IN THE HIGH COURT OF SINDH, KARACHI
M.A. No.07 of 2016
[ M/s. EFU General Insurance Ltd., & another v. Mew (Pvt) Limited]
PRESENT:
Mr. Justice Arshad Hussain Khan
Mr. Justice Amjad Ali Sahito
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Appellants : Through Abdul Moiz Jaferi, Advocate.
Respondent : Through Mr. Rizwan Ahmed, Advocate
Dates of hearing : 03.09.2026, 09.09.2026 & 22.09.2026
Date of decision : 01.10.2026
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ARSHAD HUSSAIN KHAN, J. Through this Miscellaneous Appeal, filed under Section 124(2) of the Insurance Ordinance, 2000, the Appellants have impugned the Judgment and Decree dated 28.04.2016 passed by the learned District Judge, Karachi-Central / Insurance Tribunal for Sindh at Karachi in Suit No.8 of 2007, whereby the suit filed by the Respondent for recovery of Rs.24,449,445/- was partly decreed to the extent of Rs.8,414,445/- with costs.
2. Briefly stated, the Respondent obtained marine insurance cover from Appellant No.1 in respect of its tug boat “Big Fair 327” for its delivery voyage from Hong Kong to Port Qasim, Pakistan. Following a pre-voyage survey by M/s. The Salvage Association, Singapore, Appellant No.1 issued Marine Hull Policy No.70200002/07/2004 for the period from 14.07.2004 to 13.07.2005, for a sum insured of Rs.162,400,000/-, subject, inter alia, to a deductible of Rs.1,800,000/- per accident/occurrence and Rs.3,000,000/- for the delivery voyage. During the voyage, the tug encountered adverse weather conditions and suffered engine failures on 23.07.2004 and again on 26.07.2004, resulting in loss of motive power. It was consequently towed to Vung Tau, Vietnam, where surveys were conducted at the instance of Appellant No.1 and necessary repairs, including replacement of the damaged fuel pumps, were carried out. The tug thereafter resumed its voyage, reached Karachi and was subsequently renamed and registered as “M.T. Mehran”. The Respondent lodged a claim under the policy for the losses allegedly sustained. The Appellants’ appointed Adjusters, M/s. W.K. Webster (International) Pte. Ltd., apportioned the claim into “Claim on Policy” of USD 36,513.20 and “Owners’ Liability” of USD 100,556.20, and opined that the amount recoverable under the policy fell below the applicable deductible. A further opinion obtained from M/s. Seawise Maritime Services (Pte.) Ltd. concluded that the two casualties arose from separate manufacturing defects rather than insured perils and constituted separate occurrences attracting separate deductibles. The claim having remained unsettled, the Respondent instituted Suit No.8 of 2007 before the Insurance Tribunal for Sindh at Karachi, claiming Rs.24,449,445/- towards repair expenses, supplies and loss of revenue, together with mark-up and costs. The Appellants contested the suit, inter alia, on the grounds that the claim was not covered in the manner asserted by the Respondent and that the two incidents constituted separate occurrences attracting separate deductibles, which exceeded the amount recoverable under the policy. After recording evidence, the learned Tribunal held the suit to be maintainable and found that the claim exceeded the applicable deductible. While disallowing Rs.13,035,000/- claimed towards loss of revenue as an uncovered consequential loss, it decreed the suit for Rs.8,414,445/- with costs, after deducting Rs.3,000,000/- as the policy deductible. Aggrieved by the said Judgment and Decree, the Appellants have preferred the instant Miscellaneous Appeal.
3. Learned counsel for the Appellants, reiterating the grounds of appeal, contended that the suit was incompetent, having been instituted and verified by a person lacking proper authorization from the Board of Directors of the Respondent company, whose testimony was also based largely on hearsay and information supplied by third parties who were not produced as witnesses. On merits, it was argued that the learned Tribunal misconstrued the marine insurance policy as providing comprehensive cover beyond the insured perils and erroneously assumed compliance with all thirteen recommendations contained in the Insurance Survey Certificate, despite evidence, including admissions of the Respondent’s witnesses, showing non-compliance with several thereof. It was further submitted that the losses resulted from pre-existing/manufacturing defects rather than insured perils and that, under the applicable Institute Hull Clauses, while consequential damage caused by a latent defect may be covered, the cost of repairing or replacing the defective machinery itself was not. In support thereof, counsel referred to the survey findings indicating prior running hours, sludge deposits and rust in the machinery, as well as the report of M/s. Seawise Maritime Services (Pte.) Ltd. dated 11.01.2007, which, according to him, was wrongly disregarded by the Tribunal. Counsel also challenged the Tribunal’s rejection of the Adjusters’ apportionment between amounts recoverable under the policy and those falling to the Owners’ Liability, as well as its reliance upon repair expenses and documents which had not been duly admitted in evidence. Lastly, it was argued that the incidents of 23.07.2004 and 26.07.2004 constituted separate occurrences attracting separate contractual deductibles and, upon their proper application, the admissible claim fell below the deductible threshold. The impugned Judgment and Decree for Rs.8,414,445/- with costs was, therefore, sought to be set aside.
