Dear sir/mam, please comment in simple words at this case study.

1973 PLD 49===

KARACHI HIGH COURT

Revision Applications Nos. 15 to 18 and 22 of 1966, decided on 14th October 1971. Date of hearing : 25th August 1971

PRESENT:

DORAB PATEL, JUSTICE

PETITIONERS: MESSRS VALEEJEE & SONS

VS

RESPONDENTS: MESSRS AMERICAN PRESIDENTS LINES LTD. AND ANOTHER

Fakhruddin and G. Ibrahim for Applicant.

Hassan Mahmood for Respondent.

Revision Application No. 16 of 1966

Fakhruddin for Applicant.

Hassan Mahmood for Respondent.

Revision Application No. 17 of 1966

Fakhruddin for Applicant.

Hassan Mahmood for Respondent.

Revision Application No. 18 of 1966

Fakhruddin for Applicant.

Hassan Mahmood for Respondent.

AND

Revision Application No. 22 of 1966

Fakhruddin for Applicant.

Hassan Mahmood for Respondent.

Sections:211

JUDGMENT (Read from Here)

The applicant in these Revision Applications is a firm whilst the respondents are carriers by sea and belong to an Association known as the Karmahom Liners Conference. By a notice dated the 6th July 1962, presumably because of competition amongst carriers by sea, this Association had made an offer of deferred commission to all shippers who shipped their cargo from Karachi to the ports specified in the notice exclusively by the vessels of this Association. This offer was however subject to a condition of defeasance, and the common question which has arisen in all these revision applications is the proper construction of this condition of defeasance in the said notice. I will therefore dispose of all these applications by this Judgment.

2. The claim of the applicant in all these applications is that as it had shipped cargo by the respondents vessels it was entitled to deferred commission under the said notice. But the applicant carries on various businesses, including the business of clearing and forwarding agents for other shippers, and, because, whilst acting in Its capacity as a clearing and forwarding agent, the applicant bad shipped cargo by vessels other than those of the Association, the respondents have repudiated its claim for commission on the basis of the defeasance clause. The applicant therefore tiled suits against tire respondent in the Karachi Small Causes Court for the recovery of its commission. All these suits were beard together, and by his judgment dated the 27th October 1965, the learned Judge, Small Causes Court, Karachi, accepted the plea of the respondents and held that the applicants' conduct fell within the mischief of the defeasance clause in the aforesaid notice. The applicant therefore fled revision applications against this judgment, which have now cost,; up fir hearing before me.

3. As the only point for determination is these revision applications is the construction of the relevant clause is the aforesaid notice, I will quote the relevant part of this notice.

"NOTICE TO SHIPPERS

Deferred Commissions

Sippers are hereby informed that subject to the conditions and terms hereinafter mentioned and until further notice the undersigned will pay a commission ref 10% (Subject to clause 2 hereof) sin the freight as per Bill of Lading, for shipments of all description of merchandise . . . . from al posts on the coasts of West Pakistan . . . . . . to Gibraltar acid as ports in the U. K. .. . The commission is payable to those only who until to date at which the commission shall become payable, shall have confined their shipments to Gibraltar and all ports in the U. K. . . . . . exclusively to vessels despatched by the Lines composing the Karmahom Liners Conference and provided that .such shippers and their affiliated Houses (as to which, affiliation ire the context here used shall be solely within the determination of the Conference whose decision shall lie binding) in the same port or another port either as principals or Agents, have not directly or indirectly made or been Interested in any shipments to Gibraltar, or any ports in the U. K. . . . . . . . by vessels other than those despatched by the lines composing the Karmahom Liners Conference."

