Bunge SA v Pan Ocean Co Ltd (The "Sagar Ratan")

DMC/SandT/25/04

England

Bunge SA v Pan Ocean Co Ltd (The “Sagar Ratan”)

English Commercial Court: Henshaw J: [2025] EWHC 3005 193 (Admlty): 30 January 2025

Judgment available on website of Preston Turnbull LLP @ https://www.preston-turnbull.com/uploads/250120-final-judgment-Bunge-v-Pan-Ocean-The-Sagar-Ratan-AD-2024-000007.pdf?v=1738575602

Mark Stiggelbout (instructed by Penningtons Manches Cooper LLP) for Bunge (Owners)

Gemma Morgan (instructed by Preston Turnbull LLP) for Pan Ocean (Charterers)

TIME CHARTER: OFF-HIRE: COVID-19: AMENDED BIMCO INFECTIOUS OR CONTAGIOUS DISEASES CLAUSE 2015 – MEANING OF “AFFECTED AREA”: OFF-HIRE CLAUSE FOR QUARANTINE DETENTION: OFF-HIRE CLAUSE FOR DEVIATION/PUTTING BACK: VESSEL CHARTERED FOR ONE TIMECHARTER TRIP: CREW HAD COVID-19 WHEN VESSEL DELIVERED TO CHARTERERS OR DUE TO OWNERS’ CREW CHANGE AT LOADING PORT: WHETHER VESSEL OFF-HIRE FOR DELAY DUE TO EXPECTED QUARANTINE DETENTION AT CHINESE DISCHARGE PORT IN CIRCUMSTANCES WHERE OWNERS HAD ORDERED VESSEL TO KOREA TO CHANGE CREW TO ENABLE VESSEL TO RETURN TO CHINA AND DISCHARGE CARGO PROMPTLY: APPEAL UNDER ARBITRATION ACT 1996 SECTION 69

DMC Classification: Developed

Summary

The High Court held, in dismissing Owners’ appeal against and in upholding the final arbitration award, that the Vessel was off-hire because:

(1) the discharge port in China was not an “Affected Area” under the BIMCO clause because the delay had been caused by the positive tests for COVID-19 of certain crew members, who had already been infected when the Vessel was delivered to Charterers or due to Owners’ crew change at the loading port;

(2) the off-hire detention for quarantine clause applied because there was a geographical constraint on the Vessel due to the requirement to wait out quarantine before she would have been able to discharge the cargo; and

(3) the deviation/putting back off-hire clause applied to the voyage to Korea and back to China in order to change the infected crew, because this was not a service ordinarily required by the employment orders of a time charterer.

Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, IMI Qualified Mediator, LMAA Supporting Member and Deputy Editor of DMC’s CaseNotes

Background

Disponent owners, Bunge (“Owners”), let the bulk carrier, “Sagar Ratan” (“Vessel”), to time charterers, Pan Ocean (“Charterers”), in early 2022 to perform a one time charter trip with delivery at Cebu, Philippines for a cargo carrying voyage (in the event) via Gladstone, Australia to Bayuquan, China, where discharge of the bulk alumina cargo and redelivery were to take place.

The trip time charter included among other provisions:

(a) a standard off-hire clause (15) whereby loss of time due “to any other cause preventing the full working of the vessel” was to be off-hire;

(b) an additional clause (38) providing for any time of detention for quarantine due to crew illness to be off-hire;

(c) an additional clause (50) for hire to be suspended during any deviation or putting back for loss of time for crew sickness; and

(d) an additional clause (129) - amended BIMCO Infectious and Contagious Diseases Clause 2015 - excepting calls at an “Affected Area” from off-hire.

Following delivery at Cebu on 28 February 2022, the Vessel proceeded to and loaded the cargo between 11-15 March 2022 at Gladstone, where Head Owners also took the opportunity to undertake a crew change.  On the Vessel arriving at Bayuquan on 30 March 2022, the crew were tested for COVID-19, which, during the pandemic, was common practice at Chinese and many other ports worldwide.  The Master was informed the next day that five crew had tested positive.  On retesting on 2 April 2022, four crew remained positive.

As a result, the Vessel either had to wait out quarantine or change the infected crew before berthing and the discharge of the cargo ashore would be allowed.  Head Owners and Owners decided to arrange the replacement of the four COVID-19 positive crew at Ulsan, Korea.  After the crew change, the Vessel arrived back at Bayuquan on 10 April 2022.  Thereafter, the Vessel completed discharge of the cargo on 25 April 2022 and was redelivered to Owners the next day.

A dispute between Owners and Charterers, about whether or not the Vessel was off-hire for the relevant period of delay relating to the COVID-19 positive crew, was resolved by a final arbitration award, made by Jonathan Elvey and Mark Hamsher, in Charterers’ favour.  The arbitral tribunal held that the Vessel had been off-hire for the period of delay.  The result was that the hire and additional expenses incurred by Charterers were for Owners’ account, because the cause of the delay was the crew’s infection.  The arbitral tribunal had also found that the crew’s COVID-19 infection had likely occurred before the Vessel was delivered into Charterers’ service or had arisen from the crew change undertaken by Head Owners at Gladstone.  Owners sought to appeal the award to the High Court.

