This document summarizes a judgment from the Pakistan High Court of Sind regarding two cases involving alleged short delivery of cargo.
In the first case (Suit No. 386 of 1982), the vessel Nitsa delivered a consignment of edible oil to Karachi, which the plaintiff trading corporation alleged was short landed. In the second case (Suit No. 781 of 1985), the vessel Sinoda delivered consignments of kerosene and diesel oil to Karachi, which the plaintiff insurance company alleged were short delivered as subrogees.
The court consolidated the two cases and addressed seven issues, including identifying the carrier, whether the suits were maintainable, determining loaded and discharged quantities, and
This document summarizes a judgment from the Pakistan High Court of Sind regarding two cases involving alleged short delivery of cargo.
In the first case (Suit No. 386 of 1982), the vessel Nitsa delivered a consignment of edible oil to Karachi, which the plaintiff trading corporation alleged was short landed. In the second case (Suit No. 781 of 1985), the vessel Sinoda delivered consignments of kerosene and diesel oil to Karachi, which the plaintiff insurance company alleged were short delivered as subrogees.
The court consolidated the two cases and addressed seven issues, including identifying the carrier, whether the suits were maintainable, determining loaded and discharged quantities, and
This document summarizes a judgment from the Pakistan High Court of Sind regarding two cases involving alleged short delivery of cargo.
In the first case (Suit No. 386 of 1982), the vessel Nitsa delivered a consignment of edible oil to Karachi, which the plaintiff trading corporation alleged was short landed. In the second case (Suit No. 781 of 1985), the vessel Sinoda delivered consignments of kerosene and diesel oil to Karachi, which the plaintiff insurance company alleged were short delivered as subrogees.
The court consolidated the two cases and addressed seven issues, including identifying the carrier, whether the suits were maintainable, determining loaded and discharged quantities, and
This document summarizes a judgment from the Pakistan High Court of Sind regarding two cases involving alleged short delivery of cargo.
In the first case (Suit No. 386 of 1982), the vessel Nitsa delivered a consignment of edible oil to Karachi, which the plaintiff trading corporation alleged was short landed. In the second case (Suit No. 781 of 1985), the vessel Sinoda delivered consignments of kerosene and diesel oil to Karachi, which the plaintiff insurance company alleged were short delivered as subrogees.
The court consolidated the two cases and addressed seven issues, including identifying the carrier, whether the suits were maintainable, determining loaded and discharged quantities, and
Pak. Ct.] The "Nitsa" and "Sinoda" PART 9 PAKISTAN HIGH COURT OF SIND KARACHI Feb. 26, 1999 TRADING CORPORATION OF PAKISTAN V. INTER-CONTINENTAL OCEANIC ENTERPRISES CORPORATION AND OTHERS (THE "NITSA") NATIONAL INSURANCE CORPORATION v. MIS MARITIME AGENCIES LTD. AND OTHERS (THE "SINODA") Before Mr. Justice M. SHAIQ UsMANI Bill of lading -Short delivery- Liability- Cargoes of oils carried to Karachi - Plaintiffs alleged cargo shortlanded - Identity of carrier of consignment - Whether consignment shortlanded - Whether car- rier liable- Liability of ship's agents. Suit No. 386 of 1982. The vessel Nitsa brought a consignment of edible oil to Karachi on Oct. 5, 1981. The consignment was consigned to the plaintiffs. The vessel was entered into the port of Karachi by the second defendants who were the local agents of the first defendants, the owners of the vessel. The plaintiffs alleged that the cargo was shortlanded and claimed the value of the cargo shortlanded. The defendants denied any shortlanding and sub- mitted that the cargo had been excess landed and that the shortage, if any, had occurred after the cargo had been discharged and they were not liable for such shortage. Suit No. 781 of 1985 The vessel Sinoda brought two consignments of kerosene oil and HSD oil to Karachi on Oct. 26. 1984 which was consigned to Kuwait Petroleum Co. Liaison Office (Pakistan) for and on account of the Ministry of Petroleum and Natural Resources, Karachi. The ship- per's were the second defendants and the vessel was entered into the port of Karachi by the first defendants, the local agents of the second defendants. The second defendants were the charterers of Sinoda and the plaintiffs alleged that the third defendants were the owners of the vessel. The plaintiffs were an insurance company with which the consignment was insured and they filed a suit in their capacity as alleged subrogees. The plaintiffs alleged that consignments were short delivered and claimed damages. The defendants claimed that the third defendants were not the owners of the vessel and the suit was bad for non-joinder of the the owners. The first defendant denied that they were agents of the second defendants. The defendants denied that the consignment was short landed. The suits were consolidated and the issues for decision were: (I) Who was the carrier of the consignment? (2) Whether the suit as framed was maintainable. (3) What were the loaded, arrived on board quantities of cargo and as to what quantities were discharged into shore tanks? (4) Whether any part of the consignment was short- landed and if so whether the carrier was liable for such shortlanding. (5) What was the extent and amount of loss suffered by the consignees? (6) Whether the plaintiffs had paid the consignees claim and whether they had any right to sue. (7) Whether the plaintiffs were entitled to a decree and if so against which of the defendants. ---Held, by Pak. Ct. (M. SHAIQ USMANI, J.), that ( I ) once a vessel reached the port with the cargo and delivery order was issued by the ship agent the actual identity of the canier was irrelevant in so far as the consignee/subrogee was concerned; in the final analysis it was not the shipowners or charterers who contested the claim but the P and I clubs; since the canier was the principal of the ship's agent who entered the vessel in the port, it would be sufficient if the consignee/subrogee while suing the carrier merely mentioned as primary defendant "the Carrier carrying the consignments on board M. V. - to be served on the ship agent", and the ship's agent as the second defen- dant so that service on the local agent would constitute service on the carrier (see p. 569, col. 2); (2) the loaded, arrived on board quantities of oil and quantities discharged into shore tanks as stated were assessed jointly by the surveyors representing cargo interests as well as the carriers'/owners' interest (see p. 570, col. I); (3) the quantity of cargo discovered at the time of arrival of the vessel was in fact in excess of the quantity loaded; but the quantities actually discharged into the shore tank were less than the arrived quantity; it was clear that there was considerable difficulty in ascertain- ing the true quantity of cargoes loaded in the ship because of many variable factors, (see p. 571, col. I); (4) delivery would occur once oil cargo left the ship's manifold; once the cargo left the ship's manifold it was in the custody of the shore tank terminal operators and the rights and liabilities with regard to the oil cargoes would be governed by the terms and condition of the agreement between shore terminal tank operator and the consignees/receivers; the shore tank operator thus being the agents of the consignees, the cargo could be considered to be in the constructive custody of the consignees/receivers themselves but it obviously could not be considered to be in the custody of the carriers (see p. 572, col. 2; p. 573, col. 2); (5) in the two cases the anived quantities were found to be in excess of the figures mentioned in the bill of lading and "dry tank certificates" were issued indicat- ing that the entire cargo had been discharged from the vessel; no evidence had been brought to show that such was not the case and there was no shortlanding of cargo in both cases (see p. 576, col. I); 564 LLOYD'S LAW REPORTS [2000] Vol. 1 M. SHAIQ USMANI, J.] The "Nitsa" and "Sinoda" [Pak. Ct. (6) the necessary proofs had been provided for the payments to be made to the consignee by the plaintiffs (see p. 576, cols. I and 2); (7) the earner was not liable for the short receipt of the consignment by the consignee; if the ship's agents were required to discharge the cargo claims they would do so on behalf of their principals and their liability to do so would be essentially secondary liability; it was only when the consignee was unable to recover from the earner either because of his refusal or avoidance or unavailability within the boundaries of Pakistan that the consignees/underwriters might proceed to recover from the ship's agent; the Courts should refrain from passing joint and several decrees in a cargo claim against the earner and ship's agents; in fact the interest of the consignees/underwriters would be sufficiently pro- tected if the decree was sought and granted primarily against the earners and in the alternative against the ship's agents (see p. 576, col. 2; p. 578, col. 2); (8) the earners had no liability for the short receipt of the cargo by the consignees in both suits and the liability of the ship's agents was secondary; none of the defendants had any liability in both suits and both suits would be dismissed (see p. 578, col. 2). These were actions by the plaintiffs Trading Corporation of Pakistan in suit 386 of 1982 and by the plaintiff National Insurance Corporation in suit 781 of 1985 claiming against the defendants Inter- continental Oceanic Enterprises Corporation M/s Eastern Shipping Ltd and Karachi Port Trust in suit 386, and the defendants M/s Maritime Agencies Ltd., M/s Kuwait National Petroleum Co. and M/s Hongkong Manda Shipping Co. Ltd. in suit 781 in respect of short delivery of cargoes of edible oil, Kerosene and HSD oil in the vessels Nitsa and Sinoda. Mr. Nasarullah Awan for Trading Corporation of Pakistan; Mr. Mohammed Naeem for M/s Eastern Shipping Co. Ltd. and Mr. Javed Farooqi for Karachi Port Trust. Mr. Shoib Ali Khan for National Insurance Corporation; Mr. Bashir Shaikh for M/s Maritime Agencies Ltd. and M/s Kuwait National Petroleum Co., and Mr. Mohammed Naeem for M/s Hong- kong Manda Shipping Co. Ltd. The further facts are stated in the judgment of Mr. Justice M. Shaiq Usmani. JUDGMENT Mr. Justice M. SHAIQ USMANI: By a com- mon judgment I propose to dispose of Suit No. 386 of 1982 and Suit No. 781 of 1985 as the law involved in these suits is identical. However, as far as the facts are concerned, I will describe them separately for each suit because even though in substance they are similar there are nevertheless certain variations, which need to be highlighted. Suit No. 386 of 1982 Briefly the facts of this case are that a vessel Nitsa brought a consignment of edible oil to Kar- achi on Oct. 5, 1981. The consignment was con- signed to plaintiff. The vessel was entered into the port of Karachi by defendant No. 2 who were the local agents of defendant No. I, the owners of the vessel. The plaintiffs claimed that the consignment upon arrival at Karachi was short landed by 228.092 tonnes valued at U.S. $1,24,722.99 equiv- alent to Rs. 15,25,362.29. The plaintiff through this suit claim the value of the cargo shortlanded. The defendants on the other hand, while admitting the bill of lading quantity, state that in fact there was excess shipment of 16.851 tonnes as according to them the quantity found in ship's tank determined upon taking ullages at the port of loading was 25,862.605 tonnes. The defendants contend that upon vessel's arrival at Karachi there was a joint on board survey conducted according to which the consignment was in fact excess landed by 61.265 tonnes. The entire quantity found on board, accord- ing to the defendants, was discharged into the shore tanks. A tank dry certificate was issued indicating that the entire cargo had been discharged from the vessel's tanks and that nothing remained on board. The defendants therefore deny any shortlanding of the cargo and in fact aver that the cargo has been excess landed. The shortage, if any, according to them has occurred after the cargo had been dis- charged and thus they are not liable for such shortage. Based on the pleading of the parties, following issues were settled: I. Whether the plaintiffs have right to sue in respect of the consignment? 