Razak & Co. Ltd., v. Lanka Walltiles Ltd.
RAZAK & CO., LTD.
v.LANKA WALLTILES LTD.
COURT OF APPEALEDUSSURIYA, J„
A. NO. 316/88 F
C. COLOMBO 82984/MJULY 22ND, 1998AUGUST 18TH, 1998
Judicature Act – S. 13 – Admiralty Jurisdiction Act S. 2, 3 – Shipping spaceallocated in Ship – Cargo accepted for loading – Ship arrested – Shipper orderedto offload – pay costs of offloading – To recover cost – Does District Court havejurisdiction? Admiralty jurisdiction – Privity of Contract – Central Freight Bureaulaw S. 15, 16 – liability – Is an agent liable in Tort?
The plaintiff respondent had on or about 21. 6. 77 requested the Central FreightBureau (CFB) for allocation of shipping space. Upon representation by the defendant-appellant to the CFB. Shipping space was provided, and cargo was loaded. Theship could not sail as it was arrested. The plaintiff respondent was called uponto pay for the costs of offloading. The plaintiff instituted action in the District Courtto recover the said costs. The defendant took up the position that the right toreceive cargo on board has been reserved with the Master of the vessel, andthe Master had placed the goods on Board, and the defendant became awareof the arrest of the ship only on 19. 7. 77 and the vessel was in the custodyand control of the Marshal of the Admiralty court and that no goods can be placedon board or discharged from the vessel without the express consent of the Marshal,that the Master had with the consent of the Marshal accepted the goods on board,and the Master is also liable for such acceptance.
The defendant further contented that, the plaintiff was aware that the vessel wasunder arrest, when the goods were being loaded and that on the application ofthe plaintiff the Admiralty Court permitted the plaintiff to discharge the cargo atthe expense of the plaintiff and that the court would thereafter determine the liabilityin regard to costs. The defendant further took up the position that the jurisdictionis exclusively with the Admiralty Court to determine this liability as to the costof discharge of the cargo.
The District Court held with the plaintiff.
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Admiralty jurisdiction relates to matters arising out of disputes involvingseafaring carriers and actions before the Admiralty court are either actionsin rem or actions in personam.
This is primarily an action for damages that the goods loaded on arepresentation made by the defendant and consequently discharged as theship could not sail.
Damages arising out of negligence of parties are determinable by theDistrict Court.
Under the statute, the shipping agent and the shipper have to seek theCFB and once the CFB brings the two parties together a privity of contractis established and parties may sue each other in tort or in contract.
The plaintiffs action is tortious on the basis of fraudulent and/or negligentrepresentation made by the appellant to the CFB.
As a general rule agent is himself liable for any wrongful act committedby him in carrying out the principals instructions.
APPEAL from the judgment of the District Court of Colombo.
Case referred to:
1. Scruttons v. Midland Silicones Ltd. – 1962 AC 446.
Sanjeewa Jayawardena for defendant-appellant.
Sivarasa, PC with Bimal Rajapakse for plaintiff-respondent.
Cur. adv. vult.
November 13, 1998.
The plaintiff a manufacturer and exporter of ceramic tiles alleged inthe plaint filed in the District Court of Colombo that he requestedthe Central Freight Bureau on or about 21. 6. 1977 for allocation ofshipping space on a vessel calling Doha & Quatar for approximately340 metric tons of ceramic tiles; that upon the representation madeby the defendant to the Central Freight Bureau the plaintiff was duly
CARazak & Co. Ltd., v. Lanka Walltiles Ltd. (Jayasinghe, J.)11
informed by the said Central Freight Bureau that shipping space wasavailable on MV "Falak" sailing in July, 1977; that the plaintiff madeready for shipment quantities of its products for shipment to itscustomers amounting to 333-31 metric tons valued at US $ 70781.04;that on 15. 07. 1977 the defendants through its agents/servantsinformed the plaintiff that the said vessel was ready to accept cargoand to make available the cargo for loading; that consequently 333-SI metric tons were accepted for loading between 15th to 28th July,1977; that at all times material to this action the defendant was awarethat the said vessel was incapable of moving on its own steam and/or under arrest pursuant to an order of a competent Court andaccordingly could not sail on schedule; that the defendant fraudulentlyor negligently failed to notify the plaintiff of such incapacity and therebyinduced the plaintiff to load the said cargo in the belief that the vesselwould sail on schedule; that the plaintiff was compelled to obtain anorder from the Admiralty Court in Colombo for the discharge of thecargo from the vessel in order to mitigate damages; that the plaintiffwas called upon to pay a sum of Rs. 333,310/- as costs of offloading. the cargo; that a cause of action has accrued to the plaintiff for therecovery of the said sum and prayed for judgment in a sum ofRs. 333,310/-.
