to our notice by the custodian of the Godown M/s. Murshid Enterprises, Karachi that as result of recent heavy rains in Karachi, the rain water entered through main gate into Rashid Textile Mills Godown, and damaged bottom layer of sugar bags. The roof of the Godown also leaked at the various places. However, all possible steps were taken to sweep out the water to minimize the loss/damage.
Plaintiffs accordingly appointed the Surveyors to carry out the survey and assess the loss. The Report of Surveyor dated 24 September, 1989 (Exhibit No. P5/38) is relevant for the purpose of determining the degree of care taken by the defendant No. 1 as bailee. Report reads as followers:- "On 17th July, 1988 a very intensive rain with hailstorm hit SITE area Karachi around 0900 hours. It rained whole day almost non-stop until next day. The meteorological report as of 17th and 18th July, 1988 is attached to this report as Annexure 'A'.
According to the eye-witnesses, the water from the roadside rushed into the Godown through the main gate. Due to the 4ieavy rainfall the drain, which runs between the boundary wall of the Godown and road also overflow and it, contents also joined the water from the roadside and entered into the Godown. The situation soon turned into a flood due to the fact that the level of the floor of the Godown was lower than the roadside. Further there was neither any obstruction being constructed nor any precautionary speed breaker type slope was built at the Godown entrance.
Hence the water easily penetrated until the far ends of the Godown. There were approximately 431,000 bags stored at the Godown at the time of flood and almost last three to four, bags of each row of stacking was in the water. Besides floodwater the rainwater also caused the damage to the bags; through the broken ventilators, joints and the ceiling. So much so that the top two or three bags of all the rows at the rear ends were fully soaked with the rain water.
IMMEDIATE PRECAUTIONARY MEASURES TAKEN: '
The flow of water into the Godown was so sudden and intense that the Custodian representatives and the labourers present inside the Godown became panicky and did whatever they could do to prevent further damage to the cargo.
The representatives of the custodian immediately erected some sort of temporary barrier with bricks and same and whatever else they find at the entrance of the .Godown. Whereas some labourers when could not find any other thing, stuffed and stacked sugar bags over the flood- water at the entrance as well as all along the drive way. While the measure did prevent more water from entering other parts of the Godown, but it also causes loss of contents of those bags which were placed at the entrance and the drive way of the Godown, as the water washed away not only the sugar contents but also in some cases the plastic bags as well.
As soon as the rain stopped the Custodian representatives started pumping out the water from the Godown but those bags which were soaked continue loosing their sugar contents due to the change of atmospheric conditions of the cargo.
Value at the Risk......... Delivery of sugar as sound bags after rains and flood ........ Stocks in hand as on 21/9/1989._ .....
Laboratory Test........... Joint Survey The undersigned surveyors representing TCP had attended various joint surveys held with the underwriters i.e. NIC's surveyors M/s. Republican Surveyors and Khalid and Associates. On 31st August, 1989 a final joint survey was held and NIC surveyors and officials agrees to compensate TCP to the tune of about Rs.900,000.00 covering a loss of about 90.000 M. Tons of cargo due to flood which in our opinion was a fair and just settlement.
However, since damaged caused due to rain was not covered in the policy hence no compensation was considered on those bags damaged due to rainwater.
ASSESSMENT OF LOSS: After very careful inspection and checking the cargo was found damaged and lost due to flood and rain in four categories as per details mentioned in Annexure 'B' which become an integral part of this report.
This report comprises of four pages including one Annexure duly stamped and signed. Any page, which does not bear the stamp of this office and undernoted initial/signature, is considered invalid.
The above survey represents our findings at the times of inspection only in accordance with the relevant date, information available at the time of survey and is ISSUED WITHOUT PREJUDICE TO THE RIGHTS OF WHOMSOEVER CONCERNED."
It may be noted that till submissions of the Report dated 24.9.1989 (Ex.P-5/38), settlement of the claim, the plaintiffs did not raise any demand. Plaintiffs for the first time through Ex.P-5/3, P-5/4 and P-5/5, called upon the defendant No. 1 "to explain the reasons with evidence for the shortage and why recovery should not be made from you for the quantity of Godown shortage in terms of Clause 2(c) of our agreement with. You".