2. Whether the defendant No. 2 have no privity of contract with consignee/plaintiffs and if so what is its effect? 3. Whether the suit is bad for non-joinder of parties? 4. Whether the defendants are liable for alleged shortlanding of 228.092 tonncs of Soya Bean oil in bulk and if so what was their condition quality, quantity and value? 5. What quantity of Soya Bean oil in bulk was found in ship's tanks according to the ullages on completion of loading? 6. What quantity of Soya Bean oil in bulk was found in ship's tanks according to the ullages before discharge at the Port of Karachi? 7. Whether the defendant No. I had discharged 61.265 metric tonnes of Soya Bean oil in bulk in excess of the Bills of Lading quantity and if so what is its effect? 8. Whether the surveyors issued their dry tank certificate in respect of ship's tanks after discharge [2000] Vol. 1 LLOYD'S LAW REPORTS 565 Pak. Ct.] The "Nitsa" and "Sinoda" [M. SHAIQ USMANI, J. of Soya Bean oil in bulk at Karachi and if so what is its effect? 9. What is the quantum of alleged loss suffered by the plaintiffs? 10. To what reliefs, if any, are plaintiffs entitled? The plaintiffs examined a representative of their company as well as a representative of their sur- veyors as their witnesses while defendants exam- ined one of their directors and a representative of their surveyor. Suit No. 781 of 1985 The facts of this case are that a vessel Sinoda brought two consignments of kerosene oil and HSD oil to Karachi on Oct. 28, 1984 which was con- signed to Kuwait Petroleum Co. Liaison Office (Pakistan) for and on account of Ministry of Petro- leum and Natural Resources, Karachi. The shippers of this cargo were the defendant No. 2. The vessel was entered into port of Karachi by defendant No. 1 who were local agents of defendant No. 2. who in turn were charterers of the said vessel Sinoda. The plaintiffs maintain that the defendant No. J were the owners of the said vessel. The plaintiffs them- selves are an insurance company with which the consignment was insured and they have filed a suit in the capacity of alleged subrogees. The plaintiffs claim that the consignments were short delivered by 881 tonnes of kerosene oil and 160 I tonnes of HSD oil. After allowing transportation losses allowance of 5 per cent., the shortage amounts to 636.16 kerosene oil and 807.69 of HSD oil. The plaintiffs claim the invoice value of the consignment short- landed to he Rs. 308,353.00 for kerosene oil and Rs. 378,425.00 for HSD oil totalling Rs. 686.678.00. On the other hand the defendants, according to their written statement, claim that defendant No. 3 are not the owners of the vessel and in fact the owners are another company and thus the suit is bad for non-joinder of the owners. According to them the vessel Sinoda was time chartered to Tradex Ocean Transportation S.A. who in turn had voyage chartered the said vessel to defendant No. 2 thus it is the defendant No. 2 who were the carriers of the consignment and thus the owners have no liability in the matter whatsoever. Indeed, defendant No. I also have denied that they are the agents of defendant No. 2. The defendants admit the bill of lading quantities described in the plaint but state that these were issued by defendant No. 2 as the agents of time charterers. They have denied that the consignment was shortlanded. They state that upon vessel's arrival an on board joint survey was conducted on behalf of all the interested parties and survey report showed that in fact the consignments were in fact excess landed by 12.58 tonnes of kerosene oil and 68.26 of HSD oil. They claim that since this on board quantity was fully discharged into shore tanks they have no further liability in the matter as the responsibility of the vessel ended when the consignment left the ship's manifold. The shortages if any, are based on figures derived from shore tank on the basis of which KPT' s outturn report was prepared and the defen- dants/carriers have no concern with that. Conse- quently they deny their liability for the plaintiffs' claim. Based on the pleadings of the parties, the following issues were framed: I. Whether the suit as framed is maintainable? 2. Whether the suit is bad for non-joinder of the proper party? 3. Whether the defendant No. 3 or the defendant No. 1 are carriers of the suit consignments? 4. What were the arrived on board quantities of kerosene oil and high-speed diesel oil? 5. Whether any part of the consignments was shortlanded? 6. What is the extent and value of the loss, if any, suffered by the consignee? 7. Whether the plaintiffs have paid the consign- ee's claim and have they any right to sue? 8. Whether the plaintiff is entitled to a decree, if so, against which of the defendants? The plaintiffs examined as a witness an official of their company and a surveyor who had surveyed the consignment. Whereas the defendants examined general manager of their company only. Both par- ties filed the usual documents, namely, the bills of Jading, invoices, survey reports and letters of sub- rogation etc. The evidence of the plaintiffs was, if I may say so, exceedingly slip shod and in fact the plaintiffs' witness PW-1 had very little knowledge of the manner in which the consignment was discharged. He could not possibly have much knowledge of this in as much as this is a 13 year-old case and all evidence that was brought on record was based on office records of the plaintiffs and not on the personal knowledge of the plaintiffs' wit- ness. Similar was the case with the defendants' witness. However, it was rather unusual (since it almost never happens) to have a surveyors' witness who had himself carried out the survey. In shipping cases it often happens that by the time the cases come to trial most first hand witnesses are not available and the acts brought out through evidence by the witnesses are much the same as described in the pleadings. Indeed, I am of the view that oral evidence in shipping cases amounts to merely going through the motion of recording evidence and rarely does the evidence led by witnesses meet the stringent requirement of the Qanun-e-Shahadat (Evidence Act). Most evidence consists of produc- tion of shipping documents which are standard 566 LLOYD'S LAW REPORTS [2000] Vol. I M. SHAIQ UsMANI, J.] The "Nitsa" and "Sinoda" [Pak. Ct. documents and hardly ever vary. In all cargo cases the standard documents that are produced are as fol1ows: (i) Copy of non-negotiation Bill of Lading. (ii) Invoice. (iii) Preliminary/final outturn report of KPT. (iv) Survey Reports/Inspection Report of sealed containers. (v) Shortlanding Report of KPT. (vi) Defective cargo list of KPT, if relevant. (vii) Excess landing report of KPT, if relevant. (viii) Charter-parties, if relevant. (ix) Insurance policy. (x) Letter of subrogation along with proof of payment by the Insurance company to consignee. (xi) Customs general bond given by ship agents under s. 55 of the Customs Act, 1969. Considering that none of the witnesses normally have personal knowledge about any of these docu- ments and shipping cases as a rule are decided on the basis of above standard documents, oral evi- dence would be of little value. Considerable time of the Courts would thus be saved if copies of the aforesaid documents are filed along with the plead- ings and the original thereof are filed in Court after settlement of issues and are exhibited at the time of trial through one witness and thus reduce oral evidence to barest minimum. This is not to say that the oral evidence in shipping matters is to be completely dispensed with but to say that it can be safely avoided and that oral evidence must only be recorded if so required by the Court or by any of the parties to prove a particular point vital to their case which happens to be somewhat unusual or out of the ordinary. In my view, such need could arise for example, in respect of survey reports or labo- ratory reports when the surveyors or laboratory personnel could be examined. Having heard the arguments of the learned Coun- sel for the parties and having perused the evidence brought on record by them, I found that the cases of the plaintiffs were going by default. It appears that the plaintiffs were not conscious of the gravity of the legal issues involved and the facts that needed to be proved for their claim to succeed. The defendants' approach too, appeared to be somewhat lackadaisical and they relied complaisantly mainly on the well known principle in the shipping field of carrier's responsibility for the cargo extending to "ships rail". This was so because it is perhaps the first case of its nature which deals with adjudication of cargo claim relating to oil cargo (in bulk) that has come before a superior Court. The importance of this case is apparent from the fact that I am informed that the entire shipping industry in Paki- stan and also those concerned with shipment of edible cargo to Pakistan are awaiting judgment in this case. 1 do hope the parties are not nonplussed by the results of the discussion herein particularly. because judging from the arguments advanced I find that the parties are attempting to view the legal and factual issues involved in this case in the same way as in the carriage of "dry" cargo. There is no cavil with the proposition that once a cargo, be it "dry" or "bulk" cargo is loaded on board a ship and a bill of lading describing the quantities so loaded is issued then the shipowner/ carrier is bound to deliver the same quantity at port of discharge. However, there are considerable dif- ferences when the nature of cargo is "liquid" as opposed to being "dry". This is so because in case of "dry" cargo it is easy to ascertain the quantities of cargo loaded on board and hence a priori, it is just as simple to determine as to what quantities have been discharged but when the cargo, such as edible oil or other oil is