The clause can hardly be described as a model of elegent drafting but certain thugs are not in dispute. Thus a shipper can qualify for a deferred commission under this notice only it he has not shipped cargo for the prescribed period by vessels not belonging to the Association. Similarly, he cannot get round the defeasance clause by employing Agents or affiliated Houses to snip his cargo on vessels of nonConference Lines. That is clear, but it is nobody's case that the applicant's Agents have shipped the applicant's cargo by vessels not belonging to the Association. The question here is different. The respondents claim that the defeasance clause has been attracted because, whilst acting as the clearing agents of other principals, the applicant leas shipped cargo of such other Principles by Non-Conference vessels. In other words, the submission of the respondents is that if a shipper is also a clearing and forwarding agent, then in order to preserve the commission earned by hire as shipper, he must run his clearing and forwarding business in such a manner that no cargo of his Principals in the clearing and forwarding business is shipped by vessels not belonging to the Association. It is obvious that the consequences of the construction sought to be placed or the defesance clause by the respondents are farreaching. But according to Mr. Hassan Mahmood, their learns d counsel, this construction was the plain and obvious construction of the defeasance clause in view of the words "or Agents" which I have underlined. The argument is fallacious specially in view of the peculiar economic structure prevailing in the subcontinent for generations. Business is frequently carried on in the country through managing agencies, so that it is very common for a terra or a c0nrpany to have many businesses which have no connection with one another. Thus, in the present case, the applicant wag apparently an exporter of goods at the relevant time and therefore made shipments, but it was also running the business of a clearing and forwarding agent. As there is nothing unusual in this multiplicity of businesses by an entrepreneur, it is relevant to point out that the notice under construction expressly declares that it is a notice to shippers. In this context, the words "or Agents" on which Mr. Hassan Mahmood relied have to be read with the preceding words "such shippers at their affiliated Houses" which I have underlined". So read, it is very clear that they only mean the agents of the shipper who has earned the commission under the first part of the clause under construction. This means, in the present case, that the applicant could not have shipped other goods on its account through Agents except by the vessels of the Association. But the words "or Agents" cannot possibly cover the clearing and forwarding business run by the applicant.

4. Additionally, as I have observed, if Mr. Hassan Mahmnod's construction is accepted, tire results would be very farreaching. A clearing and forwarding agent is an agent under the Contract Act and is therefore bound by the instructions of his principal under section 211 of the Contract Act. He is also bound to attend to the interests of his principal faithfully and not to make any profit out of that business, therefore, if I accept Mr. Hassan Mahmood's construction of the defeasance clause it might be virtually impossible for a shipper to carry on business as a clearing and forwarding agent. I am aware that it is the duty of the Courts to give effect to the meaning of a contract or an offer however farfetched provided the meaning is plain. But if an offerer seeks to attach unusual conditions to his offer, he must do so in plain words and not by a sidewind so to say, therefore in the instant case the respondent and/or their Associations could, if they had so wished, warned shippers that the defeasance clause would be applicable to any other businesses carried on by them, such as the clearing and forwarding business, but as they have not done so, I cannot accept Mr. Hassan Mahmood's submission.

5. I have observed earlier that the clause under construction was not a model of elegent drafting, therefore whilst in may humble opinion the respondents' construction is not supported by the language of the clause, I would not go so far as to say the clause ix not free from ambiguity. But as rightly submitted by Mr. Fakhruddin, wizen a document is ambiguous, the ambiguity has to be construed against the maker of the document. As observed in Halsbury's Laws of England, 3rd Edition, Vol. I page 394 : "covenants are construed most strongly against the covenantor, and most beneficially in favour of tire coveantee. Generally, an instrument must be read most strongly against the party who prepares it and offers it for execution by the other." In view of the principle laid down in these observations, Mr. Hassan Mahmood's interpretation of the defeasance clause cannot be accepted.

6. Mr. Hassan Mehmood then submitted that the respondent Construction was neither unusual nor improper, because a clearing agent, was free to ship the cargo of its principals in vessels of its own choice, therefore, the construction of the respondents did not amount to any interference in the clearing and forwarding business of the applicant, and learned counsel stressed the fact that this argument had boon accepted is the trial Court. I may therefore observe here that although the applicant had produced evidence in the trial Court to show that it was bound, as a clearing agent, by the instructions of its principals, the learned .fudge had ignored that evidence sad held that a clearing and forwarding agent was from to ship the cargo of its principals in vessels of its own choice. But as a clearing agent is only a type of agent, the conclusion of the learned Judge implies that an agent is trot bound by the instructions of its principals. Not only is this conclusion contrary to the plain language of section 211 of the Contract Act, but I do not think any agency business could ever be carried on by an agent who refused to be bound by the instructions of its principals. However, in gaming to this extraordinary conclusion, the learned Judge had relied on the Sea Customs Act, 1879 and some bills of lacing, on which the applicant's witness was not crossexamined and which were produced by the respondents. As to the Sea Customs Act, the learned Judge had relied in particular on the provisions of sections 4 and 202. Clearing agents are appointed under sec, don 202, and the Chief Customs Authority is empowered to make rules for the manner in which they may carry on business.

No such rules have been produced before me nor before the trial Court. Be that as it may, the learned Judge has then examined the relevant provisions of the Act, specially the provisions for the discharge of cargo, and then referred to section 4 of the Act. This section reads as follows:

"Subject to the provisions of section 202, anything which the owner of any goods is required or empowered to too under this Act may be done by any person expressly or impliedly authorised by the owner in that behalf."