As noted above, burden of proof in terms of Section 151 of the Contract Act initially is on the bailee to show that he had taken proper steps and measures as may be expected from a person of ordinary prudence under the similar eventually as was confronted by the bailee.
From the evidence discussed above, more particularly Ex.P-5118, P-5/20, in both the letters addressed to the Godown owner and the Insurer, it was acknowledged by the plaintiff "However, all possible steps were taken to sweep out the water to minimize the loss/damage. Even the Survey Report dated 24.9.89 (Ex.P-5/38), referred to above, more particularly the under lined portion, also gave detail account of efforts made and measure taken by the defendants to avert the loss.
From the evidence discussed above, it is evident that, the defendants have discharged initial burden imposed under Section 151 of the Contract Act. Defendants successfully demonstrated that they have taken all steps and measure to avert and minimize the loss to the goods bailed and had taken as much care which a person of ordinary prudence would have taken to protect his own goods in the given circumstances.
After the defendants have discharged their burden to show that they had taken as much care as a person of ordinary prudence would have taken. The burden had shifted on the plaintiffs in the present case to show that the measures and steps taken by the defendants were not reasonable or not expected from a man of ordinary prudence in order to avoid the loss. [For reference one may see, Messrs Mastersons through its Partner v. Messrs Ebrahim Enterprises and another (1988 CLC 1381) and the case of QBE Insurance Ltd. v. Trustee of the Port of Karachi (1992 CLC 904)1.
No material or evidence was brought on record by the plaintiff to show that the defendant failed to discharge their duty in terms of bailment contract. On the contrary, it was the plaintiff who was responsible to hire the Godown in low-line area. The location of the Godown on low-lying area also contributed and aided in aggravating the loss. It has also come on record that despite notification of fault in Godown (as per (Ex.P 5/88, dated. 11.2.88), plaintiff took no steps nor directed the Godown owners to carry out the repair or restore the broken windows. From the plaintiffs own surveyor report, it is apparent that the defendant No. 1 did whatever they could do to prevent further damage to the cargo. Ample evidence has come on record that the bailee had taken all reasonable precautions to protect the sugar, which was on bailment with him. Therefore, he cannot, be, held responsible for the loss that occasioned on account of rain and resultant overflow of water and flood like situation. Plaintiff was not able to show that there was any special contract, whereby the bailee could have been held responsible for loss, damage or destruction under all circumstances.
The Issue No. 3 is accordingly, answered in negative.
Issue No. 4: This issue relates to the damage/loss to the sugar stored in Rashid Godown. It has come on record that most badly effected Godown was Rashid Godown. Defendant No. 1 in the paras. 2 and 4 of the written-statement had stated the reasons for such loss as (i) the Godown was situated in the low line area i.e. Below the road level. (ii) Godown was damaged and windows were broken (Exhibit No. P-5/16), (iii) Leaky, insecure roofs and joints of ceiling (iv) Unprotected against flood-water. Total sugar that was stored in Rashid Mills Godown is reflected from the statement of the quantity of sugar vessel-wise, given in letter of the defendant No. 1, dated 17.1.1990 (Ex.No. P-5/40), addressed to the plaintiffs, which reads as follows:- "This is to inform you that deliveries of the flood affected consignments of sugar arrived by the following vessels have since been completed and the final summarized position is as under:- VESSEL STORED QTY DELIVERED SOUND QTYDELIVERED DAMAGED QTYTOTAL DELIVEREDLOSS ASCEPT AFTER FINAL DELIVERY SILVER ATHENS240270 Bags 12005 54 5M/T208110 Bags -1042 2M/T32034 Bags -1374 985M/T Tribunal240474 Bags -117 969 85Bags-2 Excess WT-2 Short SUBIC EVAC 257000 Bags -12850 M/T245513 Bags -1227 5.650-1433 2 Bags -3661 87M/T Tribunal2598 45 Bags -126 41.8 37 Bags-2 Excess WT.20 short BELLE 32000 Bags -1600 M/T29145 Bags -1457 2502855 Bags 191881 M/Trib.32000 Bags -158 9.13 Bags WT-I BAHIA 5600 Bags -280M/T4980 Bags -249 Bags620 Bags -28.5005600 Bags -277 500Bags WT-2 M/T 531870 Bags 25735.51 5M/T488078 Bags -2440 3.90049841 Bags -19013379.19 Bags -263 53M/TExcess -3049 Short Weight M/T 553M/ Tribunal2M/T The consignment accounts are in course of preparation and will be sent within a week's times.