loaded in "bulk" it becomes very difficult to determine the exact quan- tities loaded and hence the quantities discharged. Considering that the parties to the suit were unable to bring the required evidence or to advance plau- sible arguments in support of their contentions, as stated earlier, I found that such an important case was going by default. I therefore decided to act on my own and appoint three amicus curiae, namely, (i) Mr. Imtiaz Lari, Advocate, (ii) Mr. Jamil Ahmed Khan, Advocate and Mr. Ghulammohammed Ebra- him, Advocat. I, in particular chose these gentle- men because of their experience in the field of oil cargo claims and also because they mostly repre- sent either the cargo-owners or their underwriters in such cargo claim cases. Finding that the evidence on record was insufficient for me to arrive at correct conclusion 1 chose to examine some experienced individuals in the concerned field as Court wit- nesses. In this connection I examined (i) deputy traffic manager, Karachi Port Trust, Rahim Bux Brohi, who primarily deals with oil cargo; (ii) a representative of Shore Tank Terminals Mr. Mohammed Iqbal; (iii) chief executive of M/s Oceanic Surveyor, Captain, Khalilur Rehman who is experienced in the field of oil cargo surveying. I even permitted the cross-examination of these wit- nesses by the parties, even though as a rule Court witnesses ought not to be cross-examined. From the evidence that was brought on record by the parties and through these Court witnesses and the information that was derived from the argu- ments of the amicus curiae and through taking judicial notice myself the picture that emerges regarding methodology of the loading and discharg- ing of oil cargo is as follows: The basic difference between the loading of oil cargo and the dry cargo at the port of shipment is that where the dry cargo is mostly kept in the [2000] Vol. 1 LLOYD'S LAW REPORTS 567 Pak. Ct.] The "Nitsa" and "Sinoda" [M. SHAIQ USMANI, J. shippers' /freight forwarders' yards and is then transported by usual means such as by rail or motor vehicles to wharves for eventually loading on board a ship, in case of oil cargoes the cargo is initially stored in a shore tank often situated at considerable distance from wharves and is transported through pipelines to the ship's manifold leading to the ship's tanks. To continue the comparison, while the quantities of dry cargo being transported for load- ing from the yard is physically measured or counted and thereafter such description is reflected in the bill of lading issued by the carrier, the quantities of oil cargo in the shore tank are measured by taking dips of the shore tank to measure the depth of the oil in the tank. Thereafter the specific gravity of the oil and temperature is ascertained and then with the help of calibration chart of the tank the actual quantity of oil in the tank is calculated. Once this entire quantity is discharged through pipes into the carrying vessel it is presumed that the oil cargo loaded on board the vessel would be the same as was determined to be in the shore tank. The bill of lading issued by the carrier, or on his behalf by the agent, reflects the quantity as determined in the shore tank. However, the vessel too. conducts an on board survey to determine the actual quantities in the vessel's tanks at the time of loading. This is done by taking ullages of ship's tank and taking into consideration the temperature trim and list of the vessel and then calculating the actual quantity on board with the help of calibration chart of the vessel prepared by its builders. I might explain in layman's terms that ullages are the measurement of the space above the level of the oil in the tank, whereas trim indicates whether the vessel is down in water by the head or by the stern and the list indicates whether vessel is tilted to one side or the other. Once the vessel sails, from load port to the port of destination then during the voyage often the need arises to shift oil from one tank to the other for the purposes of stability of the ship. Each of these tanks have also valves which are used to shift or pump out the oil and leakage can occur from these valves. The tanks themselves can leak depending on the strength of hull of the tanks which in tum depends upon the age of the vessel. When the vessel arrives at the port of discharge, invariably an on board survey is carried out by various interests in cargo, namely, shipowner, shipper/consignee etc. The pur- pose of this on board survey on arrival is to determine the arrived quantity of oil cargo. This too, is calculated by taking ullages and considering specific gravity and temperature of cargo and the trim and list of the vessel. As a rule, this arrived quantity of oil should be the same as on board quantity at the port of loading. However, occasion- ally, this is not the case and the reasons for this could be numerous. For example, the cargo could be found to be short, as mentioned earlier, due to leakages from valves of the tanks or tanks them- selves or even oil spill but also because of the difference in trim and list and the human errors during the taking of ullages. On the other hand it could also be in excess because of the variable factors that are used for calculation of quantity and the difficulty in ascertaining exact trim and list particularly if the sea is rough. After on board survey, upon arrival of the vessel, the cargo is pumped out from ship's manifolds into shore tanks which are situated at times at considerable distance from the oil piers/jetties through pipelines which could be on surface or sub-surface. Once the cargo is discharged into the shore tanks the depth of the tanks is taken by a process known as "Dip", which entails measuring the depth of oil in the tanks, and then after ascertaining specific gravity and tem- perature etc. exact quantity in the shore tank is calculated using the calibration chart of the shore tank. Usually, universally (not including Pakistan) it has been found that there is very little difference between the arrived quantity of cargo and the quantity pumped out in shore tanks. The difference, if any, does not exceed 0.5 per cent., of the total quantity found on board on arrival due to reasons that will be discussed later in this judgment. This is so because every effort is made by the "Carrier" to discharge every drop of the oil on board the vessel. In fact after the entire cargo is discharged from the vessel the ship's tanks are physically examined by the surveyors or the concerned parties to see whether any oil still remains on board. To ensure that no oil remains, oil squeezing gangs are employed for squeezing every remaining drop as fast as possible from the various crevices of the tank. Very rarely have shortages beyond 0.5 per cent. been discovered except when voyage of vessel has not been uneventful inasmuch as the vessel may have met some accident or leakage or spills had occurred. However, unfortunately, in Karachi, it is now usual for shortage beyond this figure of 0.5 per cent. to occur. Occasionally shortages much beyond this figure also occur which appear to be unexplained and hence it would be necessary to investigate the circumstances leading to such shortage. Here the evidence of the Court witnesses has come in very handy. It appears that in so far as the ports in Karachi are concerned, that is to say the port of Karachi and Port Qasim, the shore tanks are often situated at considerable distance from the oil pier which could be even a mile away. The pipelines leading to these tanks themselves are above surface as well as sub-surface and have various joints in them. These pipes, at least the larger portion beyond the KPT area are laid by shore tank terminal 568 LLOYD'S LAW REPORTS [2000] Vol. I M. SHAIQ UsMANI, J.] The."Nitsa" and "Sinoda" [Pak. Ct. operators who are also responsible for their security and maintenance. The pipes run through an area that is not constantly under surveillance, conse- quently are liable to he tampered with leading to purloining of the oil from the pipes through drilling of holes in them by adventurers. Indeed such thefts are fairly frequent and have been widely reported in the press. Presently the practice, at least in the Karachi port, is that the vessel arrives and berths at oil pier and an on board survey is carried out by the surveyors representing the shipowner's P&l club and shipper/consignee/receiver and any other inter- ested party and the arrived quantities on board are determined. It has also been brought on record that as per Central Board of Revenue Notification dated Mar. 3, 1992 the Customs compare this arrived on board figure with the bill of lading figure when calculating Custom penalty for shortlanding of cargo under s. 55, Customs Act, 1969 and allow for an allowance of 0.25 per cent. for leakage and other loss of cargo. Thereafter the cargo is discharged from the ship manifolds into the shore tanks through pipes. It has also been brought on record through Court witnesses as well as the witnesses of the plaintiffs themselves that the shore tanks are in fact arranged by consignee through entering into an independent agreement with the shore tank opera- tors. It is an admitted position generally that the shipowners have no contractual relationship what- soever with the tank operators. Once the entire cargo is discharged from the vessel the surveyors inspect the tanks physically and then issue what is known as a "dry tank certificate" which means that there is no cargo left on board and by implication that the cargo that was determined to be the arrived quantity through a joint survey has been discharged in full. Thereafter cargo discharged into the shore tank is jointly surveyed by all aforesaid surveyors and dips and temperature are taken and by help of calibration chart the exact quantity of cargo in the shore tank is determined and this information is then conveyed to the Karachi Port Trust (KPT). Here there is a complete departure from the usual practice followed by KPT in respect of discharge of dry cargo on plinths. In case of dry cargo KPT themselves tally the cargo being discharged and hence arrive at an independent assessment of the quantities of cargo discharged which they reflect in a "Preliminary outturn report" thereafter based on it a final outturn report is issued and then in case of any shortages shortlanding certificate is issued by KPT. However, in case of oil cargo, KPT accepts the quantity determined by joint survey of shore tank to be the quantities discharged from the vessel and based entirely on that, issues an outturn report and thereafter no further reports are issued by KPT. If the cargo received in the shore tank from the vessel is short, such shortage would be reflected in the KPT outturn report without the KPT arriving at any independent assessment of their own. It follows that the same shortage would be reflected in the quantities received by various receivers/consignees since the delivery is given to them from the shore tanks based on the quantity of oil received therein. It is thus obvious and it has been so stated by KPT witness summoned by the Court, that while dry cargo is received in the custody of KPT prior to delivery to the consignees, the oil cargo is never received in the custody of KPT and stays through- out in the custody of shore tank operators, who as we already know act as agents of the consignees. Nevertheless it has been brought on record that KPT' s only interest in the consignment is the collection of wharfage on the cargo landed and once the wharfage is paid and the custom docu- ments are in order KPT issues a release order and then the consignees take delivery of their cargo from shore tank terminal operators directly without any intercession from KPT or the shipowner/carrier except that the ship agent issues the delivery order based on bill of lading quantities. The delivery itself is taken by the consignee piecemeal and not on one occasion. All this while the cargo stays in the custody of shore tank operators, who as has already been stated, act as agent of the receiver/ consignee under a separate and independent agreement. Having thus been armed with the evidence, which is truly impartial, regarding the methodology of loading and discharging of oil cargoes, I am now in a position to examine the issues involved in these suits. Even though the consignment in these suits are of different kind of oil cargoes, in so far as the question of rights and liabilities of the parties are concerned, these are similar. I have therefore, recast the issues and have consolidated them so that both suits can be decided together. The consolidated issues are as follows: 1. Who is the carrier of the consignments? 