The defendant filed answer; denied jurisdiction of Court; that thedefendant informed the Central Freight Bureau in early July, 1977,that shipping space was available on MV Falak; that such informationwas communicated to the Central Freight Bureau on informationreceived from the master of the vessel; that Central Freight Bureaubooked shipping space in the vessel for 340 metric tons of ceramictiles; that the right to receive cargo on board the. vessel has beenreserved with the master of the said vessel; that the master of thevessel did place the plaintiffs goods on board the vessel; that thedefendant became aware only on 19. 7. 1977 that the said MV “Falak"was under arrest; that the said vessel was in the custody and controlof the Marshal of the Admiralty Court of Colombo; that no goods canbe placed on board or discharged from the vessel without the expressconsent of the said Marshal; that the master of the vessel had evidentlywith the consent of the said Marshal accepted the said goods on board;that the responsibility for such acceptance is, in the first instance withthe Marshal; that the master of the said vessel is also liable for suchacceptance because the goods were received by him and receiptsissued; that the plaintiff was aware that the vessel was under arrest
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when the goods were being loaded; that the plaintiff made anapplication to the Admiralty Court for an order to permit the plaintiffto discharge the cargo at the expense of the defendant and/or ownerof the vessel; that the said Court made order directing the Marshalto arrange the discharging of the cargo at the expense of the plaintiff;that the Court would thereafter determine the liability in regard to suchcosts; that the jurisdiction is exclusively with the Admiralty Court todetermine the liability as to the cost of discharge of the cargo andmoved for dismissal of the plaintiffs action.
Mr. Jayawardena submitted that the District Court of Colombo haserred in conferring upon itself the jurisdiction to determine this disputeand that sole and exclusive jurisdiction being vested in the AdmiraltryCourt by virture of section 13 (1) of the Judicature Act.
The Admiralty Court in the first instance made order that the goodsloaded into the ship be discharged at the expense of the plaintiffand reserved for a later date the determination as to who should incurthe expenditure for the said discharge. It is on that basis that thedefendant stated that the parties have to go back to the AdmiraltyCourt for the determination of the indemnity. Admittedly the goodshave been placed on board by the plaintiff on the representationsmade by the defendant that the ship would sail on schedule. It wasin fact the defendant by "P1“ that informed the Central Freight Bureauthat shipping space was available on MV Falak. It was on thisrepresentation that the plaintiff in good faith proceeded to deposit itscargo in the ship. If as a result of the conduct of the defendant theplaintiff had to incur expenditure for the discharge of goods it mustnecessarily be attributable to that conduct of the defendant. It wason that basis that the plaintiff alleged that a cause of action hasaccrued to the plaintiff to sue the defendant for the recovery of thesaid sum.