Kindly file a final claim on the Insurance Corporation for the above loss of 430,062 Metric tons.
The surveyors of the plaintiffs through their Survey Report dated 23rd April, 1990. (Ex.No.P-5/55) certified the vessel-wise position, which report in verbatim reads as follows:- "This addendum is issued to the survey report No. 512/TCP-6/89, dated 24th Sept., 1989 regarding the loss of sugar consigned to Trading corporation of Pakistan at Rashid Textile Godown, SITE Karachi on 17th and 18th July, 1988.
While in the Annexure 'B' attached to the above report a quantity of 636,700 M/Tons was classified by us as "damaged with contents partially last" and 88,750 M/Tons of sugar was estimated as washed away due to flood and rain, we now certify and reproduce below the exact quantity of sugar lost after completion of all the deliveries to the successful tenders.
S.No Name of VesselValue at risk No. Of Bags M Tons (Book Balance)Net delivery M.TonsNet shortage M.Tons 1 M.V. Silver Athens136.349 6,817,1506,608,920 208,530 2 M.V. Subicfvak 257.000 2,850,00012,641,837 208.163 3 M.V. Belief 32,000 1,600,0001,589,131 10.869 4 M.V. Bahia DF Cinefongas5,600 280,000 277.500 2.500 430,919 21,547,45021,117,388 430.062 SUMMARY Total cargo in the Godown at the Time of flood as per book balance.21,547,450 M.Tons Cargo delivered as sound between 10th July, 1988 and 23rd Sept., 198919,263,335 M/Ton.
Cargo delivered as salvage after 24th Sept., 1989. 1,854,053 M/Ton.
Net shortage due to flood and rain. 430.062 M/Ton.
Volume of loss admitted by NIC on 31st Aug., 89 vide Policy No. NIC/KF/01- 0223.2/88 under Peris Atmospheric Disturbance flood (Copy attached). As Annexure "A" 90,000 M/Ton.
Volume of loss apparently caused. Due to rain for which no compensation has yet340,062 M/Ton.
Been considered by MC vide above policy.
The above information represents our findings at the times of inspection only in accordance with the relevant data available at the time of survey and is ISSUED WITHOUT PREJUDICE TO THE RIGHTS OF WHOMSOEVER CONCERNED"
The said report of the Surveyors was never questioned or challenged by the plaintiffs. Such reports confirmed the stance taken by the defendant No. 1 that the level of the floor of Godown was lower than the roadside. The rainwater entered through broken ventilator and joint of ceiling of which the defendant No. 1 cannot be held responsible. As neither the defendants hired the Godown nor, they were responsible to carry out the repairs. The water that forced into the Rashid Godown as was situated below the road level as pointed out by the Surveyors of the plaintiffs themselves. Under the circumstances , there are compelling reason to decide the Issue No. 4 in negative. The defendant No. 1 was successful in establishing the reason for the loss as narrated in para 4 of his written- statement and a confirmed by the Surveyors Reports.
ISSUE No. 5: This issue relates to the loss that occasion in four godowns of Dost Muhammad and Usman Textile.
The alleged loss only reflects to be 2.2% of the total quantity of the sugar stored therein. Case of the defendant as regard such loss is contained in para. 3 of the written-statement as 2.138 M.T. The reason for "such negligible loss" was attributed to frequent handling and bursting and re-stitching of bags with the resultant spillage and loss of contents. It was claimed that such negligible loss is wholly unavoidable and is accepted as such by trade usage. Said facts were reiterated in Paragraphs 24 and 25 of the Affidavit-inEvidence. Such assertion on oath made by the defendant's witness was not challenged by the plaintiffs in cross-examination and had gone unrebutted.