2. Whether the suit as framed is maintainable? 3. What were the loaded, arrived on board quantities of cargo and as to what quantities were discharged into shore tanks? 4. Whether any part of the consignment was shortlanded? And if so, whether the carrier is responsible for such shortlanding? 5. What is the extent and amount of loss suffered by the consignees? 6. Whether the plaintiffs have paid the consign- ees' claim and whether they have any right to sue? [2000) Vol. I LLOYD'S LAW REPORTS 569 Pak. Ct.] The "Nitsa" and "Sinoda" [M. SHAIQ USMANI, J. 7. Whether the plaintiffs are entitled to a decree, if so against which of the defendants? I shall now proceed to deal with these issues individually. The question, as to who is the carrier of the consignment is not free of ambiguity, more so because the consignee usually is not in a position to ascertain as to who is in fact the carrier. Under the Hague Rules, which is applicable to consignment in both the suits before me, the "carrier" as per art. 1 (a) thereof includes the owner or the charterer who enters into a contract of carriage with a shipper. The responsibilities of carrier as per art. 2 are as follows: ARTICLE 2: Subject to the prov1s1ons of Article 6, under every contract of carriage of goods by sea the carrier, in relation to the loading, handling, stowage, carriage, custody, care and discharge of such goods, shall be subject to the responsibilities and liabilities, and entitled to the rights and immunities hereinafter set forth. The above definitions would clearly show that the carrier of the consignment does not have to be the owner of the vessel and it is the carrier who is responsible for any Joss or damage to the consign- ment since he is responsible for the cargo from time of loading till discharging of the cargo. When a vessel arrives at Karachi and the consignee man- ages to retire the bill of lading from the bank, it is only then that the consignee has the opportunity to learn the identity of the carrier i.e. the one who issues bill of lading. Occasionally the name of the carrier is mentioned in the letterhead of the bill of lading, but more often than not it bears the name of either the charterer or the managing agents of the owners or charterers. If the consignment is short- landed or is damaged then obviously the consignee has a claim against the carrier, hut when he or his underwriter chooses to initiate legal proceedings against carrier, the only person he knows definitely to be connected with the carrier/vessel is the ship- ping agent who enters the vessel in port of Karachi and who issues the delivery order for the consign- ments. If the bill of lading indicates the name of a party in the letterhead then he invariably impleads him as a defendant in the proceedings and then by way of abundant caution and also in view of the provisions of s. 55 of Customs Act, 1969, he impleads the local shipping agents as well. In their anxiety not to leave out the person who would be liable for the claim, often the consignees of their subrogees decipher names of some party or the other from the shipping documents whom they regard to be the owner and thus implead them as well. It is obvious that this leads to proliferation of defendants and yet consignee is not sure as to who is truly responsible for the alleged loss. If the assumptions of the consignee in this regard are wrong, it gives an opportunity to the parties so impleaded to deny their liability. All this unneces- sarily burdens the Court because notices have to be served on parties who are unconcerned with the carriage and usually operate from tax havens and have no fixed address and thus initial service is delayed unnecessarily. Seemingly this is an exer- cise in futility because the fact remains that it is the shipping agent who enters vessel in the port and then comes forward to defend the vessel, as instructed by his principal, who is the person actually responsible for the consignments. I there- fore, feel that once a vessel reaches the port with the cargo and delivery order is issued by the ship agent the actual identity of the carrier becomes irrelevant in so far as the consignment/subrogee is concerned. In the final analysis it is not the ship- owners/charterers who contest the claim. It is in fact the protection and indemnity clubs popularly known as P&I clubs, who are akin to, but not quite, an insurance company, and insure the third party liability of shipowner/carrier, that contest the claim behind the scenes on behalf of the shipowners/ charterers. Thus true identity of the carrier is of no concern to the consignee for his claim is against the carrier, whosoever it might be. Since invariably the carrier is the principal of the ship agent who enters the vessel in the port I hold that it would be sufficient if the consignee/subrogees while suing the carriers merely mentions as primary defendant "The Carrier carrying the consignments on Board MY .... to be served through the ship agent (who enters the vessel in port)" and the ship agent himself as the second defendant and thus service on the local agent would constitute service on the carrier also. Later the ship agent can be asked to disclose the identity of his principal/carrier as per law and then his name can be included in the title to the plant. In view of these findings of mine as above, I feel there is no need to consider various objections raised in the written statements in two suits regarding the liability or otherwise of various defendants that have been named in the plaints in the two suits. Need it to be said, the parties during the course of arguments never dwelt upon this issue. Issue No. 3: The loaded, arrived on board quantities of oil and quantities discharged into shore tanks in the two suits are tabulated below: 570 LLOYD'S LAW REPORTS [2000] Vol. 1 M. SHAIQ UsMANI, J.] The "Nitsa" and "Sinoda" [Pak. Ct. SUIT NO. 386/1982 As per Bill of Lading 25801.749 MT As per loading ullages 25862.600 MT As per arrival ullages 25863.014 MT Quantity received in Shore Tanks 25557.657 MT Shortage as compared to Bill of Lading quantity 244.092 MT SUIT NO. 78111985 As per Bill of Lading As per loading ullages As per arrival ullages Quantity received in shore tanks Shortage as compared to Bill of Lading quantity Kerosine Oil 6,311.000 6,359.700 6,323.580 6,181.02 129.98 DSDOil 21,047.000 MT 21,297.839 MT 21,276.345 MT 20,826.24 MT 220.76 MT Keeping in view the evidence of the surveyors and others that I have already touched upon it is clear that the quantities as above are determined as per methodology that I have explained above and are assessed jointly by surveyors representing cargo interest as well as the carriers'/owners' interests. Issue No. 4: This is by far the most crucial issue. Before I proceed further to discuss this issue, it would be better if I first touch upon the question of liability of the carrier before determining whether any short landing had occurred or not. In order to do this it would be advantageous to quote certain relevant provisions of the Hague Rules: ARTICLE 3.2 Subject to the provisiOns of Article 4, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried. ARTICLE 3.4 Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described in accordance with para- graph 3(a), (b) and (c). ARTICLE 4.2(m) Neither the Carrier nor the ship shall be responsible for loss or damage arising or result- ing from: . . . . .. Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods. An examination of the above provisions of law and their interpretation that has been well settled by now, would show that once the carrier loads con- signments on board the vessel and issues a bill of lading, which is not claused in any way, then he is deemed to have certified that the goods that he has received are as described in the bill of lading and he undertakes to take care of the goods and also discharge the same at the port of discharge. This bill of lading, therefore, is a prima facie evidence of the goods as described in the bill of lading. In other words an estoppel is set up against the carrier. This is of course a rebuttable presumption inasmuch as it is for the carrier to show that the goods were in fact not as described in the bill of lading. If carrier is not able to rebut the presumption and if he is not able to deliver the consignments as described in the bill of lading he is liable for any shortage or any damage to the cargoes. This principle equally applies to dry cargo as well as oil cargo and no distinction can be drawn between the liability of a carrier for one cargo or the other. The only latitude that a carrier has is that he can show that the cargo was not loaded in the same quantity or condition as described in the bill of lading. However, if he can show at the discharging point that the shortage or damage to the cargoes occurred while the goods were not in carrier's custody then he can escape liability. He can also escape liability if he can show that loss or damage falls within one or more exceptions described in art. 4 of Hague Rules. If the carrier takes these pleas then the consignee whose consignment has been lost or damaged can show that the vessel was not seaworthy or cargo worthy "before and at the beginning of the voyage". If this happens, then the carrier can assert that he exer- cised due diligence to make the ship seaworthy. The burden of proof thus keeps shifting between carrier and the consignee/shipper. The above proposition is easy to adhere to in case of general dry cargo but difficulty arises when the mode of carriage is unusual, particularly if it is containerized cargo or if the cargo is of a different kind such as oil cargo. In case of containerized cargo, the carrier often resorts to clausing the bill of lading, that is endorsing it with some qualifying remarks regarding the cargo because the containers are received by the carrier in sealed condition and are discharged in the same condition and the carrier never becomes aware of its contents. The remarks that the carrier normally endorses on container bill of lading are "said to contain", "Shipper load stow and count" or "CY to CFS" etc describing that the container has moved directly from container freight station (CFS) or container yard (CY) to a station or yard at the discharging port. In view of such clausing of the bill of lading, the carrier maintains that the bill of lading is not even a prima facie [2000] Vol. 1 LLOYD'S LAW REPORTS 571 Pak. Ct.] The "Nitsa" and "Sinoda" [M. SHAle..