Admiralty jurisdiction relates to matters arising out of disputesinvolving seafaring carriers and actions before the Admiralty Court areeither in rem or actions in personam. This is primarily an action fordamages; that the goods loaded on a representation made by thedefendant and consequently discharged as the ship could not sail onits own steam does not necessarily bring the matter within thejurisdiction of an Admiralty Court. It was necessary to seek theapproval of the Admiralty Court for the discharge of the goods for
CARazak & Co., Ltd, v. Lanka Walltiles Ltd. (Jayasinghe, J.)13
the reason that it was under arrest on an order made by the AdmiraltyCourt. The Admiralty jurisdiction of the High Court is set out in section2 of the 3 Admiralty Jurisdiction Act, No. 1983. Section 2 (1) setsout the area in which the Admiralty Court is vested with jurisdictionto hear and determine claims arising out of disputes. The jurisdictionof the Admiralty Court is therefore confined to the parameters ofsection 2 (1). However the jurisdiction of the Admiralty Court is notexclusive. Section 2 (2) (b) provides that;
Nothing in section 13 of the Judicature Act, No. 2 of 1978 orsubsection (1) shall be read and construed as affecting any jurisdictionconferred by any other law, on any other court or tribunal to hearand determine any such question or claim as referred insubsection (1). Therefore it cannot be said that the jurisdiction of theDistrict Court is ousted by the Admiralty jurisdiction of the High Courtas submitted by Mr. Jayawardena. It is my view that damages arisingout of the negligence of parties are determinable by the District Court.Mr. Jayawardena however did not cite any authority to support hiscontention that in matters such as this the jurisdiction was withthe Admiralty Court. I am unable to accept that the District Courtacted without jurisdiction in this instance.
Mr. Jayawardena also submitted that the respondent cannot main-tain this action in the absence of privity of contract between theappellant and the respondent. According to section 16 of the CentralFreight Bureaul law:
The Minister may, from time to time, by Order publishedin the Gazette, vest in the Bureau, with effect from suchdate as may be specified in the order, the exclusive rightto book, reserve or allocate freight or cargo space onany ocean going vessel for the carriage of goods otherthan the goods specified in the order, from any port inSri Lanka to any destination specified in the order.
On and after the date with effect from which the exclusiveright to book or reserve freight or cargo space for thecarriage of any goods to any destination has been vestedin the Bureau under subsection (1) –
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no person other than the Bureau shall make any bookingor reservation of freight or cargo space with a shipowneror his agent for the carriage of such goods to suchdestination;
no person shall ship such goods to such destination onany ocean going vessel unless freight or cargo space hasbeen booked, reserved or allocated for the carriage ofsuch goods by the Bureau; and
any booking, reservation or allocation of freight or cargospace for the carriage of such goods to such destinationin contravention of the preceding provisions of this sub-section, and any contract of affreightment in respect ofsuch carriage entered into between a shipper and anyowner, agent or master of an ocean going vessel shallbe deemed for all purposes to be null and void and tohave no force or effect whatsoever.
The preamble to Law, No. 26 of 1973 has been enacted to providefor the establishment of the Central Freight Bureau for the purposeof centralization of booking of freight from Sri Lanka to such foreignports as may be determined by the Minister.
Counsel further submitted that in view of section 16 the respondentis enjoined by law from directly entering into a contract with theappellant. Therefore in such circumstances the respondent cannotmaintain the present action against the appellant as parties are notjoined by contract resulting in the absence of privity of contract. I amunable to accept the submission. The parties both the shipping agentand the shipper have to seek the Central Freight Bureau by operationof law. This is required by statute. Therefore on that basis there isno privity of contract in the sense envisaged by counsel. Howeveronce the Central Freight Bureau brings the two parties together aprivity of contract is established and parties may sue each other intort or in contract.
Mr. Jayawardena seems to have overlooked the fact that it is thebasis set out above that operates to attach liability to the appellanton the basis of a Tort. It is ridiculous to assume that a cause ofaction accrues to the parties to sue the Central Freight Bureau unless
CARazak & Co., Ltd. v. Lanka Walltiles Ltd. (Jayasinghe, J.)15
negligence/fraud of the Central Freight Bureau is established. TheCentral Freight Bureau is cast with no obligation to make a physicalverification of any space available on any ship. It only operates asa fund that collects the space available for affreightment to be dis-bursed among the prospective shippers. The Central Freight Bureauacts on the representation made by the agents of the ship as to theavailability of space and the readiness of a vessel to sail for designateddestinations. "D2" which Mr. Jayawardena relies upon is a documentissued by the Central Freight Bureau to the respondent confirmingthe freight booking of 340 metric tons of wall tiles to Doha on MV.Falak. This confirmation of the freight booking has been effected bythe Central Freight Bureau for "Lanka Wall Tiles" (ie plaintiff) on therepresentations made by the appellant. According to “D1" the CentralFreight Bureau has written to the appellant urging the appellant toinform without delay the likely date MV. Falak would sail as prospectiveshippers have complained that the delay may cause documents tobe dishonoured on Falak's arrival in the Persian gulf. The CentralFreight Bureau has also urged the appellant to confirm the ship's,proposed itinerary after leaving Colombo. D1 and D2 are evidencethat Ms. Razak & Company the appellants have been operating asagents for "MV. Falak" and of an admission that the defendants arethe local agents.