Learned counsel for the defendant No. 1 in support of his contention that, such loss in handling contracts is usual and inherent. Mr. Hamza has placed reliance on the principle enshrined in frinite de route i.e. a normal minor loss during the voyage. He has referred to Marine Cargo Claims by William Tetley, Second Edition at page 119.
It has come on record through various stock reports i.e. Ex-Nos.P-5/6, Ex.P-5/7, Ex.P-5/8 and Ex.P- 5/9, relating to sugar arrived through (i) M.V. BELLE AND (ii) M.V. BAHIA DE CIENFUEGOS, and stored Usman Godown Hall Nos. 1 and 2. Dost Muhammad Godown Hall Nos. 1 and 2. Usman Godown No. 2 and Dost Muhammad Godown, respectively. Summary in seriatim in above Exhibits is as follows:- QUANTITY STORED QUANTITY DELIVEREDDIFFERENCE BETWEEN A&BREMARKS 103106 bags 5152,650 M Tons103995 bags- 5152.230 M Tons Bags 889 delivered in excess. Weight 0.420 M/Trib. Out- turned shortResidual stock of consignments were subject to double shifting.
39600 Bags- 1980,000 M/Tons39610 Bags- 1978.930 M.Tons. Bags-10 delivered in excess. Weight-1 070 M/Trib. Out- turned shortResidual stock consignment was to double shifting 53000 Bags- 2650,000 M Tons 53110 Bags- 2649.352 M Tons Bags-10 delivered in excess. Weight 0.648 M/Ton. In short 56800 Bags- 2840,000 M/T57020 Bags- 2840,000 M/TBags-220 delivered in excess. Weight- Nil Total loss on such head of account is also reflected in respect of Dost Muhammad and Liman Textile Godown in Letter of the defendant, addressed to the plaintiff Ex.P.5/12, dated 6/2/1990 which reads as follows: "We hope prompt action has been taken in this regard at your end.
The detailed position of portion of this consignment stored elsewhere and not affected by flood is as under:- S.No Name of godownQty. Stored Qty. Delivered Difference
(i) Dost Muhammad39600 bags = 1980.000 M/T 39640 Bags =1978.930 M/T Bags = +40 B Weight= 1 .070
(ii) Usman Textile 103106 bags=5152.650 M/Tribunal103995 bags= 5152.230 M/TribBags = +889 Weight =0.42 The weight difference under serial No. Ii) and (ii) above are minimal occurred owing to piecemeal handling of the consignment and falls within the permissible limit of tolerance allowed by T.C.P.
The plaintiffs never challenged such stock reports or the claim of the plaintiffs as has come on record. Therefore, I am of the view that in handling contract for (1980 M.T. + 5152.65 M.T.) 7132.65 M.T.
Loss of 1.490 Metric.
He has referred to Marine Cargo Claims by William Tetley, Second Edition at page 119 it reads as follows:- "MINOR INVENTIABLE LOSS OR DAMAGE Wine in bulk always has a minor inevitable loss or freinte de route but Courts at first were reluctant to entertain the proposition. One of the earliest decisions was by the Court Appeal demontpellier.
Wine in bottles, on the other hand, has no such loss and no friente de route is allowed. Flour suffers a minor loss in bulk with time and travel, as does cement.
Certain commodities packed in cartons and bags will usually suffer a small amount of damage through normal handling. In the Canadian trade, approximately half of one percent of the bags of a shipment of cement will be expected to be torn, although this will not result in a loss of half of one percent of the total shipment, because the cement can be re-bagged: In France, where the packing would appear to be different and not five or seven ply bags, the freinte de route for cement has been higher, even upto 4% and 5% of the bags carried.
Coffee in bags has a certain friente de route.
Where inferior packing is used, a higher friente de route is to be expected. Thus where inferior plastic bags were used for a cargo .Of engrais (chemical feed) and the shipper attached 600 empty bags to a shipment of 60,000, a frginte de route of 0.25% was not considered excessive.
The Court d'Appeel de Paris observed that rice packed in single, thickness jute bags will escape and that the carrier is not responsible for the loss in virtue of 4(2)(m) of the Hague Rules: "Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods".