4. Conversely, learned counsel for the Respondent supported the impugned Judgment and Decree and, while reiterating the written objections and synopsis, initially contended that the appeal was barred by limitation. On merits, it was submitted that the Respondent had paid a premium of Rs.4,848,000/- for marine insurance cover throughout the delivery voyage from Hong Kong to Karachi against, inter alia, perils of the seas, latent defects in machinery and negligence of the Master, officers or crew. Counsel maintained that all thirteen recommendations contained in the Insurance Survey Certificate had been complied with and that neither the Surveyor nor the Adjuster had reported any violation thereof. The recorded engine hours were attributed to pre-delivery testing and were stated not to establish prior use or any pre-existing defect. It was further argued that the engine failures occurred during adverse weather conditions and resulted from a common cause, namely ingress of seawater into the bunker fuel system, causing contamination of the fuel and consequent damage to the engines. Since both incidents arose from the same proximate cause, only one deductible of Rs.3,000,000/- was attracted, as also acknowledged by the Adjuster in its correspondence. Counsel further disputed the Adjuster’s bifurcation of expenses into “Claim on Policy” and “Owners’ Liability”, as well as the subsequent findings of M/s. Seawise Maritime Services, contending that these were inconsistent with the terms of the policy and the contemporaneous survey material. Lastly, it was submitted that the objections regarding maintainability, authorization and admissibility of evidence had been duly considered and rightly rejected by the learned Tribunal. Accordingly, counsel prayed for dismissal of the appeal and maintenance of the impugned Judgment and Decree. In support of the his arguments learned counsel has relied upon the case of EFU General Insurance Ltd. v. Jahangir Mughal [2021 CLD 1334], State Life Insurance Corporation v. Sumera Iqbal [2014 CLD 934] and Takaful Pakistan Ltd. v. Executive Director (Insurance) [2010 CLD 1228].
5. We have heard learned counsel for the parties at considerable length and have carefully examined the record, including the impugned Judgment, the pleadings, the evidence led before the learned Tribunal and the documents relied upon by the parties.
6. Before adverting to the merits, we may first address the preliminary objection raised by learned counsel for the Respondent that the appeal is barred by limitation. Admittedly, the impugned Judgment was pronounced on 28.04.2016, whereas the instant appeal was instituted on 08.08.2016. Section 124(2) of the Insurance Ordinance, 2000 prescribes a period of thirty days for preferring an appeal before the High Court against a decision of the Insurance Tribunal.
7. The record reflects that the Appellants applied for a certified copy of the impugned Judgment on 23.05.2016; the copy was prepared and made ready on 23.06.2016 and was received on 28.06.2016. In terms of Section 12 of the Limitation Act, 1908, the time requisite for obtaining the certified copy is liable to be excluded while computing the prescribed period of limitation. Upon such exclusion, the remaining period of limitation expired during the summer vacation of this Court.
8. Section 4 of the Limitation Act, 1908 provides that where the prescribed period for filing an appeal expires on a day when the Court is closed, the appeal may be instituted on the day the Court reopens. In the present case, the appeal was filed on 08.08.2016, being the first reopening day of this Court after the summer vacation. The Appellants were, therefore, entitled to the benefit of Section 4 of the Limitation Act.
9. Consequently, upon exclusion of the time requisite for obtaining the certified copy under Section 12, read with Section 4 of the Limitation Act, 1908, we are satisfied that the instant appeal, having been presented on the first reopening day of this Court after the summer vacation, cannot be treated as barred by limitation. The preliminary objection is, accordingly, repelled.
