QCR Autumn 2021: “KAIJIHO KENKYU KAISHI” - Tokyo District Court Judgment: 2018 (Wa) No. 26723 and No. 28332 Maritime Law Review1 (The Japan Shipping Exchange, Inc.) 2021.5 (No.251) P71-P80

Tokyo District Court Judgment: 2018 (Wa) No. 26723 and No. 28332 Maritime Law Review (“KAIJIHO KENKYU KAISHI” in Japanese)1 (The Japan Shipping Exchange, Inc.) 2021.5 (No.251) P71-P80

Facts

1. On or about 21st October 2017, the Defendant “Y” as carrier and a third party “O” as shipper entered into a contract for the carriage by sea of frozen meat in three 40-feet reefer containers from the Port of Oakland, USA to the Port of Tokyo, Japan, where the Plaintiff “X” as consignee was to receive the frozen meat (the “Contract”). X’s main business is the import, export and sale of foodstuff. It was agreed that the temperature in the container should be maintained at “zero degrees” Fahrenheit (equivalent to “minus 18” degrees Celsius). This temperature was stated on the relevant bill of lading issued by Y to O (the “Bill of Lading”).

2. The back clauses in the Bill of Lading (the “Back Clauses”) include the following provisions:

(a) In the case of refrigerated or special Containers packed by the “Merchant”, the “Merchant” shall properly prepare and pack Goods for the shipment and set the temperature as required (Clause 13(4)) (For your information, ”Merchant” means the shipper, consignor, consignee, owner and receiver of Goods, and Holder, and anyone acting on behalf of this person(Clause 1(1)h);

(b) The maintenance of the temperature within a refrigerated or special Container is not guaranteed by the Carrier and is solely at Merchant’s risk, even if a particular temperature is stated on and irrespective of whether the Container is packed or the temperature is set by the Carrier or Merchant (Clause 13(5));

(c) The Merchant shall take delivery of the Goods within the time provided in the Tariff (Clause 19(2));

(d) The Merchant’s attention is drawn to the stipulations concerning free storage time and demurrage contained in the Tariff, which is incorporated in this Bill of Lading (Clause 19(4)). 

3. On 16th October, 2017, O packed the frozen meat into the three containers, and on 19th October, 2017, a trucker appointed by O delivered them to a terminal operator at the Port of Oakland commissioned by Y. On 21st October, 2017, the containers were loaded on a vessel (the “Vessel”) by the terminal operator.

4. During the transport by sea, on 22nd October 2017, Y found that the internal temperature of one of the three containers (the “Container”) packed by O, was set at “zero degrees” Celsius, which is “18 degrees” higher than the intended temperature of “zero-degrees” Fahrenheit, and corrected the temperature on 23rd October 2017. During the period from 19th October to 23rd October 2017,the internal temperature of the Container was therefore set incorrectly at “zero-degrees” Celsius.

5. The three containers arrived at the Port of Tokyo on 2nd November 2017 and were unloaded there. However, X, who had already been made aware of the wrong temperature, refused to receive the Container in question.

6. X informed O that X would return the Container to the Port of Oakland, stating that he, X, recognized that arrangement for the ship-back was underway between O and a subsidiary of Y.

7. The Container was stored by Y for approximately nine (9) months, i.e. until 30th July 2018, when the frozen meat was incinerated by Y in accordance with a directive of the Japanese Animal Quarantine Agency.

8. X sued Y seeking recovery in the sum of USD 63,897 for damage to the frozen meat, alleging that (i) Y made a mistake in setting the temperature of the Container incorrectly and this caused the damage to the frozen meat and (ii) Y disposed of the frozen meat without X’s permission contrary to the ship-back agreement between X and Y (Case No.1).

9. Y, in turn, sued X seeking recovery of the storage and disposal costs in the total sum of JPY16,145,939, alleging that X breached X’s obligation to receive the Container in accordance with the Back Clauses (Case No.2).

Points of Dispute

No.1 Should Y as carrier be obliged to set, maintain and control the temperature in the Container?

No.2Was the frozen meat damaged during the period of carriage undertaken by Y under the contract?

No.3Was the alleged ship-back agreement actually made between X and Y?

No.4Should X as consignee be obliged to receive the Container and bear the costs for the storage and disposal of the frozen meat under the Back Clauses of the Bill of Lading?

Decision

The court dismissed all of X’s claims on the following grounds (Case No.1), while fully accepting all of Y’s claims for storage and disposal costs (Case No.2).

1. Point of Dispute No.1

Should Y as carrier be obliged to set, maintain and control the temperature in the Container?