Judgment

The Judge first outlined the background to the dispute, the charter provisions, the facts, the final award and the parties’ submissions.  He noted that there were three issues to be resolved on the appeal, which he addressed in turn.

(1) Additional Clause 129: Did the Vessel remain on-hire during the relevant period because Bayuquan was an “Affected Area”?

The Judge concluded that the answer was “no”, for the following reasons.

The Judge highlighted that there were two (disjunctive) limbs of the definition of “Affected Area”; one could be a port or place where there was a risk of exposure of the Vessel, crew or other persons on board to the disease (“Limb 1”); the other could be exposure to a risk of quarantine or other restrictions being imposed in connection with the disease (“Limb 2”).  The focus here was on Limb 2.

In the Judge’s view, Limb 2 applied where the risk of quarantine or other restrictions was one of general application arising from the disease.  More broadly, it applied where there was a risk of quarantine or other restrictions by reason of the vessel having previously visited a port affected by the disease.

The Judge considered that such an approach to Limb 2 was consistent with the language of the definition and avoided an overly wide effect.  It also struck a fair balance between the parties, since it was consistent with the general rule of thumb that delays arising from problems with the vessel and crew were for owners’ account.  It meant that the vessel would be off-hire by reason of problems that would not have arisen but for the provision of an infected crew.

On that basis, the Judge considered that Bayuquan was not an “Affected Area”, the quarantine having been imposed entirely because of the crew’s actual infected status, and not because of any policy of quarantining incoming vessels in general or vessels that had visited particular countries.  As such, the quarantine resulted essentially from a characteristic of the Vessel and her crew, not a characteristic of a place to which Charterers had ordered her.

(2) Additional Clause 38: Did the Vessel remain on-hire where she was able to avoid a detention for quarantine at Bayuquan by changing crew at Ulsan?

Based on the language of the provision, the Judge considered additional clause 38 to be a quarantine-specific off-hire provision.  The Judge did not agree with Owners’ narrow definition of “detention for quarantine”, which was that the Vessel would remain on-hire if she did not in fact wait out a quarantine period.

The case law indicated that whether a restraint was a “detention” was to be determined with regard to whether it impeded the core venture of the charterparty, not whether it prevented a vessel’s movement in any direction.

A quarantine, at minimum, was a restriction placed on contact with or movement by a vessel imposed to avoid the spread of disease.  That should, for additional clause 38, be interpreted to cover a restriction to prevent infection which prevented the Vessel from entering the port, particularly where entering that port was part of the core adventure, in circumstances where that detention was due to the illness of the Vessel’s crew.  That is what had happened to the Vessel at Bayuquan.  The Vessel’s action in sailing to Ulsan to change crew did not alter that fact.

On that basis, the Judge considered the arbitral tribunal to be correct, that the Vessel was off-hire under the circumstances, holding that there could also be a “detention for quarantine” where there was a crew change in lieu of waiting out quarantine.

(3) Additional Clause 50: Did the Vessel remain on-hire by performing the service immediately required of her by Charterers during the relevant period?

On this question, the judge held that, in simple terms, the service immediately required was to discharge at Bayuquan, not a detour to Ulsan to replace the infected crew, however reasonable that course of action may have been in the circumstances.

The Judge noted that the case law in point assisted Charterers, because the relevant question to ask was what the service immediately required of the vessel was in relation to an activity ordinarily required by a time charterer.  Where an activity was not in the ordinary way required in that sense, such as where a vessel suffered an engine breakdown and experienced delay while the owner undertook repairs, then the vessel would clearly not be performing the service immediately required by a time charterer and would therefore be off-hire.

The Judge considered the Chinese port authority’s refusal to allow the Vessel to berth on the grounds of crew illness was clearly analogous, because being unable to berth due to crew illness quarantine restrictions was not in the ordinary way the Vessel providing the service immediately required.  The Vessel was, accordingly, off-hire.

Conclusion

For the reasons given above, the Judge dismissed the appeal on the basis that the arbitral tribunal had not erred in law, and so the award was upheld.

Comment

While there have been some reported arbitration awards on COVID-19 related shipping disputes, this appears to be the first reported judgment on the topic, and the useful guidance provided by the High Court is to be welcomed.

The judgment in particular also helpfully confirmed that BIMCO Contagious or Infection Diseases Clause 2015 clause (h)(iii) requires a causal connection between the visit to the “Affected Area” and a relevant period of delay.

The outcome, on the particular fact-pattern, is not surprising and is likely correct, because delay related to COVID-19 infections that are not caused by compliance with charterers’ orders is owners’ risk and responsibility.

The factual novelty of COVID-19 related shipping disputes and the lack of authorities has made assessing the merits of many disputes difficult, and so this judgment should provide greater clarity to aid achieving settlements.