Counsel sought to impress upon court that the plaintiff having cometo court on the basis of a contractual agreement could not nowmaintain this action on the basis of a Tort. It would appear from para9 of the plaint that the plaintiff alleged that the defendant was awarethat the vessel was incapable of moving on his own steam and/orunder arrest pursuant to an order of a Competent Court and ac-cordingly would not sail on schedule and that the defendant fraudu-lently or negligently failed to notify the said facts and thereby inducedthe plaintiff to load the said cargo on the said vessel in the beliefthat the vessel would sail on schedule and in para 13 the plaintiffalleged that by reason of fraudulent and/or negligent acts of thedefendant that the plaintiff has suffered loss or damage in a sum ofRs. 333,310. The plaintiff also raised an issue on that basis. Thisis evidenced by document of P6. According to "P6” the defendantswere aware that the ship had developed engine trouble and was adriftand had to be towed to Colombo for necessary repairs. When thedefendant informed the Freight Bureau that shipping space was avail-able on MV. Falak it was still being repaired. There was a duty cast
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on the defendant to monitor the progress of the repairs to the pointof the ship being load ready. If they did, they would have been awareof the subsequent development and that the ship was arrested onorders of the High Court. On "P6” itself negligence on the defendantis established. Mr. Jayawardena submitted that the alleged failure tonotify the prevelant circumstances cannot in any manner be held tohave been actuated by an intention to be deceitful or deliberately andmaliciously caused the respondent to incur loss and damage. Thiscertainly is not the case of the respondent. Issue No. 3 was on thebasis whether the appellant fraudulently or negligently failed to notifythe respondent of any one or more of the matters specified in issueNo 2. All that the respondent has to establish is that; between 15thJuly and 20th July, 1977, the appellant was aware of the elementsset out in issues 1 and 2 and that there was a failure on the partof the defendant to inform the plaintiff of such circumstances. On "P6“the defendant was aware that the ship was under arrest and it ison that basis that the plaintiff claims that it was done either fraudulentlyor negligently and that conduct of the defendant resulted in the plaintiffhaving to unload the said cargo from the vessel and consequentlysuffer loss and damage in a sum of Rs. 333,310 for discharging thecargo.
His argument is also untenable in that the plaintiff was seekingto convert a contractual action into an action in Tort.