(i)  Details of the Back Clauses

Clauses 13(4) and (5) of the Back Clauses state that the Merchant bears the risk and responsibility for setting the temperature of a reefer container like the Container. In other words, the Carrier does not guarantee the maintenance of the temperature in the reefer container, regardless of whether the Carrier or the Shipper had set the temperature, even if a specific temperature is stated on the Bill of Lading.

Therefore, Y as carrier has no obligation to set, maintain and control the temperature in the Container.

It is common in international carriage of goods by sea that detailed clauses are stated on the reverse side of the Bill of Lading. Therefore, even if X alleged that X was not informed of the contents of Clauses 13(4) and (5) of the Back Clauses and did not confirm these contents, X would still be bound by these clauses.

Here, the contents of the Back Clauses were very clear, and therefore Y was not required to proactively inform X of or explain to X the contents of, Clauses 13(4) and (5).

(ii)  Do the Back Clauses contravene Article 15 (1) of Japan COGSA?2

Should the contents of Clauses 13(4) and (5) of the Back Clauses, which would work against X, be invalid under Article 15(1) of Japan COGSA(which is analogous to Hague Visby-Rules Article III Rule 8)?

Article 15(3) of Japan COGSA (which is analogous to Hague Visby-Rules Article VII) states that Article 15(1) does not apply to damage caused by events occurring before the goods were loaded on board. In the present case, damage to the frozen meat can be considered to have been caused by an event before the shipment, since the temperature of the Container had already been set incorrectly by O as shipper before the Container was loaded on the Vessel. Therefore, Article 15(1) of Japan COGSA should not impact upon under Article 15(3) thereof, on which basis Clauses 13(4) and (5) should be valid.

X alleges that the damage to the frozen meat in the Container was caused by Y’s inappropriate care involving the setting and control of the temperature after loading the Container on the Vessel. However, it is difficult to accept this allegation because the Container temperature had already been set incorrectly before the Container was loaded on the Vessel.

2. Point of Dispute No.3

Was the alleged ship-back agreement made between X and Y?

X alleges that Y incinerated the frozen meat without X’s permission in violation of the agreement to ship the Container back to the Port of Oakland. However, it is not recognized that there was any specific ship-back agreement between X and Y.

3. Point of Dispute No.4

Should X be obliged to receive the Container and bear the costs for the storage and disposal of the frozen meat under the Back Clauses of the Bill of Lading?

(i) Should X be required to receive the Container under Clause 19(2) of the Back Clauses?

Since the Tariff provides not only for a free of charge storage period but also for a storage charge in the event of the expiry of the free storage period, it shall be construed that Clause 19(2) of the Back Clauses does not merely provide for a time limit for receipt but also for the shipper’s obligation to receive the goods.

(ii) Does X have any justifiable reason for rejecting receipt of the Container?

Since no ship-back agreement was found in this case, X has no justifiable reason for rejecting receipt of the Container.

4. Conclusion

(Case No.1) As for the claim by X, it is unnecessary to consider Point of Dispute No.2 since Y was not obliged to set, maintain and control the temperature in the Container. The lawsuit by X should be entirely dismissed.

(Case No.2) As for the claim by Y, it is admitted since X breached the obligation to receive the Container, whereby Y suffered damage equivalent to the cost of the storage and the disposal of the frozen meat.

Comments

The majority of Japanese judgements are not open to the public. It is therefore rare for the general public to have access to new judgements of the Japanese court relating to the maritime industry.

In this decision, the Japanese Court has confirmed the validity of the Back Clauses for container carriage as follows:

(i)  the responsibility for setting the temperature of a reefer container packed by a “Merchant” lies with the “Merchant” even if a specific temperature is designated on the Bill of Lading.

(ii)  the consignee is required to take delivery of the goods and pay for the storage even if the goods are suspected to have been damaged.

(iii)  in this case, the court did not decide whether a right by a shipper or consignee to dispose of the goods should not include a ship-back right. Instead, the court rejected the agreement since there was no evidence to support the existence of an agreement to ship back

This case is significant because it involves the interpretation of Back Clauses of a Bill of Lading and is informative on how the Japanese Court handles disputes where Back Clauses are relied upon.

The UK P&I Club would like to thank Kimura sensei for contributing the summary of the above case in which his law firm acted for the successful carrier.

Masamichi Kimura,

Representative Partner, MYO Law Office, LPC 

gate@myocean-law.jp

http://www.myocean-law.jp/

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1The article in Japanese is available here, https://www.jseinc.org/en/books/index.html

2In other words, does Article 15(1) of Japan Cogsa render null and void Clauses 13(4) and (5) of the Back Clauses?

Staff Author

UK P&I

Date17/09/2021