Bunge SA v Pan Ocean Co Ltd (decided on 30.1.2025)
Mr Justice Henshaw held : –
– To be an affected area, there must be an generalised risk of quarantine or other restrictions being imposed similar to a blanket requirement that all vessels be required to quarantine for a fixed number of days regardless of the test results.
– the BIMCO Additional Clause (h)(iii) contain a causation requirement, including the portion providing for the vessel to remain on hire throughout.
– The vessel will become off hire when it triggers Clause 38 of the BIMCO Additional Clauses due to illnesses onboard the vessel.
Factual Background
On 28.2.2022 the vessel was delivered to Charterers at Cebu, the Philippines. It was ordered by Charterers to Gladstone, Australia to load cargo. On 11.3.2022 at Gladstone, the vessel began loading and seven crew members were changed. On 15.3.2022, the vessel sailed for Bayuquan.
On 30.3.2022 the vessel arrived at Bayuquan tendered NOR and berthed. The crew were tested for COVID-19. On 31.3.2022 the Master was informed that five crew members had tested positive for COVID-19. On 2.4.2022 those five crew members were tested again. Four tested positive and one( the Master) tested negative.
Head owners and owners arranged to replace the four COVID-19 infected crew members in Ulsan South Korea and sailed there accordingly. On 7.4.2022 the four infected crew members disembarked. On 8.4.2022 the vessel sailed back to Bayuquan. On 10.4.2022 the vessel re-tendered NOR and discharge was completed on 25.4.2022. At 0036 on 26.4.2022 the vessel was redelivered to the vessel owner.
Charterers deducted hire and expenses in respect of a period from 7:50 LT on 31.3.2022 (the time of the first positive tests at Bayuquan) to 18:30 LT on 14.4.2022. This is referred to as the “period of delay”.
Owners claimed for the total hire withheld by Charterers for the period of delay and for indemnity for any claim advanced by Head Owners for the costs of replacing the four COVID-19 infected crew members at Ulsan. Charterers denied owner’s claim and claimed they were entitled to make the deductions because of the time lost and additional expenses. Both parties argued that, regardless of the tribunal findings, they were entitled to recover a small balance (USD 2,518.94) from the other. Both parties also claimed interest and costs.
The tribunal concluded that the Bayuquan positive test results must be taken at face value (contrary to the owner’s contention that they were inaccurate) (Award [16] to [17].) At the same time, there was insufficient evidence to conclude that the positive tests resulted from failure by the owner to take all reasonable steps to detect and avoid the spread of COVID-19 (Award [26]). It was not possible to determine whether they resulted from the crew change at Gladstones or whether one or more crew members were already infected when the vessel was delivered into charterers’ services on 28.2.2022. As result, the tribunal thought, it was not possible to determine whether there was a breach of lines 21 and 22 of the charterparty (state of vessel and crew on delivery); and it seems to the tribunal that the obligation in clause 1 to “keep the vessel, in thoroughly efficient state in hull, machinery and equipment…” would not readily apply to the vessel’s crew.
Further, the tribunal considered that clause 15, the basic off hire clause, which had been amended to require that the loss of time be “due to vessel’s fault”, probably did not apply. It was not necessary to reach a firm conclusion on that point because the tribunal was satisfied that additional clauses 38 and 50 applied (Award [36]). The tribunal rejected Charterers’ submission that additional clause 131 (BIMCO COVID-19 Crew Change Clause) applied, on the basis that it was a clause invokable by Owners if they had to deviate from the port to which the vessel had been ordered in order to allow the crew changes to take place (Award [27]).
The tribunal found that the decision to sail to Ulsan to replace the infected crew members provided certainty and could not be criticised as unreasonable (Award [18]-[23]).
Issues
– Was Bayuquan an infected area?
– Was there additional expenses or delay for the vessel?
– Did visiting an affected area cause additional expenses or delay?
Discussion and Analysis
The BIMCO Clause/u>
The are three general principle of contractual interpretation to be perused in this case. The first being, where agreements are sophisticated, complex and have been negotiated and prepared with the assistance of skilled professionals, they are to be interpreted by close textual analysis – Wood v Capita Insurance Services [2017] UKSC 24 at [17].