Because uh the authority conferred on the agent under this section and because the loading of goods on ship would fall within the ambit of the various provisions of the Act, the learned Judge took the view that a clearing agent was free to ship goods by vessels of his own choice. Further, because some bills of lading for cargo shipped by the applicant, in the course of its clearing and forwarding business, bore the applicant's name as shipper, the learned Judge thought that this proved his conclusion that a clearing agent was free to ship goods in vessels of its own choice.

7. With respect, the argument does not bear analysis. Taking first the question of the applicant's name on bills of lading, it is unfortunate that the learned Judge overlooked the obvious consideration that a clearing agent did not become the owner of the goods shipped merely because it was described the shipper tin the bills of lading. The names of clearing against Eire sometimes put on bills of lading for the convenience of the parties and to facilitate rapid clearance, but it is settled law that this does not make them the owner of the goods shipped under the bills of lading (See Carver on Carriage of Goods by Sea (10th Edition, pages 5356). Turning now to the Sea Customs Act, on which the learned Judge also relied, It is true that a clearing agent is empowered under this statute; to act on behalf of the owner of a cargo, but this is only for the purposes of the statute, and the clearing agent, does not thereby become the owner of the cargo entrusted; to it for clearance. It is thus obvious that the conclusion; reached by the learned Judge was based on a misreading of the Sea Customs Act and on the evidence on record. Additionally as the Sea Customs Act is not intended to alter the liabilities of an agent under the Contract Act, I have to repeat here that a clearing and forwarding agent is bound by the instructions of its Principals undo section 211 of the Contract Act. Accordingly; I have no hesitation in accepting Mr. Fakhruddin's argument that a clearing agent has to ship cargo according to the instructions of its Principals. But this conclusion is fatal to Mr. Hassan Mahmood's argument, As a clearing agent is bound by the instructions of its Principals, it follows that the respondent's construction of the defeasance clause would make it extremely difficult, if not impossible, for the applicant to carry on its clearing and forwarding business, therefore even on the assumption that there is an ambiguity in the offer of the respondents, their construction has to be rejected, as ambiguities in a document have to be construed against the author of the document.

8. Mr. Fakhruddin also argued in the alternative that if the respondent's construction was correct, which he denied, it wars hit by section 27 of the Contract Act, because it imposed a restraint on the applicant's right to carry on its clearing and forwarding business. Section 27 of the Contract Ace reads as follows :

"27. Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

Exception 1 (a). One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the Buyer, or any person deriving title to the goodwill from him, carries on a like business therein : Provided that such limits appear to the Court reasonable, regard being had to the nature of the business."

Subject to the exception, this section prohibits all agreements which impose any restraint on a profession, trade or business therefore, the respondents' construction would impose a very severe restraint on the applicant's clearing and forward business and if it is correct, the defeasance clause is illegal. That was also the view of the Calcutta High Court in Noor Ali Dubush v. Abdul Ali (I L R 19 Cal. 76) a case not dissimilar from the present.

9. Mr. Hassan Mahmood admitted that his of the defeasance clause imposed a restraint on the clearing and forwarding business of the applicant, but as that restraint was a partial and not an absolute restraint, he submitted that it was not hit by section 27. I cannot accept this argument. Section 27 prohibits all agreements in restraint of trade, and it is intended to invalidate many agreements that are valid under the Common Law. Mr. Hassan Mahmood's submission however had reference to the Common Law cases. But in enacting Section 27, the Legislature was made an express departure from English Law. That is also the view of the authorities. See Oakes & company v. Jackson ((1875) 1 Mad. 134), and Nur Ali Dubash v. Abdul Ali. Therefore English cases, and judgments in which such were cases were followed, are not good law. It is the duty the Courts to give effect to the plain language of section 27, and not less so because the departure from the Common Law has perhaps checked the growth of cartels and monopolies. The language of section 27 being plain and unambiguous, have no doubt that the respondents' construction of their offer would render it illegal under section 27. However I am also satisfied that this construction is not correct. Accordingly, bold that the applicant was entitled to the commission claimed because the cargo shipped by it as a clearing agent did not fall within the perview of the defeasance clause.

10. In the result I allow the revisions, set aside the judgment the learned Judge, Small Causes Court and decree the suits of the applicant against the respondents with costs.

SD/-

DORAB PATEL

JUSTICE