10. Reverting to the merits, the first objection raised by the Appellants concerns the competence of the person who instituted and verified the suit on behalf of the Respondent company. The record reflects that the plaint was signed and verified by Muhammad Zubair, Manager Legal of the Respondent, and was accompanied by a Resolution of the Board of Directors dated 05.06.2007 expressly authorizing institution of the proceedings. Order XXIX Rule 1 CPC permits pleadings on behalf of a corporation to be signed and verified by its Secretary, Director or other principal officer who is able to depose to the facts of the case, whereas Order III Rule 1 CPC recognizes acts performed through a duly authorized agent. In the presence of the aforesaid Board Resolution, and in the absence of any material demonstrating that the authority so conferred was invalid or otherwise deficient, we find no error in the conclusion of the learned Tribunal that the suit had been competently instituted.
11. The further objection that the Respondent's witnesses lacked personal knowledge of every event occurring during the voyage also does not, by itself, render the suit incompetent or the entire claim unproved. The occurrence of the casualties and the damage sustained by the auxiliary engines were not sought to be established merely through the oral assertions of the Respondent's representatives. The record also comprised contemporaneous survey and adjustment material prepared by professionals engaged in connection with the casualties, including the Salvage Association survey report and the adjustment prepared by M/s. W.K. Webster. The evidentiary value of individual documents and particular heads of expenditure is, however, a separate matter and falls for consideration while determining the extent of the recoverable loss.
12. The principal controversy concerns the nature and extent of the insurance cover. The Schedule describes the insured interest as “Hull and Machinery & Third Party Liabilities Insurance” and incorporates the Institute Time Clauses—Hulls as well as the relevant Protection and Indemnity provisions. The policy expressly extended to the delivery voyage from Hong Kong to Karachi and prescribed a deductible of Rs.3,000,000/- in respect thereof. Under the incorporated perils clauses, loss or damage caused, inter alia, by perils of the seas, latent defects in machinery or hull, and negligence of the Master, officers or crew was covered, subject to the other terms, warranties and exclusions contained in the policy.
13. We are, however, unable to endorse the construction that the policy provided unrestricted or “comprehensive” insurance against every loss or expenditure incurred during the delivery voyage. The policy insured specified interests against specified perils and liabilities. Similarly, the Protection and Indemnity provisions cannot be read in isolation merely because they employ expressions such as “any sum or sums”; those words are necessarily controlled by the nature of the liabilities and circumstances specifically enumerated in the clauses that follow. The mere fact that a particular expenditure is not expressly mentioned amongst the exclusions does not, without more, render it recoverable. The Respondent was required to establish that the particular loss claimed fell within an operative insuring provision and bore the requisite causal connection with an insured peril.
14. The learned Tribunal was also not justified in treating the W.K. Webster report as an affirmative determination that all thirteen recommendations contained in the Salvage Association certificate had been complied with. Under the heading “Relevant Insurance Details”, the Adjuster merely reproduced the policy warranty that all recommendations made by the Salvage Association “are fully complied with in all respects”. The recital represented a reproduction of the contractual term rather than an independent factual finding by the Adjuster that each of the thirteen recommendations had actually been observed. The reasoning of the learned Tribunal to that extent proceeds upon a misreading of the document.
15. This, however, does not establish the converse proposition that the recommendations stood breached. The policy undoubtedly made compliance therewith a warranty, but the alleged breach was required to be demonstrated from the evidence. Recommendation No.3, for instance, provided that where bad weather was forecast or experienced, the vessel should seek shelter “if possible”, otherwise its course and/or speed should be adjusted so as to minimize water on deck. The mere fact that the vessel encountered heavy weather cannot, therefore, by itself establish breach of the recommendation. Similarly, Recommendation No.7 contemplated that problems encountered during the voyage were to be dealt with as found necessary, with notification to the Salvage Association where further recommendations might be required. On the material placed before us, no specific breach has been established with sufficient certainty so as, by itself, to defeat the claim.
16. The more substantial controversy relates to the cause of the damage. The contemporaneous survey material records that, following its departure from Hong Kong, the vessel encountered rough to very rough seas and winds of approximately 20 to 30 knots. Upon inspection, the Salvage Association found sludge deposits and rust in the fuel-pump components and further recorded that, on 13.08.2004, the vessel's managers had reported possible ingress of seawater into the bunker fuel tanks through the air-vent pipes. Similar sediments were also found in the remnants of fuel contained in the bunker tanks.
