This was an appeal from the judgment of the 13th Civil Chamber of the Istanbul Regional Court of Appeal (2018/799-2019/785) and a judgment of the Istanbul 17th Commercial Court (28 March 2018, 2014/731-2018/138).

The plaintiff claimed that it had agreed with the defendant for the shipment of six semi-trailers by sea from Istanbul to Lagos, Nigeria, and had paid USD 47,400 to the defendant as freight. In particular, the plaintiff argued that the goods were loaded onto the vessel at Istanbul and a bill of lading issued on 5 July 2012, but that they were not delivered to the port of arrival. During negotiations with the defendant, it was reported that the vessel had arrived at the Port of Las Palmas in Spain and could not depart from there. The plaintiff argued that since the goods were not delivered to the port of arrival despite all negotiations, commitments, and notices, the goods should be deemed lost according to art 1178 of the Turkish Commercial Code (the TCC) [which is based on art 3.2 of the Hague Rules, art 3.2 of the Hague-Visby Rules, and art 4.2 of the Hamburg Rules - although Türkiye is only a State Party to the Hague Rules, the TCC incorporates a set of rules which purport to adopt elements of the Hague-Visby Rules and the Hamburg Rules], and claimed TRY 402,189.48, equivalent to USD 217,800 with interest, and TRY 87,528.84, equivalent to USD 47,400 freight paid to the defendant with interest.

The defendant argued that it acted only as an agent in the relevant transport, and that in a sale of goods agreement on CFR terms, the risk related to the cargo passed to the buyer as soon as the seller delivered the goods onto the vessel. The defendant claimed that since the plaintiff was the shipper, it did not have capacity of right to sue regarding damage to the goods, that the vessel was suitable and cargoworthy for transportation, and that the plaintiff could not claim a freight refund. As a result, the defendant claimed that it did not have any liability. Alternatively, its liability was limited.

The Court of first instance found that although the defendant claimed that the plaintiff had a lack of right to sue against the carrier due to the sale on CFR terms, the cost of the goods had been collected according to the records of the plaintiff. The Court observed that since the plaintiff proved that the foreign company, the buyer of the goods, had assigned its rights to sue in writing, the plaintiff had standing. The Court further observed that since it could not be proved that the goods were delivered by the defendant, it should be accepted that the goods were lost in accordance with art 1178.5 of the TCC, and held that the defendant was liable to the plaintiff for the value of the goods according to art 1178. Additionally, the Court found that the defendant could not benefit from the limited liability provisions referred to in art 1186 of the TCC [which is based on 4.5.a of the Hague-Visby Rules - although Türkiye is only a State Party to the Hague Rules, the TCC incorporates a set of rules which purport to adopt elements of the Hague-Visby Rules] and that the plaintiff could not claim the freight paid. As a consequence, the Court partially accepted the plaintiff's claim and ordered the defendant to pay TRY 402,189.48 with interest.

Both the plaintiff and the defendant appealed to the Court of Appeal.

The Court of Appeal observed that there was no compensation payable to the plaintiff. Therefore, as of the date of the lawsuit, the plaintiff did not suffer any loss, and there was no active capacity to sue; for this reason, the assignment of the receivable from the consignee did not change the legal result. The Court held that the plaintiff, who was not liable for the freight and paid the defendant for the benefit of the buyer, did not have the right to demand the return of the freight due to the fact that the contract between the parties had been terminated by the failure to transport the machines by the defendant.

The Court of Appeal decided to dismiss the lawsuit due to the lack of right to sue by revoking the judgment of the Court of First Instance.

The plaintiff appealed the judgment of the Court of Appeal to the Supreme Court of Appeal.

Held: The appeal is admissible. The judgment of the Court of Appeal is upheld.

The Supreme Court of Appeal observed that all risk, benefit, and damage passed to the buyer once the loading took place on 5 July 2012. The Court further observed that the vessel departed from Istanbul, and since the plaintiff did not incur any loss and the assignment of the receivable would not change the situation, the Court approved the judgment of the Court of Appeal, which was in accordance with the procedure and law.

One of the Judges provided a dissenting opinion as follows: There is no disagreement on the fact that a transport contract was concluded between the parties for the transportation of the plaintiff's cargo from Istanbul to Nigeria and that freight amounting to USD 47,400 was paid in advance to the defendant carrier in accordance with the defendant's invoice dated 2 July 2012. The defendant undertook to deliver the cargo to the address within 40-45 days at the latest, and the defendant, who undertook the carriage, also entered into a contract of carriage with the shipowner of the MV Shelly Express to carry the cargo as the actual carrier. The vessel set sail on 5 July 2012. Accordingly, it should have reached the address on 20 August 2012 at the latest.

The contract of carriage was concluded between the plaintiff and the defendant, and the defendant did not fulfil its performance, and the carriage was not carried out. The fact that the plaintiff collected the price in advance is a legal relationship between the buyer and the seller under the sale agreement. Moreover, the plaintiff subsequently made a new arrangement with the buyer regarding the undelivered goods worth USD 217,000 and undertook to deliver the same goods to the buyer again. Therefore, the plaintiff suffered damages. The plaintiff is not a party to the carriage of goods contract. The defendant is liable for the damages arising from the failure to fulfil the performance against the carrier, whether the defendant is accepted as the actual carrier or the freight forwarder.

Cost & Freight (CFR) is one of the 11 different delivery methods in Incoterms 2010, called Group C, where the shipment is organised by the seller. In the CFR delivery method, the seller, ie the exporter, completes the operation by organising the processes of loading at the factory, internal transportation, loading on the vessel at the port, and freight and delivering the cargo to the buyer at a port located in the country of the buyer, ie the importer. Due to the CFR sale, the plaintiff seller's liability for delivering the goods to the buyer (who subsequently assigned its rights) continues. In addition, the responsibility for the carriage of goods received in advance continues until the cargo reaches the port of destination. If the carriage is not carried out at all, or is interrupted before the port of arrival, the right of the consignee to bring an action against the plaintiff is not revoked. Therefore, the plaintiff has suffered damages, and the defendant's actual carrier is liable.

The Judge found that the carrier is liable to the shipper for the return of the freight paid due to the carriage not reaching its destination. The return of the freight has nothing to do with the transfer of the damage and benefit to the buyer. Hence the Judge did not agree with the approach of the majority of the Chamber that the risk passed to the defendant with the loading and that the plaintiff does not have standing.