".... Will inevitably suffer some minor damage by way of condensation, staining or wasting of a few bags..." and consequently the carrier was not responsible."
The U.S. Court of Appeals noted that fully mature garlic is perishable in nature and as such its shipment is likely to involve a degree of deterioration.
Unpacked automobiles suffer minor scratches and carrier is not responsible for these. The leading c-ase for years has been The Southern Cross, where it was held that carriers are responsible for all but "slight dents and scratches". A number of French Courts have held carriers responsible for damage to unboxed automobiles, but not for minor inevitable damage. Carriers must use the most modern methods to load, stow carry and discharge unboxed automobiles, nevertheless, a certain allowance is made for, minor damage. A Canadian case, however, allowed nothing for minor damages to unpacked automobiles on the ground that careful handling and stowage could have prevented even minor dents and scratches.
Tallow seems to have a normal one quarter of one percent loss because of tallow stiking to tanks, pipes, etc."
This Court had occasion to examine the loss on account of Mercentile Usage in respect of Cargo Handling Contract in the case of Rice Export Corporation v. A.H. Corporation (2002 CLR (Kar) 237). In said case shortfall to the extent of 1.6% that occurred in rice handling contract was held to be within the permissible limits and inherent in grain handling contract.
Terms and conditions of Custodian Ship Agreement are recorded in Letter of appointment as Custodian Ex.P-5/17 read with Ex.P-5/2 relevant clause 4 and 5 reads as:-
4. To stop damaged bags and sweeping in the Godown separately free from sound stacks after proper weighment etc. To be done in presence of the TCP's surveyor.
5. To make arrangement for re-stitching and refilling of torn/damaged sugar bags in Godown in presence of TCP's surveyor and to keep proper account thereto.
Looking at total quantity, the loss that occasioned and complained of in respect of Godown of Dost Muhammad and Usman, appears to be but nominal and inherent in such nature of contract and the defendants cannot be alleged upon to account for the same.
Issue No. 6: Issue No. 6, it is in respect of the responsibilities of the plaintiffs as a bailor. Though in Chapter IX of the Contract Act dealing with bailment responsibilities and obligations of bailee are outlined in detail but it does not in so many words defines the obligations duties of the bailor. Such obligations could be inferred. From Chapter VI of the Contract Act, which deals with consequence in case of breach of contract. Where a persons claims some compensation or damages on account of breach of contract then it is incumbent on such person to take such appropriate measures and do all what is within its power to do in order to lesson, avert or mitigate such damages or loss. (See PLD 1990 Kar. 395, 1999 CLC 483 and 1993 SCMR 441).
29. Such policies have been produced alongwith he covering letter Exhibit No. P-5/63. Originally it appears that the Policy No. 01-0099-3/88 was for the fire. Risk covered was No. (i) FIRE, (ii) FLOOD, RAIN. The policy was of Rs.10,8700,000,000/- in respect of the goods stored in the godowns. The policy was subject to Flood Endorsement as per clause attached hereto . The endorsement attached to the Police reads as follows:
(a) Hail, snow, wind, huriance, cyclone, tornado or Typhoon; and/or,
(b) Rain, provided the building(s) in respect of which the claim made or containing the property in respect of which the claim is made is so damaged by any of the perils specified in a supra as to admit rainwater to the interior of the said building(s); and/or,
(c) Flood, which shall mean:-
(1) The overflowing or deviation from their normal channels of either natural or artificial water courses; and
(2) Any flow or accumulation of water on the ground except when such flow or accumulation be of water emitted from any water-supply main, tap, pipe, value or the like, All the Insurance Policies provided similar coverage i.e. Against rain, hall flood, fire, burglary and theft. Therefore, it cannot be asserted that, such policies were only confined to the loss that occasioned on account of the loss in quality of the sugar that occurred on account of rain and flood-water as suggested by Mr. Mamnoon Hassan.