> UsMANI, J. evidence of the goods as described in the bill of lading and thus the carriers have no liability for any loss or damage to contents of container as long as the container is delivered in a sealed condition. This seems very simple but it is not, because the basic question involved here is one of estoppel, that is to say whether an estoppel is set up against the carrier or not. There is a plethora of case law on this subject but the case on which the foundation of the entire structure of law on this point rests is the Canadian Sugar case i.e. Canada and Dominion Sugar Co. Ltd. v. Canadian National (West Indies) Steamship Ltd., [ 1947] A. C. 46. In that case it was held: ... That if a statement relating to the apparent good order and condition of the goods is qual- ified by endorsement of remarks in Bill of Lading then the estoppel fails. Based on this case it is now universally accepted that if a container is loaded in a sealed condition and is discharged in the same condition and the bill of Jading is claused as stated above then the carrier is not liable for Joss or damage to the cargo. This proposition is now sanctified even in Pakistan by the case reported in P.L.D. 1992 S.C. 291. I have indulged in brief digression about the containerized cargo only to bring the point home that as per the law developed in the last 30 years while determining the liability of the carrier under a contract of carriage, it has become important to ascertain whether the carrier was in fact aware or in the knowledge of what was loaded in the receptacle or in case of oil cargo in the tanks and also whether the cargo so loaded was discharged directly into the custody of consignee/receiver or after the discharge there was yet another intermediary custodian. Hav- ing dealt with the part relating to lack of knowledge of the carrier relating to the contents of receptacle, the question that comes to fore now is whether the carrier will be liable for any loss or damage to the cargo once it has left the custody/control of the carrier. This question attains particular importance in case of carriage of oil cargo. This I shall deal with later in this discussion on this issue. Presently it needs to be considered whether any shortlanding did occur in these cases or not. The table, that I have given under issue No. 3 would show that the quantity of cargo discovered at the time of arrival of the vessel was in fact in excess of the quantity loaded and yet it is found that quan- tities actually discharged into shore tanks are lesser than the arrived quantity. What could be the expla- nation of this? From the description of method- ology of loading and discharging of oil cargo above, it is clear that there is considerable difficulty in ascertaining the true quantities of cargo loaded in the ship because of the presence of many variable factors. The bill of lading issued for the oil cargo, therefore, usual1y conforms to the quantities calcu- lated from the dip taken in shore tanks at the port of loading. However, when a ship carrying the con- signments reaches the port of discharge and the quantities calculated after taking ullages of ship's tanks are found to be lesser than the quantity described in the bill of lading for whatever reasons, then there is no doubt that the burden will be on the carrier to explain the shortage. If on the other hand the arrived quantity is the same as the bill of lading quantity or is in excess (which can be explained as an outcome of the difference in the variable factors fed into the calculation) then the presumption would be that there was no shortage. To say this is to simplify the problem involved but it is obviously not as simple as that. The evidence brought on record clearly shows that it is not possible for the oil cargo to be discharged directly to the consignee. Perforce, the cargo has to be discharged into the shore tanks which are often situated at great dis- tance from the oil pier and the pipelines leading to shore tank pass through an area which is not under continuous surveillance. This state of affairs pre- vails in most countries but in spite of this usually there is very little difference between the quantities that are found to be on board and the quantities that are eventually found to be in the shore tanks. The difference between the two quantities is minimal and rarely exceeds 0.5 per cent. which occurs due to what may be called "transportation losses". So much so that this figure of 0.5 per cent. has by now become internationally accepted. Even the plain- tiffs in suit No. 781/1985 have, of their own volition, made an allowance of 0.5 per cent. while calculating shortage in the cargo received. When- ever shortages have occurred in most developed countries these are normally attributable to either theft by the ship's staff or spills and leakages. However, unfortunately the conditions that prevail here are somewhat different. Here evidence has been brought through independent witnesses that there are widespread incidents of theft by organized gangs whereby they drill holes in the pipeline and siphon away great quantities of oil. Evidence has also been brought on record to the effect that thefts occur from the shore tanks as well and that shore tanks themselves are erected on land based on soft sand and hence the bottoms of tanks tend to cave in leading to errors in calculation. Hence it cannot be said with any degree of certainty that if the cargo is found to be short after discharge into shore tanks, such shortage is attributable to the carrier. Nevertheless the fact remains that there is no alternative to discharging of oil cargo into shore tanks. The ideal would have been to give direct delivery from the ship's manifold into some con- tainers of the consignee but that is not feasible. 572 LLOYD'S LAW REPORTS [2000] Vol. I M. SHAIQ USMANI, J.] The "Nitsa" and "Sinoda" [Pak. Ct. Considering that the oil cargo must be discharged into shore tanks the question that comes to fore is at what stage is the delivery made to consignee because as emphasized by one of the amicus curiae Mr. Ghulammohammad Ebrahim, merely discharg- ing the consignment is not sufficient, the cargo ought to be also delivered to the consignees by the carriers. There is no doubt that art. 3.2 of the Hague Rules only enjoins the carrier to discharge the goods and not to deliver these to the consignee. Discharge means merely the act of letting some- thing go or in other words get rid of something. Would that mean that the carrier would fulfil his responsibility under the law by merely depositing the cargo on any quay or barge upon reaching the port of discharge? Apparently not; because it is the contract of carriage which must be considered and not period of time. To this extent Mr. Ghulammo- hammad Ebrahim is right and the contrary argu- ment has been rejected in a passage from the case of Pvrene Co. Ltd. v. Scindia Navigation Co. Ltd. [ i 945] 2 Q.B. 402 which has been approvingly cited by the Hon'ble Supreme Court in the case of East & West Steamship Co. v. Hussain Brothers and Others, (P.L.D. 1968 S.C. 15) as under: In my judgment this argument is fallacious, the cause of the fallacy perhaps lying the suppo- sition inherent in it that the rights and liabilities under the rules attach to a period of time. I think that they attach to a contract or part of a contract. It would thus appear that in carriage of goods by sea the law cannot be viewed in isolation with contract of carriage and to that extent "discharge" and "delivery" would be concomitant to each other. However, in case of oil cargo, the question arises, whether the delivery is made when the last drop of oil cargo exits from the ship's manifold or is it made when it reaches the shore tank or is it made when the consignee takes delivery from the shore tank. Along with the question of delivery the question that attains prominence in order to deter- mine liability is, in whose custody can the oil cargo be considered to be at these various stages? What then is the definition of delivery in case of oil cargo? The word "delivery" means "handing over" "giving to some other person". In other words it connotes the act of physical parting with something into the custody of another. The two co-ordinates of this phenomenon are (I) the act of proffering or discharge and (2) the incidence of passing into another's custody, whosoever it might be. To show as to how this happens in case of oil cargo, I would quote the following passage from American juris- diction reported in 1972 American Maritime Cases p. 373 Centerchem Products, Inc. v. AIS Rederiet Odjjell And Skibs A/S Hasee/ And AIS Specialbank (1972 A.M.C. 373): It has been established that proper delivery occurs when a carrier (I) separates goods from the general bulk of the cargo; (2) designates them; and (3) gives due notice to the consignee of the time and place of their deposit, and a reasonable time for their removal. Titanio, 131 Fed. 229 (2 Cir., 1904); Calcot, Ltd. vs. lsbrandten Co., 1963 A.M.C. 1993 318 F. (2d) 669 (I Cir., 1963 ). When the glyoxal entered the flexible hose supplied by Norfolk Oil Transit it was thereby separated from the other cargo, it had been designated to the particular consignee and proper notice had already been given. It is, therefore, the opinion of this Court that the defendant-carrier had effected proper delivery once the chemical had left the ships pipes and entered the flexible hose. Since the was unable to show an)' loss of glyoxal prior to this delivery, there can be no judgment against the carrier. From another American jurisdiction case of Northeast Petroleum Corporation v. S.S. Prairie Grove, ( 1977 A.M.C. 2139), where the same point was considered, I will quote the following passage to bring the point home: The Court does not agree with plaintiff that the amount of cargo represented by the shore figures taken at the Massashusetts ports constitutes the amount of cargo "delivered". Here, as provided by the charter party, delivery occurred upon passage of the cargo from the vessel's permanent hose connections to connections provided for by plaintiff. Although the best evidence of the amount of cargo so delivered, i.e., passing through the permanent hose connections of the vessel, would be the actual total of the count of each barrel as it passed from the vessel's