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Tuesday, 13 January 15
MORE PITFALLS FOR OWNERS LOOKING TO TERMINATE FOR UNPAID HIRE - INCE & CO
 KNOWLEDGE TO ELEVATE
It is a debatable point whether or not the obligation to pay hire under a time charter is a condition of the contract or not, notwithstanding the obiter comments of Mr Justice Flaux in the Astra [2013] EWHC 865 (see the Shipping E-Brief July 2013). Making payment under a commercial contract is said to be “not of the essence of the contract” and therefore not a condition. The significance is that a breach of condition allows the innocent party to terminate the contract in addition to claiming damages. Otherwise, he may be limited to his damages claim but unable to terminate the contract unless the failure to make payment, or indeed making repeated late payment under an instalment contract, amounts to a repudiatory breach of the contract.
The traditional view is that, in order to terminate a time charter and claim damages for losses suffered following a failure to pay hire, the charterer’s conduct must be shown to be
(i) repudiatory in the sense that the breach deprives the owner of substantially the whole benefit of the charter; and/or
(ii) renunciatory in the sense that it evinces an intention on the charterer’s part no longer to perform the charter at all or to perform the charter in a manner substantially inconsistent with his contractual obligations.
It will very much depend on the facts and circumstances in any given case whether the non-payment or late payment of hire instalments under a time charter amounts to a repudiatory breach. This often requires the owner to make a difficult decision as to whether the charterer’s failure to pay a number of hire instalments, or paying them late, entitles him, the owner, to terminate the charter. If the owner “calls it wrong”, he can find himself in repudiatory breach for wrongful termination and facing a claim for damages from the charterer.
Januzaj v. Valilas is not a shipping case but deals with general principles concerning the law on repudiation. It arguably introduces a further potential pitfall for owners seeking to rely on multiple failures to pay hire, or repeated late payments of hire, in order to demonstrate repudiatory conduct on the part of a charterer.
The background facts
The Claimant was a dentist operating his practice from the Defendant’s premises. The Claimant had agreed to pay the Defendant half his earnings from his practice in return for use of the premises. The Claimant’s earnings came from the UK’s National Health Service (the “NHS”) under an arrangement whereby the Claimant was paid in advance in equal monthly instalments for his work. If, at the end of the year, the Claimant had not done sufficient work, then any over-payment of his advance earnings had to be refunded to the NHS.
A dispute arose between the Claimant and Defendant, as a result of which the Claimant stopped any further payments to the Defendant. The Claimant was particularly concerned that the Defendant would not return his half of any advance payments if a refund became due to the NHS. The Claimant failed to make three monthly payments to the Defendant between August and October. In November, the Defendant terminated the agreement on the basis of the Claimant’s repudiatory breach of contract.
The Court decisions
At first instance, the Court found that the agreement had been terminated wrongfully and awarded the Claimant damages. The majority of the Court of Appeal upheld this decision on the basis that, on the facts, the Defendant should have been aware that the Claimant was only intending to pay late as opposed to evincing an intention not to pay at all. By contrast, the dissenting judgment concluded that the failure to make three payments in a row was a repudiatory breach.
In the context of time charter hire disputes
The onus will be on an owner to demonstrate that he has been deprived of substantially the whole benefit of his time charter and/or that the charterer does not intend to make any further hire payments in the future. Furthermore, The Brimnes [1972] 2 Lloyd’s Rep. 465 made it clear that even persistent late payment of hire instalments will not necessarily amount to a repudiation of the charter.
One of the majority appeal judges in Januzaj v. Valilas suggested that, in determining whether the number of missed or late payments was repudiatory, regard had to be given to the length of the contract as a whole. There is, however, previous case law to the effect that, in deciding whether repeated late payments are repudiatory, it will not simply be a question of looking at the number of payment instalments required over the whole of the contractual period and comparing that number with the number of occasions on which payment has not been made or has been made late. It is also necessary to look at the type of contract in question.
Januzaj v. Valilas was very much decided on its own facts. In that case, the dentist who missed three monthly payments had, in previous years, always managed to complete the requisite amount of work he had to perform for the NHS over the course of the year and so no refund to the NHS had ever been necessary. The majority of the Court of Appeal concluded that the Defendant should, therefore, have known that the Claimant would complete all his NHS work in the relevant year also, so that no refund would have been required and the Claimant would eventually have paid the Defendant all that was owing to him, albeit somewhat late. That was not sufficient to amount to repudiatory conduct.
In a time charter context, however, and in a challenging economic climate, it will often not be at all clear to an owner that he will eventually get his money, albeit late. Charterers may be on the brink of insolvency and may be looking to negotiate a reduced hire rate rather than comply with their original contractual obligations. There may also be a history of repeated defaults on the part of the charterer that can render his behaviour repudiatory as a whole. Nonetheless, Januzaj v. Valilas gives an owner faced with a defaulting charterer some cause for concern that he will be jumping the gun if he chooses to terminate where a charterer has missed a few hire payments. Is it relevant to consider the length of the charter when deciding whether several unpaid instalments is repudiatory? Are those payments just late or is the charterer not going to pay at all?
Comment
Given the Court of Appeal decision in Januzaj v. Valilas, an owner will need to be cautious about terminating for late payments of hire and there remains uncertainty over exactly how many non-payments will be sufficient to justify a decision by the owner to terminate the charter. Defaulting charterers often suggest to owners that they intend to pay outstanding hire in the future. Such a defaulting charterer, faced with an owner who chooses to terminate the charter as a result, may now argue that the outstanding payments were merely late or that only a few non-payments of hire in the context of a long-term charter is not repudiatory.