30. It may be observed that, in all the Surveyors Reports the loss has been attributed on account of rain and flood-water. National Insurance Corporation ("NIC") even requested the plaintiffs to segregate the rain affected sugar with that of flood, affected sugar in order to ascertain the loss on each account but the plaintiffs declined to incur the expenses to segregate such bags that were effected. Reference may made to letter of NIC, dated 18/5/1989 (Ex.No. P-5/31) and reply of plaintiffs dated 4.6.1989 (Ex.No. P-5/32). Even the surveyors of the plaintiffs recommended that "if NIC still insist that their surveyors conditions be fulfilled, then we have no choice but to arrange and segregate the damaged bags to their entire satisfaction". There is nothing on record to show that, the plaintiffs took any measures to meet the demand of the Insurance Company. Though the report dated 24th September, 1989 of surveyor (Ex.No. P-5/38) shows that, NIC agreed to compensate the plaintiffs to the tune of about Rs.900,000.00 covering a loss of about 90.00 M. Tons of cargo due to flood. However, they were of the opinion that the damaged caused due to rain was not covered in the policy hence no compensation was considered on those bags damaged due to rain water. Such opinion of the surveyor in view of the coverage provided by the Insurance Policy as reproduced above was not in consonance of the policy. From bare perusal of the Insurance Policies as reproduced above, it is apparent that; damage on account of rain was also covered.
31. The defendant No. 1 since from the beginning when the demand was raised insisted that the shortage, which occurred on account of damage to the tune 430,06, should be claimed from the Insurance. Reference can be made to the letter-dated 17.1.1990 (Ex.No.P-5/40). It appear that, the plaintiffs have failed to take and invoke the insurance policies in respect of the loss that has occasion on account of rain and flood in terms of the surveyor report. Even the plaintiffs have not deducted the amount of Rs.900,000/- out of the total loss attributable to the defendant No. 1 nor they have shown or disclosed the amount they have recovered by disposing off salvaged sugar.
The witness of the plaintiffs admitted "that insurance claim and salvage are deducted from the total amount but in this case he is not aware why such adjustment has not been given".
32. Therefore, in view of the foregoing, the plaintiffs have failed to discharge its duties to mitigate the loss as was required from a person of ordinary prudence firstly, the plaintiff failed to carry out the repairs as notified by the defendant No. 1 (Ex.P-5/16). Secondly, they failed to claim loss on account of rain and flood water in terms of Insurance Policies (produced alongwith Ex.P/63) pursuant to, notice of the defendant under Order 12, Rule 8, CPC. Issue is accordingly answered in affirmative.
Issue No. 7:- Learned counsel for the defendants does not press this issue. No finding is record in this regard.
Issue No, 8:- This issue relates to the encashment of the Bank Guarantee by the plaintiffs. It was contended by the learned counsel for the defendants that no. Bank Guarantees were furnished to the plaintiffs in respect of Contract of Bailment. It was urged that the Bank Guarantees were only in respect of an Agreement (Exhibit No. P-5/1) in relation to the Clearing Agent. Since the defendant No. 1 was not awarded Contract of clearance of the consignment in issue, therefore, such Guarantees could not have been encashed in respect of the alleged breach of Custodian Agreement (Exhibit No P-5/2).
33. Mr. Mamnoon Hassan, learned counsel for the plaintiff, countered that, the Guarantees were furnished in terms of the Agreement dated 137.1987 (Ex.P-5/1 ) appointing the plaintiffs both as a Clearing Agent as well as Custodian.
34. While deciding Issues Nos. 1 and 2 above, it was held that, the plaintiff's appointed the defendant as Custodian for the subject sugar under letters dated 209.1.1988 and 4.7.88 (Ex.P-2/5 and Ex.P-5/17 respectively) which were an independent Contract.
Therefore, it is to be examined whether under the terms of the Contract (Exhibit No P-5/2) defendant had furnished any Bank Guarantee.
35. Copies of the Bank Guarantees ware produced as Exhibits Nos. P-5/13 and P-5/14 respectively.
From the reading of Bank Guarantee, it will clarify as to for what purpose and under what Contract such Guarantees were furnished. The opening recital of the Guarantee reads as follows:- "Whereas Messrs Murshid Enterprises have entered into an agreement with you and hereby you have hired their services as your Clearing Agent on condition that we guarantee to pay in the sum of Rs.100,000/- only."