The second principle is that the relevant words of a contract must be assessed in their documentary, factual and commercial context in light of the facts and circumstances known or assumed by the parties at eth time the document was executed – Arnold v Britten [2015[ UKSC 36 at [15].
The third is that a contract must be read as whole, reading each clause in light of and consistently with every other clause and with the overall purpose of the contract. Clause 129 of the charterparty must be read, so far as is possible, consistently with clauses 38 and 50.
Here the charterers submitted clauses 38 and 50 accorded with the entirely familiar distinction between those matters which lie upon the owners’ side of responsibility, essentially the vessel and crew… and those matters relating to the charterer’s employment of the vessel and crew (The Doric Pride [2006] Lloyd’s Rep 175 at [33]).
Where the cost of a vessel being refused entry to a port must be allocated, the question which is to be asked is “where does the real problem lie: with the crew’s status of with the trading of the vessel to the particular port?
Charterers also submitted the overall purpose of the contract was to convey cargo from Australia to a port in China. Owners could be taken implicitly to have accepted the risk of sailing to China and clause 129 must be read accordingly.
Owners, on the other hand, relied on Steyn J’s warning in The Fjordaas [1988] 2 All ER 714 (at p.720c) that ‘ it would be wrong to approach’ a clause ‘with a predisposition in favour of a restrictive interpretation’ based on ‘the traditional allocation of risk as between owners and the charters’. To rely on this ‘traditional allocation’ was to beg the question as to whose responsibility was the period of delay, which was not the question required by the words of clause 129.
Was Bayuquan an ‘affected area’?
Owners submitted that the meaning of affected area is identical with or without the deletions, but some of their arguments stray close to relying on the deletions as points in favour of their preferred meaning.
a) The tribunal findings – The tribunal found that COVID-19 was a qualifying disease for the purpose of clause 129
b) The two limbs of the definition of affected area – under the BIMCO Clause there are two limbs to the definition of an affected area. An affected area can be a port or place where there is a risk of exposure to the vessel, crew or other persons on board:
i) To the disease (Limb 1) ; and/or
ii) To a risk of quarantine or other restrictions being imposed in connection with the disease(Limb 2).
The focus in the present case is in Limb 2.
To which port is Limb 2 directed?
Charterers submit that Limb 2 refers to a port or place which is affected by a disease and so gives rise to a risk that the vessel may subsequently be subject to a quarantine or other restrictions by reason of having called there.
There are two difficulties with this approach
a) The word where in the language “ any port or place where there is a risk of exposure to the vessel, crew or other persons… to a risk of quarantine r other restrictions being imposed…” in the court’s view most naturally has a geographical meaning and points to the place where the quarantine or other restriction is liable to be imposed. The court would accept that it is possible to read Limb 2 as referring to the West African port as per the illustration of the charterers, on the basis that is a port where there is a risk of subsequent exposure to quarantine risk at a port subsequently visited.
b) The second problem is that a port that is affected by a disease, and so gives rise to a risk that the vessel may subsequently be subjected to quarantine or other restrictions by reason of having called there, will almost inevitably fall within limb 1 already because it will be a port or place where there is a risk of exposure to the vessel, crew or other persons on board to the disease. The charterers’ proposed interpretation would thus make Limb 2 redundant or virtually redundant.
The increased risk argument
Charterers submitted that where a port has been specified as a destination in the charterparty, in order for it to be an affected area, the risk of quarantine or other restrictions there must have increased from the date of the conclusion of the charterparty.
They referred to a series of war risk cases where it was held inconsistent with an express agreement to sail to or through a particular area, for a master subsequently to rely on a war risks clause to refuse to sail to or through that particular area.
In The Polar [2024] UKSC 2, Lord Hamblen reviewed these authorities including The Product Star (No 2) [1993] 1 Lloyd’s Rep 397 and The Paiwan Wisdom [2012] 2 Lloyd’s Rep 416 and concluded that they would not have been so entitled
The charterers argued that the owners agreed to sail from Australia to any port in China and accordingly accepted the COVID-19 testing and quarantine procedure present at all Chinese ports when the charterparty was concluded.