Mr. Jayawardena's other argument was that it is unequivocally clearthat the contract was between the Central Freight Bureau and theappellant acting as agents for and on behalf of its principals and relieson section 15 (2) (e) of the Central Freight Bureau Law No. 26 of1973 and submits that section 15 (2) (e) specifically contemplates theCentral Freight Bureau entering into contracts with shipowners andshipping lines for the carriage of goods. He submitted that this contractualcapacity is vested in the said Bureau by the legislature in view ofthe fact that the shipping lines and exporters are prohibited fromcontracting together. Thefore he submits that the Bureau does notmerely place parties together. He submitted that the fact that all thedocumentation produced were between the appellant and CentralFreight Bureau, was indicative of a privity of contract between theappellant and the Central Freight Bureau and therefore it is the Bureauthat can maintain an action against the appellant and that the respond-ent also could have proceeded against the Bureau for the represen-
CARazak & Co., Ltd, v. Lanka Walltiles Ltd. (Jayasinghe, J.)17
tation it made regarding the availability of space. Mr. Jayawardenarelied on Scruttons v. Midland Silicomes Ltd.w House of Lords whereit was held that it is a fundamental principal that only a person whois a party to a contract can sue upon it and a stranger to a contractcannot with either of the contracting parties take advantage of thecontract even where it is clear from the contract that some provisionin it was intended to benefit it. Mr. Jayawardena persists in his attemptto classify the arrangement between the plaintiff and the CentralFreight Bureau as a contractual agreement between them in orderto escape liability. I am unable to accept this contention. Firstly thatsection 15 (2) (e) of the Central Freight Bureau Law empowers theBureau to enter into agreements with shipowners and as stated before,shipping lines, etc., but this section cannot be relied upon by theappellant as to urge that there was a contract between the plaintiffand the Central Freight Bureau. Therefore the above case is of noapplication. I am satisfied that the Plaintiff's action is tortious on thebasis of fraudulent and/or negligent representation made by the appellantto the Central Freight Bureau. Counsel also argued that the respondentfailed to establish the point of time as to when it claims the appellantshould have notified it of the ship's condition. I am unable to acceptthis contention. The plaintiff is entitled to proceed to load goods intothe ships without any further inquiries as to whether the ship isseaworthy. He is entitled to presume that the ship would sail onschedule and the defendant had held out to the plaintiff that the shipwas ready to sail through the Central Freight Bureau. According to"P6" the appellant as agent for MV. "Falak" was aware that the shiphad been towed to Colombo on 25. 6. 1977 after developing enginetrouble on the high seas and was a drift. Mr. Jayawardena also submitsthat there was no evidence of how much cargo has been loaded bythe time ship's condition became known. "P6" again stands in the way.
We are inclined to accept Mr. Rajapakse's submission that theappellant had to be satisfied on its own inquiries that the ship wasloadready from 10. 7. 1977 when it addressed “PI" to the CentralFreight Bureau. It is on this footing that fraud/negligence is alleged.
Mr. Jayawardena also submitted that in any event the agent is notliable in tort and that in any event it was the principal who is liablein law for the tort committed by his agent. Personal liability of theagent has been considered in Fridemans Law of Agency at page 325.“As a general rule an agent who commits a tort will be personally
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liable for his wrongs even if it is done with the authority of his principaland for the principals benefit. He cannot plead the authority of hisprincipal by way of defence even though he does not know what heis doing is tortious". In Bowstead and Reynolds on Agency “whereloss or injury is caused to any third party by a wrongful act or omissionof an agent while acting on behalf of his principal the agent ispersonally liable whether he was acting with the authority of theprincipal or not, to some extent as if he was acting on his own behalf,unless the authority of the principal justifies the wrong.
Mckerron in Law of Delict 7th edition also takes the same view.That a person who commands instigate or authorises another tocommit a wrong is responsible for the wrong in the same mannerand to the same extent as if he himself has committed it and a personis also responsible for a wrongful act committed by another whichhe has subsequently ratified or adopted. This being the liability ofprincipal for the wrong committed by the agents". “It need hardly bestated that as a general rule agent is himself liable for any wrongfulact committed by him in carrying out the principals instructions". I amagain unable to accept Mr. Jayawardena's submissions that an agentis not liable in tort and that it is a principal who is liable for the tortcommitted by the agents. The entire case in the District Court wasfought on the basis of a tort committed by the defendant-appellant.It was never based on contractual liability. Issues were also raisedon that basis by the plaintiff-respondent and no issue was raised bythe defendant-appellant that there was a contractual liability and thedefendant was represented by an eminent counsel. The defendanthas been sued on his direct liability for the damages incurred. Theplaintiff-could have wellsued both the defendant who was directly liablefor his negligence and the principal on the basis of his vicarious liabilityif he so desired. In this instance the plaintiff had chosen to proceedonly against the defendant.
For the reasons stated above the appeal is dismissed with costsfixed at Rs. 10250/-.
EDUSSURIYA, J. – I agree.