Admittedly, the plaintiffs secured the clearance of subject sugar from the other Clearing Agents.
Defendant's services were hired as a Custodian through letter dated 20.1.1988 and 4/7/89. First Guarantee was issued on 25.1.1987 and the other on 30.5.1987. Expiry of both the Guarantees were on 31.12.1987. The Custodian Agreement was entered into on 20.1.1988, therefore, it cannot be said that the Bank ,Guarantees could have been issued earlier than the date of appointment as a Custodian. Prima facie, under the Agreement for a Clearing Agent dated 13.7.1987 Clause (10) reads as follows:- "The Clearing Agent shall be liable to indemnify the TCP against all damages/shortage/losses occurring in HIS Godown for any reason whatsoever. The amount of such damages/shortages/loss shall be determined by TCP at its sale discretion and RECOVERED FROM THE CLEARING AGENTS BANK GUARANTEE, pending or current bills and or any other assets owned by the clearing agents, without prejudice to the exercise of other rights or legal action".
The defendant No. 1 was not held responsible for the loss. Secondly as already held while deciding issue No. 1 that the service of the defendant No. 1 was not hired as a Clearing Agent and last the Godowns were not hired by the defendant No. 1, as the liability even for the loss if any under. Ex.P- 5/1 was in respect of- HIS Godown.
Rights and obligations contained in one agreement, that was never acted upon cannot be invoked, unless such terms and conditions by necessary implication made part of other agreement that was acted upon. As held above, agreement Ex.P-5/1 was never acted upon nor its terms and conditions were made part and parcel of export-5/2 and Ex.P-5/17. Relationship between the parties was regulated under terms as set out in Ex.P5/2 and Ex.P-5/17 and no Bank Guarantees were furnished thereunder. Therefore, the plaintiffs were wholly unjustified to encash the Bank Guarantee furnished under a different Agreement i.e: Ex.P-5/1. Accordingly, in my opinion, the plaintiffs unlawfully encashed the Bank Guarantees of Rs.1,00,000/- each. The issue is answered in affirmative.
Issue No. 9: There is no dispute on the issue. It was admitted by Mr. Mamnoon Hassan, learned counsel for the plaintiffs that, custodial charges were not paid. According to him. Plaintiffs were justified to adjust such charges against the loss suffered by the plaintiff for the fault of the defendant No. 1. In terms. Of Agreement P-5/1 plaintiffs are entitled to set-off such claim.
While deciding other issues, it was held that the relationship between the plaintiffs and the defendant No. 1 was not governed under Ex-P5/1. Therefore, the plaintiff cannot be allowed to invoke clause (10) of the Agreement (export-5/1) to set of the losses. Even otherwise the defendants were not held liable for the loss.
Issue No. 10: While deciding Issues Nos.4, 5 and 6, it was held that the loss to the sugar was not caused on account of failure of the defendant to take care of the subject goods bailed to him, as a man of ordinary prudence would have taken care of his goods. Such loss occasioned on account of rain and flood. Defendant No. 1, it was held had taken care of goods as a man of ordinary presence would have taken of his goods under similar circumstances. Therefore, in my opinion, plaintiffs to recover any amount from the defendants for the loss caused to the sugar under bailment with the defendant on account of rain and floodwater.
As held, while deciding issue No. 8 that the Bank Guarantee in the sum of Rs.100,000/- were unlawfully encashed by the plaintiffs against a Contract. (Ex.P-5/1) which was never, awarded to the defendant No. 1. Plaintiffs are liable to refund the amount Rs.2,00,000/- (i.e. Rs.100,000 for each Guarantee) for the two Bank Guarantees so encashed. As regards Custodian Charges, while deciding issue No. 9, it was held that the plaintiffs have no paid the same for three (3) months, at the rate of Rs.25,000/- per month. Accordingly, the defendants are entitled for recovery of said amount from the plaintiff as well.
Issue No. 12: Resultantly, in view of the foregoing discussion, the suit of the plaintiff is dismissed with cost. Whereas, counter claim of the defendant is decreed as prayed.
The suit and counter claim through this Common Judgment stand disposed of in terms above.