17. In this context, the adjustment prepared by M/s. W.K. Webster on behalf of the Underwriters assumes relevance. Referring to the Salvage Association's communication dated 12.05.2005, the Adjuster recorded that the damage to both auxiliary engines appeared to have resulted from contaminated fuel bunkers. It further observed that, although the precise manner in which the contamination occurred had not then been conclusively identified, it appeared likely that both auxiliary engines had been affected or damaged due to a common cause. Proceeding on that basis, W.K. Webster considered it reasonable that only one policy deductible of Rs.3,000,000/- should apply to the total claim.
18. It must, however, be noticed that W.K. Webster did not finally determine that the loss was covered under the policy. The Adjuster expressly observed that the precise cause of damage had not yet been ascertained and that it remained necessary for the Assured to establish whether the loss was attributable to an insured peril. It also adverted to the possibility of recourse against the engine manufacturer or builder if the damage was ultimately found attributable to defective machinery or installation. Thus, while the report constitutes material supporting the existence of a common cause, it cannot be construed as an unequivocal admission of liability by the Underwriters.
19. The subsequent report of M/s. Seawise Maritime Services dated 11.01.2007 expressed a different technical opinion. It considered that the sludge deposits and corrosion observed in the fuel pumps could not reasonably have developed merely from seawater entering the fuel system during the relatively short interval between departure from Hong Kong and the respective engine failures. It accordingly opined that the contamination and corrosion probably originated during construction or commissioning of the vessel. The report also relied upon rust staining of the governor spring, which, according to Seawise, was not exposed to fuel, as militating against seawater-contaminated fuel being the sole cause of the damage. On that premise, Seawise regarded the failures of the two auxiliary engines as separate casualties.
20. The Seawise opinion was undoubtedly relevant and required due consideration. Its evidentiary weight, however, has to be assessed alongside the contemporaneous material. Seawise did not inspect the vessel or the damaged machinery at the time of either casualty; its opinion was rendered in January 2007, approximately two and a half years after the events, principally upon the documents made available to it. In contrast, the Salvage Association attended the vessel at Vung Tau immediately following the casualties, inspected the damaged components and recorded the sludge deposits, prevailing heavy-weather conditions and the subsequent report of seawater ingress into the bunker tanks. W.K. Webster thereafter considered the same material and regarded contamination of both engines from a common cause as the likely explanation, albeit without finally determining policy liability.
21. On a cumulative assessment of the material, we are of the view that the contemporaneous evidence carries greater persuasive weight regarding the circumstances surrounding the two casualties. Both auxiliary engines failed within a short interval during the same delivery voyage and after exposure to the same adverse sea conditions; materially similar sludge deposits and contamination were discovered in their fuel-pump systems; and, significantly, the Underwriters' own Adjuster, upon consideration of the Salvage Association material, regarded it as likely that both auxiliary engines had been affected or damaged due to a common cause. It is true that the precise source and mechanism of the contamination were not conclusively established at that stage. The subsequent Seawise report advanced an alternative technical explanation by attributing the condition of the machinery to contamination occurring during construction or commissioning; however, that opinion was rendered considerably later without contemporaneous physical inspection of the vessel or the damaged components. In these circumstances, while it may not be possible to record a definitive technical finding as to the precise mechanism by which the contamination occurred, the subsequent opinion of Seawise does not, in our view, sufficiently displace the Respondent's case, supported by the contemporaneous material, that the failures of the two auxiliary engines were attributable to a common underlying cause.
22. The consequence of the above finding is material to the question of deductible. The mere fact that the two auxiliary engines ceased functioning on different dates does not, by itself, establish two independent occurrences for purposes of the policy. The deductible operates by reference to an “accident or occurrence” and the determination must, therefore, turn upon the causative circumstances rather than merely upon the number of damaged components or the dates upon which the resulting failures manifested themselves. Significantly, W.K. Webster itself observed that, although the two incidents occurred separately, both auxiliary engines were likely affected or damaged due to a common cause and, on that basis, considered it reasonable that only one policy deductible of Rs.3,000,000/- should apply to the total claim. In the absence of evidence sufficiently establishing two independent causative events, we find no ground to interfere with the learned Tribunal's application of a single delivery-voyage deductible of Rs.3,000,000/-, though the conclusion is sustainable on the basis of the common causative circumstances reflected in the record rather than merely because both incidents occurred during the same voyage.
23. This brings us to the quantum of the decree. The Respondent claimed Rs.24,449,445/-, comprising Rs.8,224,167/- towards repairs at Vung Tau, Rs.3,190,278/- towards repairs and supplies at Colombo and Port Bin Qasim, and Rs.13,035,000/- towards loss of revenue. The learned Tribunal excluded the claim for loss of revenue upon finding that consequential loss of that nature was not covered by the policy. No provision of the policy has been brought to our notice which would extend the cover to loss of earnings or revenue; hence, no interference with that finding is called for.