The owners, conversely argued that the owner has no right to refuse to go to the charterer’s named port in China citing The Archimidis [2008] 1 Lloyd’s Rep 597, where there was held to be no inconsistency between a safe port warranty and a named load port, such that the owners of the vessel were not liable for vessel not in fact being able to load the contractual quantity of cargo safely at the port in question.
The correct interpretation of Limb 2
Limb 2 applies where the risk of quarantine or other restrictions is one of general application arising from the disease.
More broadly, it applies where there is a risk of quarantine or other restrictions by reason of having previously visited a port affected by the disease.
The court was of the view that the passages in Carver consider that Limb 2 at least typically applies where a risk of quarantine or other restrictions arises at a port by reason of it having previously visited a port affected by the disease.
This was supported by the explanatory notes within the BIMCO Clause.
As such Bayuquan is not an affected area.
Causation under the BIMCO Clause
There was an implicit finding that a causal link between the visit to the affected area and the period of delay was necessary for Clause 129(h)(iii) to apply. The tribunal held that the quarantining of the vessel was not brought about by the vessel being in an affected area as defined by clause 129 of the charterparty.
The court did not accept the owner’s submission that no causation is required as the core purpose of the clause is to protect owners where as a result of charterers’ decision to visit an affected area, a delay or other cost rises. It is not to provide a blanket protection for owners for a delay encountered on a visit to an affected area howsoever incurred and regardless of all other provisions in the Charterparty. Further as a matter of language, the words ‘the Vessel shall remain on hire throughout’ are connected by the conjunctive particle ‘and’ to the preceding words before which provide that additional costs, expenses and liabilities are for charterers’ account only where they arise out of ‘the vessel visiting or having visited an affected area’.
For these reasons the Court held that the BIMCO Clause (h)(iii) contain a causation requirement, including the portion providing for the vessel to remain on hire throughout.
The delay was not because of the visit to Bayuquan. The delay was due to the 5 crew members having tested positive for COVID 19 on 30.3.2022 and four tested positive again on 2.4.2022.
Question 2
Detention for quarantine
The tribunal found that the situation was covered by additional clauses 38 and 50 so that the hire and additional expenses incurred by the charterers were to be for the owners’ account.
The cardinal rule for interpreting off hire clauses is that “the charterer will pay hire for the use of the of the ship unless he can bring himself within the exceptions” (The Berge Sund [1993] 2 Lloyd’s Rep 453 quoting Bucknill LJ in The Ann Stathatos (1948) Lloyd’s Rep 196.
The word detention has been given a broad meaning in charterparties. In The Jalagouri [2000] 1 Lloyd’s Rep 515, the Court of Appeal approved Kerr J’s definition in The Mareva A/S [1977] 1 Lloyd’s Rep 36 as a “physical or geographical constraint upon the vessel’s movements in relation to her service under the charter”. It was similarly held in The Doric Pride [2005] 2 Lloyd’s Rep 470.
As such the Court held that the tribunal was correct in holding that Clause 38 was triggered by a ‘detention …for quarantine’ due to the illness of the crew and that the vessel was thereof off hire for the period of delay.
Question 3
Service immediately required
A vessel is inefficient for the purposes of an off hire clause where it cannot perform the service immediately required of it.
The tribunal found that the answer to this question to be in the negative and that the vessel could not perform the service immediately required of it.
The owners relied on The Burge Sund where it was held that an unexpected and extraordinary cleaning exercise was nonetheless the service immediately required. By analogy the owners argue that unexpected and extraordinary crew change which was a reasonable cause of action in order to enable the vessel to comply with charterers’ orders was the service immediately required.
It is evident on the fact this was not the case in the present appeal as the vessel was held not to provide the service immediately required and was thus off hire during the period of delay pursuant to Clause 50 whether or not it was off hire under Clause 38 or not.
Decision
The court concluded that the Tribunal did not err in law and the appeal must therefore be dismissed.
This case summary was prepared by Chakaravarthi Thillainathan, Principal Associate at Low & Partners, Malaysia. We thank Dr. Arun Kasi, Barrister at 4-5 Gray’s Inn Square, London, for his insightful input on the case.