connec- tions to plaintiffs coupled with the "Dry Tank Certificates", absent this total, the Court finds that the next best evidence of the amount of cargo delivered to be those calculations taken by the Captain and the Saybolt representative based on the joint ullage reading of the vessel's tanks upon arrival at each destination point. Thus, comparison of the shore tank figures (at load port) recited in the bill of lading issued at Corpus Christi with either the figures calculated by the Captain or the Saybolt representative in Massa- chusetts establishes that the vessel arrived with substantially all of the cargo which was loaded at Corpus Christi. This definition of delivery brought out in the above case would clearly show that the delivery I would occur once oil cargo leaves ship's manifold, which is akin to the well understood expression "ship's rail" used in case of dry cargo. This point of view is further supported by the evidence brought on record, according to which the shore tanks are [2000] Vol. 1 LLOYD'S LAW REPORTS 573 Pak. Ct.] The "Nitsa" and "Sinoda" [M. SHAIQ USMANI, J. arranged by the consignees/receivers under an agreement whereby the shore tanks accept liability for any shortages. Besides, the shore tanks terminal representative has also brought on record that the pipes that lead from the ship's manifold, partic- ularly the portion that lies outside the Karachi Port Trust area right up to the shore tanks is laid by the shore tank terminal operators and its security is also their responsibility. The following extract from one of the clauses of the agreement between consignees and shore tank terminal operator would show that the shore tanks do accept responsibility for any shortage in the oil stored by them or any theft or pilferage of the said cargo. (vi) The Contractors (Terminal operators) shall indemnify the Hirers (Consignees) for any loss caused to them due to non-performance of the terms of this agreement by the Contractors and due to any loss of oil by theft, pilferage or any other reason. The Contractors further undertake to compensate the Hirers for any such loss by making payment of the value of the lost oil and for any other expenses on demand by the Hirers. 13. The Contractors shall be responsible for any shortage in the quantity of oil stored in their land tanks and they shall have no lien or right of retainer-ship on such oil. Moreover, it has come on record that in case of oil cargo there is almost negligible involvement of KPT in the process of preparation of outturn report or the final delivery to the consignees in complete contradistinction to the process followed in case of dry cargoes. KPT's interest in all oil cargo, as brought out by the evidence of deputy traffic manager KPT, is only to the extent of collection of wharfage charges and assisting customs to com- plete their formalities. The outturn report prepared by KPT in case of oil cargo is also not a document that is prepared by any involvement on their side but is entirely based on the shore tank figures provided to them by the surveyors who measure the quantities in the shore tanks after completion of discharge of the cargo. Further, the final delivery to the consignee is also not on one occasion but piecemeal; that is to say that the delivery to the consignees/receivers could extend over a period of a month or even longer. The question thus arises, in whose custody does the cargo lie all this while after it is discharged from the ship's manifold. It is obvious that unlike the dry cargo, it is not in the custody of the KPT nor can it be said that it is in the custody of the ship inasmuch as once the cargo leaves ship's manifold it is a matter of fact that shipowner/carrier has no further control over it as they have nothing to do with shore tanks terminal operators. Indeed even if the shipowner/carrier wanted to keep any control over the passage of oi I after it leaves the ship's manifold it would be impossible for him to do so. Here I may quote a passage from a case cited earlier i.e. ( 1977 A.M.C. 2139): In accord with Genterchem Products, supra, this Court finds that as a practical matter this is the only conclusion which could be reached. "To require the carrier to inspect a maze of piping and storage tanks over which it had no control or expertise would be burdensome if not impossible". However, it was argued before me by one of the amicus curiae, Mr. I.A. Lari that cargo could be considered to be in the custody of the carrier even after its discharge from the vessel and for this he relied on P.L.D. 1968 S.C. 15 where since the cargo was discharged into barrages by the ship it was held that the cargo continued to be in the custody of the vessel owner even when it was stored in the barrages. But in that case, the barrages were arranged by the shipowner. On the contrary in case of oil cargo it is an admitted position that shore tanks are arranged by consignees/receivers and not by the shipowner under a separate and independent agreement. Obviously, therefore, once the cargo leaves ship's manifold it is in the custody of shore tank terminal operators and the rights and liabilities with regard to the oil cargo would be governed by the terms and condition of the agreement between shore terminal tanks operator and the consignees/ receivers. The shore tank terminal operator thus being agents of the consignee, the cargo could even be considered to be in the constructive custody of the consignees/receivers themselves but it obvi- ously cannot be considered to be in the custody of carriers. In this connection one of the amicus curiae, Mr. Mohammad Jamil Khan referred to the case of Amoco Oil Co. v. Parpada Shipping Co. Ltd., [ 1989] 1 Lloyd's Rep. 369). In this case the question before the Court was whether the ship's figures upon arrival were to be preferred over shore tanks figures or vice versa. The learned Judge Mr. Justice Staughton came to the conclusion that ship's figures were to be preferred to the shore figures but this judgment was reversed by the Court of Appeal, which though approving the general principle of carrier's custody of oil cargo lasting only till the ship's manifold, held that Mr. Justice Staughton had arrived at the wrong conclusion on a point of fact, that is even though he had found the evidence of the chief officer of the ship regarding the defective ship's automatic ullage gauge to be suspect, he had nevertheless held that the ship's figures were to be preferred. Consequently the Court of Appeal felt that in that particular case, the shore tanks figures were to be preferred. Here it is necessary to consider that in this case discharge of oil took place 574 LLOYD'S LAW REPORTS [2000] Vol. I M. SHAIQ USMANI, J.] The "Nitsa" and "Sinoda" [Pak. Ct. in England where the incidences of differences between arrived quantity of oil and shore tank figures are very rare and incidence of pilferage from pipelines or the shore tank have hardly ever been reported. Moreover. the shore tanks in England are usually part of the port complex and, unlike in Pakistan, there is no evidence of there existing any contractual relationship between the receivers/con- signees and shore tanks terminal operators. Conse- quently, it would appear that this case turns on facts and has little relevance to the situation at Karachi port where the entire question regarding delivery, custody and also loss attributable to theft etc. have to be considered. Nevertheless in this case too as a matter of rule the learned Judges did agree that the shipowner had no further responsibility with regard to the oil cargo once it left the ship's manifold. A relevant passage from the judgment in which Lord Donaldson in his speech approvingly paraphrases a portion of Mr. Justice Staughton, judgment, is quoted below: (i) The responsibility of the shipowners begins when the oil passes into the ship on loading and ends when it leaves the ship upon discharge at the port of destination. Measurements of quan- tities of oil at any other points are merely means of determining quantities at those crucial points to which, for clarity rather than absolute accu- racy, I can refer as "ship's rail". And again a quotation from Mr. Justice Staughton as approved by Lord Donaldson: (ii) Secondly, the defendants are responsible for loss only if it occurred between the time when the oil came on board the ship and the time when it left the ship. As there may be a considerable distance of pipeline between the shore tanks and the ship, both at loading and discharge ports. It is important to remember that losses which may occur between a shore tank or meter and the ship are not the shipowner's responsibility. Having thus dealt with the questions as to when the delivery takes place. and as to when the custody of ship in case of carriage of oil cargo ends, we are now in a position to examine the kind of losses that occur in the carriage of oil cargoes and how the liability for such losses is to be determined and apportioned and as to on whom the burden of proof lies. In order to answer these questions one has to ~ x m i n e various different situations that occur in the discharging of oil from ships. First is the occasion when the arrived quantities of cargo are found to be the same as in bill of lading or are found to be in excess. The quantities in excess ought to be ignored as the consignees can not be asked to take into account the excess quantity of the cargo as there is no agreement or contract of carriage with regard to this additional cargo between the carriers and the consignees. The second situation would be when the arrived quantities are found to be short as compared to the bill of lading quantities. In such an event it is obvious that the carrier would be liable for such shortages and then the burden would shift on the carrier to show that the shortage was covered under the exception laid down in art. 4.2 of the Hague Rules. He could also show that the quantities were short shipped at the port of loading. For this purpose the master of the ship can rely on the mate's receipt and if he is bound to sign for the amounts in excess of the amount actually loaded, for instance because of certain binding term of charter-party, then he could lodge a note of protest at the port of loading before sailing and if time does not permit him to do so, he could lodge such note of protest immediately upon arrival at the first port that the vessel touches. Such note of protest may be accepted in evidence to show that the quantities actually loaded on board were not the same as shown in the bill of lading. Now coming to the first situation i.e. the arrived quantity is either the same or in excess of the quantity mentioned in the bill of lading. If, after discharge of the consignment from the ship and after issuance of "dry tank certificate" shortage is discovered when the measurements are taken in the shore tanks into which cargo is discharged, then the burden will be on the consignee to show that either the arrived quantities were incorrect or that the cargo was lost due to the fault or negligence of the carrier between the ship's manifold and the shore tanks. This could occur if there was an oil spillage exactly