24. The learned Tribunal, however, proceeded to allow substantially the entire balance of the claim on the reasoning that W.K. Webster's classification of part of the expenses as “Owners' Liability” was neither found in the policy nor reflected in the earlier Salvage Association report. Such reasoning cannot be sustained. The absence of the expression “Owners' Liability” from the policy does not determine whether each individual expense was recoverable thereunder. Equally, the fact that the Salvage Association's survey report dated 23.08.2004 did not classify expenses under such head is of little significance, since the Surveyor expressly recorded that, at the time of preparation of its report, the repair accounts had not been submitted for review.
25. The proper inquiry was whether each material head of expenditure had been proved, was reasonably incurred as a consequence of damage falling within the policy cover, and was recoverable under the relevant provisions thereof. In this regard, the Seawise report specifically questioned a number of expenses, including certain main-engine repairs, radio equipment, running spares, Singapore expenses and diesel consumption, on the ground that they were unrelated to the auxiliary-engine casualties. Those objections required independent consideration on their own merits. An expenditure does not become recoverable merely because it was incurred during the insured voyage or because it is not expressly mentioned amongst the exclusions contained in the policy.
26. The learned Tribunal, however, did not undertake the requisite scrutiny while determining the quantum of the claim. It treated W.K. Webster’s reproduction of the policy warranty as proof of compliance with all thirteen recommendations, rejected the Adjuster’s classification of certain expenses under “Owners’ Liability” principally because that expression did not appear in the policy, and allowed substantially the entire balance of the repair and supply expenses without examining whether each head was duly proved and attributable to the insured casualties. In particular, no distinction was drawn between expenses connected with the auxiliary-engine failures and those relating to ordinary maintenance, main-engine repairs, replenishment, operational expenditure or other matters having no sufficient nexus with the insured damage.
27. These errors materially affect the determination of the amount recoverable under the policy and, to that extent, the impugned Judgment cannot be sustained. They do not, however, affect the learned Tribunal’s findings regarding the competence of the suit, the Respondent’s entitlement to indemnity in respect of the insured casualties, or the application of a single deductible of Rs.3,000,000/-.
28. For the foregoing reasons, we find no merit in the Appellants’ objections regarding the competence of the suit or the applicability of the insurance cover. We are also not persuaded to interfere with the application of a single deductible of Rs.3,000,000/-. However, the impugned Judgment cannot be sustained to the extent of the quantum awarded, as the learned Tribunal failed to separately examine whether the individual heads of expenditure were duly proved, causally connected with the insured casualties and recoverable under the terms of the policy.
29. Accordingly, the instant Miscellaneous Appeal is partly allowed. The impugned Judgment and Decree dated 28.04.2016 are maintained to the extent that the Respondent was held entitled to indemnity under the insurance policy and that a single deductible of Rs.3,000,000/- was applicable; however, the same are set aside to the extent of the quantum of Rs.8,414,445/- awarded to the Respondent. The matter is remanded to the learned Insurance Tribunal for the limited purpose of determining, on the basis of the evidence already available on record and after affording the parties an opportunity of hearing, the amount legally recoverable under the policy, keeping in view the observations made hereinabove. The learned Tribunal shall endeavor to conclude the exercise expeditiously, preferably within three months from the date of receipt of this judgment. The parties shall bear their own costs.
JUDGE
JUDGE
Accordingly, the instant Miscellaneous Appeal is partly allowed. The impugned Judgment and Decree dated 28.04.2016 are maintained to the extent that (a) the suit was held competently instituted, (b) the claim for loss of revenue of Rs.13,035,000/- was held to be not recoverable, (c) the Respondent was held entitled to indemnity under the insurance policy, and (d) a single deductible of Rs.3,000,000/- was held applicable; however, the same are set aside to the extent of the quantum of Rs.8,414,445/- awarded. The matter is remanded to the learned Insurance Tribunal for the limited purpose of determining, on the basis of evidence already available on record and after affording the parties an opportunity of hearing, the amount legally recoverable under the policy, keeping in view the observations made hereinabove. The learned Tribunal shall endeavor to conclude the exercise expeditiously, preferably within three months from the receipt of this judgment. The parties shall bear their own cost.