The appellant purchased a consignment of fertiliser in bulk from ConAgra Resources Europe Ltd (the shipper). The consigment was carried on the respondent vessel. A bill of lading dated 20 September 2001 was endorsed to the appellant. According to the appellant, this bill of lading was the contract of carriage between the appellant and the shipper. The appellant claimed that cll 47 and 58 of the charterparty dated 14 September 2001 under which the cargo was being carried were breached, in as much as the appellant's cargo was loaded at the Port of Ilyichevsk, Ukraine, and although it was agreed that it would be discharged first at Karachi, Pakistan, without there being any en route calling and loading, the respondent vessel not only deviated, but also loaded other cargo, which caused a delay in reaching the port of discharge. This caused a loss in the value and utility of the cargo, which could not be used for the potato crop. The appellant claimed that its suit arose from a contract of carriage by sea in terms of s 3(2)(h) of the Admiralty Jurisdiction of the High Courts Ordinance 1980 (the Ordinance) and, as the shipowner was liable in personam, the vessel could be arrested to answer the claim in rem.

The master of the vessel objected to the appellant's application for ship arrest, asserting that the owners of the vessel had no privity of contract with the appellant. The claim, if at all, was between the voyage charterer, ie the shipper, and the time charterer of the vessel, under the charterparty entered into between them. After hearing the parties, a single Judge of this Court dismissed the appellant's arrest application in view of the fact that the shipper itself was the voyage charterer who had entered into a charterparty with the time charterer (disponent owner) and not with the shipowner. Since the shipper was aware of the terms of the charterparty, its case would be governed under the charterparty alone, and since the appellant was claiming under the shipper, it was also bound by the terms of the charterparty, and not those of the bill of lading. The appellant appealed against this ruling.

The appellant contended that it was the endorsee of the bill of lading which was signed by the master of the vessel for and on behalf of the owner. The appellant, being a stranger to any arrangement under the charterparty between the shipper and the time charterer, could not be compelled to pursue the charterer, as opposed to the owner of the vessel.

The respondent argued that in this case the shipper entered into a voyage charter with the time charterer, and the consignment of bulk fertiliser was being carried under the terms of that charterparty. Under cl 27 of the charterparty, the master was authorised to sign bills of lading without prejudice to the shipowner's rights under the charterparty, and the dispute between the voyage charterer and time charterer was subject to arbitration. The respondent further contended that, since the time charterer was neither the owner of the respondent vessel, nor had any beneficial interest in the vessel, an action in rem for the arrest of the respondent vessel was not maintainable.

Held: Appeal dismissed.

It is clear from the Ordinance that the exercise of the admiralty jurisdiction in rem can be invoked against the ship if at the relevant time when action is brought, majority shares in the ship are beneficially owned by a person against whom an action in personam is maintainable.

In this case, the appellant itself has relied upon the charterparty, which contains terms and conditions of affreightment. The appellant rests its claim for damages on the breach of charterparty alone. The appellant argues that since it is the endorsee of the bill of lading duly signed by the master of the vessel, prima facie, it presupposes a contract entered into by the master on behalf of the shipowner, and therefore a suit in rem is maintainable against the vessel. This contention, while seemingly attractive, is true where the principal arrangement of affreightment is between the shipper and the master of a vessel without there being any knowledge of an intermediary charterparty. Such a proposition is not true in a case where the bill of lading obtained by a subcharterer from the master of the vessel was issued under a time charter. In this case, the shipper, who is also a voyage or subcharterer, endorsed the bill of lading in favour of the appellant. Where the shipper itself is the charterer, the bill of lading in the hand of the charterer is merely a receipt for goods. Such a receipt, even if endorsed, as in the present case, in favour of the consignee, will not change its complexion, and it will remain a receipt of the goods. In fact, the endorsee in such a case will step into the shoes of the shipper, and will be liable for, and entitled to, all such obligations and rights in relation to the affreightment contract as may be available to the shipper, who incidentally in this case is also the charterer of the vessel.

In this entire episode, the owner or beneficial owner of the vessel does not come into the picture. Generally, where the bill of lading is signed by the master, the presumption is that the bill is an owner's bill. This presumption is rebuttable where it is successfully demonstrated that the bill of lading signed by the master was, in fact, signed on behalf of the charterer, and was intended to take effect as a charterer's bill. Clause 27(a) of the charterparty relied upon by the appellant reads as follows: 'The Master is to sign Bills of Lading as presented without prejudice to the owners' rights under this charter‑party.'

In The Rewia [1991] 2 Lloyd's Rep 325, a bill of lading signed by the master was considered to be prima facie an owner's bill. This presumption is rebuttable and is not attracted here, as the appellant itself has relied upon, and filed a copy of, the charterparty which authorises the master to sign a bill of lading for the charterer. In a case where the charterer itself is the shipper, as here, the bill of lading is reduced merely to a receipt of the goods shipped, and such receipt when endorsed will only entitle the holder in due course to all the rights of the shipper/charterer. From whatever angle the case is approached, one cannot establish any nexus in the affreightment contract between the holder of such receipt and the owner of the vessel. The conclusion drawn by the single Judge that the vessel cannot be arrested in an action in rem as the appellants have failed to show that the time charterer is the owner or beneficially owns majority shares or interests in the respondent vessel itself, is correct.