at the point of exit of the cargo from the ship's manifold or if the carrier had for some reason or the other expressly accepted the responsibility for the oil even after it had left ship's manifold. If the consignee is able to show the arrived quantities to be incorrect the burden will shift to the carriers to prove affirmatively that not only the information fed for calculation such as trim, list of the ship etc. was correct but also to show that the voyage was uneventful, that is to say that there were no leak- ages or spills during the voyage. This could be shown among other things by bringing on record the ship's log book abstracts relating to the period of vessel's passage between port of loading and port of discharge. It is trite law that in a claim for short delivery the burden of proof shifts to and fro between the consignee and the carrier, though it is undeniable that legal burden lies on the claimants. He who alleges must prove. In this connection a passage from an American case i.e. ( 1977 A.M.C. 2137) quoted earlier is very pertinent: Evidence introduced by plaintiff as well as defendant supports this conclusion, e.g., the [2000] Vol. I LLOYD'S LAW REPORTS 575 Pak. Ct.] The "Nitsa" and "Sinoda" [M. SHAIQ USMANI, J. "Dry Tank Certificate" issued at Corpus Christi establishes that the defendant's vessel's Jog recit- ing an uneventful voyage significantly reduces the probability that any cargo was lost at sea; the Captain's testimony explaining the oil spills rebuts assertions that the vessel's tanks were leaking; the fact that the seals on the tanks were intact upon arrival establishes that there were no unauthorized deliveries; and the "Dry Tank Cer- tificate" issued after discharge at each port estab- lishes that all of the cargo on board was delivered. Taken as a whole, this evidence estab- lishes that the defendant was free from fault in the Joss, if any, of plaintiff's cargo. See Dow Chemical Co. (U.K.). supra, 1970 AMC at 391, 297 F. Supp, at 708 Yet in another case of American jurisdiction a similar point was considered i.e. Palmaco Inc and Fireman s Fund Insurance Company v. American Resident Lines Ltd & Others, ( 1978 A.M.C. 1715): Defendant's primary defense is that there was no actual shortage, only "paper" losses. By comparing the bill of lading weights and the shore tank gauging weights, I have determined that there was a shortage. The only method applicable to this case by which the defendant can defeat the prima facie case is by showing that it exercised due diligence in making the vessel seaworthy. Defendant has not presented sufficient evi- dence to establish its due diligence for the full amount of the Joss. Defendant has introduced evidence tending to show clean and tight holds on board the ships and has introduced the ship's logs to negate any possible oil spills. Before concluding discussion on this issue, it is necessary to touch upon yet another aspect of the Joss of oil cargo. Basically two kinds of losses can occur when oil cargoes are carried. One may be termed as "transpiration losses" and the other "marine losses". The causes of transpiration losses include clingage, sedimentation and evaporation. To explain it a little further, losses due to clingage occur because of the oil sticking to the side of the oil tanks and in pipes, while losses due to sed- imentation occur because of formation of sediments in the oil which often happens in case of edible oil cargoes. On the other hand, the "marine losses" are caused by incidents such as collision, unseaworthi- ness of the ship or cargo spaces or Jack of care of the cargo. Taking the "transpiration losses" first, it is now universally accepted that certain percentage of oil cargo is waste loss during transportation by sea and such loss has been accepted to be upto 0.5 per cent. of the total quantity loaded on board. This kind of Joss has been amply explained in the following passage from a case from American jurisdiction ( 1978 A.M.C. 1715) that has been cited earlier: Although defendant cannot explain away the full amount of the loss, it also contends that a certain small percentage of a bulk shipment of oil is always lost, despite the carrier's due diligence. This amount, known as a "tare," is the result of a film of oil left on the walls of the ship's holds, plus normal retention in the pumping lines. Defendant contends that the normal tare for bulk oil is .5 per cent. Plaintiff contends that there is legal basis for deducting .5 per cent of the cargo unless pro- vided for in the bill of lading. However, the carrier is not an insurer of the cargo. COOSA imposes liability only if the carrier fails to exercise due diligence. 46 U.S. Code sec I 304( 1). Defendant's proof of an expected and normal loss of .5 per cent rebuts plaintiff's prima facie case of unseaworthiness for that amount. Defendant is not liable for any shortage of up to .5 per cent per shipment. This completely disposes of any claims for shipment 4, 5, and 6 and reduces the claims for the four other shipments. And again in the same case it has been held: It is true that plaintiff has not suffered any damages for the amount of the lost oil which was actually moisture and impurities. However, defendant's method of computing damages results in presuming that the full amount of moisture and impurities was in the lost oil. Actually, moisture and impurities would be evenly distributed throughout the bulk shipment. The amount of the Joss consistituting moisture and impurities would be .2 per cent (for the first shipment) of the net shortage, not .2 per cent of the full 1 ,500 ton shipment. As is apparent from the passage quoted above transpiration losses to the extent of 0.5 per cent. relate to inflammable oil cargo only, where the losses attributable to evaporation amount to about 0.2 per cent. to 0. 25 per cent., while the balance 0.25 per cent. losses are attributable to other factors and these relate to all oil cargoes, including edible oil cargo. In view of the overwhelming evidence of universal acceptance of "transpiration losses" as above, I hold that in case of inflammable oil cargo the "transpiration losses" would not exceed 0.5 per cent.. and in case of edible oil cargo this will not exceed 0.25 per cent. Considering that it is permis- sible for a carrier to claim exception for wastage in bulk under art. 4.2(m), of the Hague Rules, I hold that the carrier can press this exception into service and thus if arrived quantity of cargo is Jess than the bill of lading quantity the carrier will not be liable 576 LLOYD'S LAW REPORTS [2000] Vol. 1 M. SHAIQ USMANI, J.] The "Nitsa" and "Sinoda" [Pak. Ct. for shortage upto 0.5 per cent. in case of inflamma- ble oil cargo and 0.25 per cent. in case of edible oil cargo. I am informed that Pakistan Custom also allows upto 0.25 per cent. shortage while calculat- ing Customs penalty on short landed quantity of edible oil cargo based on arrived quantities. I find this to be in accord with the universally accepted figures. In these two cases that are before me, the arrived quantities were found to be in excess of the figures mentioned in the bill of lading and "dry tank certificates" were issued indicating that the entire cargo had been discharged from the vessel. No evidence has been brought on record to show that such was not the case. In the light of the above discussion therefore, this would mean that there was no shortlanding of cargo in both the cases. Issue No. 5: Since I have already held under Issue No. 4 that there was no shortlanding in both cases no finding need be recorded on this issue. Issue No. 6: This issue finds a place virtually in every case relating to cargo claim. This occurs because it is generally the underwriter who sues after being subrogated to the rights of the consignee, who, as is well settled by now, acquires such right only upon paying consignee's claim, as has been well settled by now. Consequently, it is always the attempt of the carriers to prove that the underwriters, as the plaintiffs, are not entitled to sue by showing that they have not paid the claim. This, in my view, is a mere technicality which wastes considerable time of the Court. It is inconceivable that a consignee would sign a letter of subrogation presented by the insurance company without having first received the claim amount. This can occur only in cases where a regular customer of the underwriter is involved and there are many pending claims. A consignee may then sign a letter of subrogation without having actually received cargo claim on a promise of its being paid in future. However, since it is well settled that the subrogation rights arise only after payment of the claim, actual payment would be necessary. Consequently, if an under- writer is able to produce a receipt for payment from the consignee along with Jetter of subrogation and a duly signed copy of loss voucher or even a copy of a cheque made out in the name of the consignee, then no further evidence with regard to rights of subrogation would be necessary. I find in this case necessary proofs have been provided for the pay- ments made to the consignee by the plaintiff and hence my findings with regard to this issue is in the affirmative. Issue No. 7 I have already recorded my findings to the effect I that the carrier is not liable for the short receipt of the consignment by the consignee. Now all that remains to be considered is what, if any, is the liability of the ship agent. In cargo claim cases as a rule the plaintiffs seek a decree against all the defendants jointly and severally and the list of defendants invariably includes the ship agent who enters the vessel in the port. While one can under- stand the impleading of shipping agents as party to such proceedings, no explanation is available as to why a decree is sought against the agent jointly and severally with carrier. As explained earlier in this judgment, the agent's liability, if at all, arises from a general bond signed by the agent with the Customs under the provisions of s. 55(1 )(d) and (e) of the Customs Act, 1969, which is akin to s. 64-D of Customs Act, 1878, and is reproduced below for ease of reference: Section 55 - ( 1) Power to refuse port-clear- ance to vessel or permission for departure to other conveyance. - The appropriate Officer may refuse to give port-clearance to vessel or permission for departure to any other conveyance until- (a) .. . (b) .. . (c) .. . (d) The agent. if any delivers to the appro- priate Officer declaration in writing to the effect that he will be liable for any penalty imposed under clause 24 of the Table under subsection (I) of section 156 and furnishes security for the discharge of the same. (e) the agent, if any delivers to the appropriate Officer declaration in writing to the effect that such agent is answerable for the discharge of all claims for damage or short delivery which may be established by the owner of any goods comprised in the import cargo in respect of such goods. (2) An agent delivering a declaration under clause (d) of subsection (I) shall be liable to all penalties which might be imposed on the person in charge of such conveyance under clause 24 of the Table under subsection (I) of section 156, and an agent delivering a declaration under clause (e) of subsection (I) shall be bound to discharge all claims referred to in such declaration. It is significant to note that such bond is not signed by agent on every occasion that a vessel is entered in the port by him. In fact signing of such a bond by the agent is one of the prerequisites for obtaining a license to act as a ship's agent from the Customs. A [2000] Vol. 1 LLOYD'S LAW REPORTS 577 Pak. Ct.] The "Nitsa" and "Sinoda" [M. SHAIQ USMANI. J. plain reading of s. 55 would show that the bond is given only to ensure the issuance of port clearance by the Customs for the vessel for departure from the port. It is given also to ensure that after departure of the vessel someone remains available in Pakistan from who Custom penalty can be recovered. Sec- tion 55(1 )(d) therefore makes the agent liable for Customs penalty. In complete contradistinction to it, s. 55(l)(e), which deals with damage or short delivery of cargo, does not make the agent liable but only "answerable for discharge of all claims for damage or short delivery". This distinction between the liability or answerability of the Cus- toms penalty and cargo claim respectively carries over to s. 55(2) which makes the agent liable for payments of all Custom penalties which may be imposed on master of the ship by s. 156( I) of Customs Act but merely binds the agent to dis- charge all cargo claims. What then is the sig- nificance of use of the word "liable" for custom penalty and "answerable" and "discharge" for cargo claim? There was nothing to prevent the law makers from using the same words for both, but the fact they chose to use different words for the two clearly goes to show that they had intended the responsibility for two types of claims to be differ- ent. This point has been considered in the case of Crescent Sugar Mills and Distillery Ltd. v. Amer- ican Export lsbrandtsen Inc., (P.L.D. 1983 K.A.R. 29). The relevant passage from it is quoted below: The effect of these declarations has been specified in section 55(2). The agent will be liable to pay all the penalties specified above and shall be also liable to satisfy the claims relating to short-delivery and damage to import cargo as specified in the declaration. Such satisfaction of the claim is however subject to condition speci- fied in section 55(1 )(e) that agent's liability will arise only after the damage or short delivery is established. The agent's liability is therefore not independent of his principal. It is co-extensive with the carrier and unless the claim is admitted, before holding the agent liable the claimant should establish his claim for damage or short delivery against the carrier. In this regard refer- ence can be made to Barjorjee Cowasjee v. Habib Insurance Co (I) in which section 64(d) of Sea Custom Act 1878, was under consideration and it was held that a ship agent is not personally liable on his declaration given under section 64(d) of the Sea Custom Act before the claim is established against the carrier. Further reference can be made to Haji Slzakoor Ghani Firm v. Firm of Volart Bros. and another (3) AIR 1937 Sind II Uudgment in appeal); British India Steam Nav- igation Co Ltd and another v. M.A. Wadud & Co. and another ( 4 ). In this case the learned single Judge has in effect held that the agent's liability is co-extensive with that of the carrier and before agent can be made liable for the cargo claim, the claimant should establish his claim against the carrier. But the learned Judge did not proceed further to examine as to how is the cargo claim to be satisfied once the liability is finally established after the end of all proceedings including appeals, as appeals are essentially continuation of suits. To determine this it will be necessary to examine the distinction between the words "liable" and "discharge" used in s. 55(2) for "Customs penalty" and "cargo" claims respectively. According to Blacks Law Dic- tionary the word "liable" means the following: Liable: Bound or obliged in law or equity; responsible; chargeable; answerable; compella- ble to make satisfaction, compensation, or resti- tution. Obligated; accountable for or chargeable with Condition of being bound to respond because a wrong has occurred. Condition out of which a legal liability might arise. And the word "discharge" means the following: Discharge: To release; liberate; annul; unbur- den; disencumber; dismiss. To extinguish an obligation. A comparison of the meanings of the two words would show that there is a subtle difference between the two. But before highlighting the differ- ence it may be appropriate to consider the back- ground and nature of the two undertakings that are given by the ship agent pursuant to s. 55( 1 )(d) and (e) i.e. with regard to Custom penalty and cargo claims. In so far as Customs penalty is concerned, its origin lies in the distant past when masters owned their own ships and often disposed of cargoes surreptitiously even before entering the port of call. Upon entering port they lodged cargo manifest with Customs and blamed any shortage in the manifested cargo to peril of sea etc. This enabled the consignees to claim exemption from payment of duty on the short landed cargo. Since the vessel left the port soon thereafter it became impossible for the Customs to make investigation into the true cause of shortages that resulted in depriving the state of the customs duty. It is in order to ensure that someone was available within the country to explain the shortage and upon liability being established, to pay the custom penalty, that this provision of s. 55(1 )(d) was introduced, whereby agent was made personally liable. Pres- ently the consignees pay the full duty on manifested cargo but upon shortlanding occurring they claim refund of duty paid on shortlanded cargo. After departure of the vessel the Customs issue a letter of call to the ship agent (not the Carrier) to explain the shortage and if the agent is unable to explain, 578 LLOYD'S LAW REPORTS [2000] Vol. 1 M. SHAIQ USMANI, J.] The "Nitsa" and "Sinoda" [Pak. Ct. Customs penalty as per Customs Act, 1969 is imposed on the ship agent. The ship agent thus becomes personally liable to the Customs for pay- ment of Customs penalty. It may appear to be rather a harsh measure as the ship agent has no contractual relationship with the consignee whatsoever and has no responsibility for the carriage of the goods, but it is nevertheless necessary because otherwise unscrupulous consignees in collusion with errant shipowners can avoid customs duties on a large scale. The mischief therefore that is sought to be addressed by s. 55(1 )(d) is very much present and needs to be suppressed since it involves govern- ment revenues. However, the situation is entirely different in so far as cargo claims arising from shortlanding or damage to a consignment is concerned. First of all it appears extraordinary that such a provision i.e. s. 55(1 )(e) has found a place in the Customs Act, because a cargo claim has no nexus with liabilities under the Customs Act. The only explanation for the presence of such a provision in the Customs Act is that in the earlier days giving of port clearance was the sole responsibility of Customs and hence Customs wanted to ensure that before giving of port clearance the interests of a consignee, who has suffered losses due to fault of shipowners, are protected. Need it be said that this is no more the case. The port clearance is now given after "No Objection" is recorded by many departments and organizations including Customs but not including consignee. This provision, therefore has now become an anachronism because as already explained P & I clubs now take over the responsi- bility for shortage or damage to cargo on behalf of the carriers but they do so not directly, only from behind the scenes. Moreover, the consignee can always protect themselves by obtaining security for the claim by seeking arrest of the vessels under Admiralty jurisdiction of this Court and in the alternative accepting letters of undertaking from P & I clubs, which are all reputable organizations. Nevertheless the fact remains that this provision still exists on the statute books and thus has to be interpreted by giving natural meanings to the words that it consists of. Now, therefore, reverting to the meanings of "liable" and "discharge" used in the context of customs penalty and cargo claim respect- ively it is easy to see that since the word "liable" connotes legal responsibility the use of it in the context of Customs penalty appears to be in con- sonance with the intention and anxiety of law makers to prevent evasion of Customs duties by consignees in collusion with shipowners. But the use of the word "discharge" in the context of cargo claims connotes nothing but an "act of paying off' by the ship agent not on his own but on behalf of his principals. But why should the ship agent pay off the claim of the consignee when he has no con- tractual relationship with the consignee whatsoever. It would be understandable for this to happen if the ship agents were the exclusive agents of their principals, who would then deem to carry on their business in Pakistan through the agent but not when they are general ship agents, who offer their serv- ices to all and sundry. It would therefore appear that while law makers wanted to make the ship agent co-extensively responsible with carrier for answer- ing for cargo claim, they did not want the patent to he personally liable for payment of the claim. All they were contemplating was that once the liability of the carrier was established the ship agent should discharge the cargo claims on behalf of their principals. I am therefore, inclined to hold that if the ship agents are required to discharge the cargo claims, they would do so on behalf of their princi- pals and hence their liability to do so would be essentially secondary liability, that is to say the liability of a guarantor as contrasted with that of strict surety. Consequently it is only when the consignee is unable to recover from the carrier, either because of his refusal or avoidance or una- vailability within the boundaries of Pakistan, that the consignees/underwriter may proceed to recover from the ship agent. It would therefore seem that the Courts should refrain from passing joint and several decrees in cargo claim cases against the carriers and ship agents. In fact the interest of the consignees/underwriters will be sufficiently pro- tected if the decree is sought and granted primarily against the carriers and in the alternative against the ship agents. Since I have already held that the carriers have no responsibility for the short receipt of the cargo hy the consignees in both suits and the result of the discussion under the above issue would show that the liability of the ship agents is in any case secondary, I find that none of the defendants have any liability in both the suits. I accordingly dismiss both suits with no orders as to costs. But before parting with these cases I would like to record my appreciation for the assistance provided to me by the amicus curiae appointed by the Courts.