Source: INCE&Co | Hellenic Shipping News
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Friday, 20 February 15
U.S. PRODUCED AROUND 19.2 MILLION SHORT TONS OF COAL WEEK ON WEEK
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.2 million short tons (mmst) of coal ...
Thursday, 19 February 15
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Handy
The handy and supra market has not seen any firming rates in front of the Chinese New Year and still suffering on low activity in both hemi ...
Wednesday, 18 February 15
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Strong trade growth, moderating fleet development and deployment of new fuel efficient vessels are expected to lead to a recovery in dry bulk shipp ...
Tuesday, 17 February 15
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KNOWLEDGE TO ELEVATE
This was an appeal from an arbitration award on a point of construction in relation to the wording of an addendum to a ch ...
Tuesday, 17 February 15
BUOYANT WAVES IN RECENT YEARS: GLOBAL SHIP INVESTMENT SINCE THE CRASH - HELLENIC SHIPPING NEWS
Anxiety about fleet expansion is a recurring feature of world shipping markets. Within the global maritime community, worries about the vast amount ...
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- Eastern Energy - Thailand
- Xindia Steels Limited - India
- Australian Commodity Traders Exchange
- Energy Development Corp, Philippines
- SMG Consultants - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Oil Corporation Limited
- Carbofer General Trading SA - India
- Timah Investasi Mineral - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GVK Power & Infra Limited - India
- New Zealand Coal & Carbon
- Oldendorff Carriers - Singapore
- Coal and Oil Company - UAE
- Thai Mozambique Logistica
- Bukit Asam (Persero) Tbk - Indonesia
- Lanco Infratech Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Marubeni Corporation - India
- Straits Asia Resources Limited - Singapore
- Eastern Coal Council - USA
- Deloitte Consulting - India
- Coalindo Energy - Indonesia
- Wilmar Investment Holdings
- European Bulk Services B.V. - Netherlands
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Gujarat Sidhee Cement - India
- Goldman Sachs - Singapore
- Latin American Coal - Colombia
- Star Paper Mills Limited - India
- The University of Queensland
- Energy Link Ltd, New Zealand
- South Luzon Thermal Energy Corporation
- Bangladesh Power Developement Board
- Bhushan Steel Limited - India
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- Australian Coal Association
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- Gujarat Mineral Development Corp Ltd - India
- Merrill Lynch Commodities Europe
- Chamber of Mines of South Africa
- Vizag Seaport Private Limited - India
- Coastal Gujarat Power Limited - India
- Trasteel International SA, Italy
- Minerals Council of Australia
- Petron Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Parliament of New Zealand
- Uttam Galva Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- White Energy Company Limited
- Neyveli Lignite Corporation Ltd, - India
- Kepco SPC Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Sarangani Energy Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Indo Tambangraya Megah - Indonesia
- GMR Energy Limited - India
- ASAPP Information Group - India
- Iligan Light & Power Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Global Coal Blending Company Limited - Australia
- Mintek Dendrill Indonesia
- Baramulti Group, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Global Green Power PLC Corporation, Philippines
- Borneo Indobara - Indonesia
- Metalloyd Limited - United Kingdom
- GAC Shipping (India) Pvt Ltd
- Gujarat Electricity Regulatory Commission - India
- Tata Chemicals Ltd - India
- Meenaskhi Energy Private Limited - India
- The Treasury - Australian Government
- Kobexindo Tractors - Indoneisa
- Renaissance Capital - South Africa
- Karaikal Port Pvt Ltd - India
- Indogreen Group - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Maheswari Brothers Coal Limited - India
- Independent Power Producers Association of India
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Banpu Public Company Limited - Thailand
- Sojitz Corporation - Japan
- Price Waterhouse Coopers - Russia
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- Salva Resources Pvt Ltd - India
- Mjunction Services Limited - India
- Orica Australia Pty. Ltd.
- Bukit Makmur.PT - Indonesia
- Chettinad Cement Corporation Ltd - India
- Miang Besar Coal Terminal - Indonesia
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- Billiton Holdings Pty Ltd - Australia
- Madhucon Powers Ltd - India
- Mercator Lines Limited - India
- Parry Sugars Refinery, India
- Barasentosa Lestari - Indonesia
- Ministry of Finance - Indonesia
- Singapore Mercantile Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Toyota Tsusho Corporation, Japan
- MS Steel International - UAE
- PowerSource Philippines DevCo
- Malabar Cements Ltd - India
- Kaltim Prima Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Sical Logistics Limited - India
- Mercuria Energy - Indonesia
- Romanian Commodities Exchange
- Semirara Mining Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Central Electricity Authority - India
- Alfred C Toepfer International GmbH - Germany
- OPG Power Generation Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Medco Energi Mining Internasional
- Ministry of Transport, Egypt
- Agrawal Coal Company - India
- VISA Power Limited - India
- Sakthi Sugars Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhoruka Overseas - Indonesia
- Rio Tinto Coal - Australia
- Pendopo Energi Batubara - Indonesia
- PTC India Limited - India
- ICICI Bank Limited - India
- Binh Thuan Hamico - Vietnam
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
- Ministry of Mines - Canada
- Jorong Barutama Greston.PT - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Aditya Birla Group - India
- Ceylon Electricity Board - Sri Lanka
- Bulk Trading Sa - Switzerland
- Dalmia Cement Bharat India
- Indonesian Coal Mining Association
- Tamil Nadu electricity Board
- Ambuja Cements Ltd - India
- Commonwealth Bank - Australia
- Africa Commodities Group - South Africa
- Siam City Cement PLC, Thailand
- Altura Mining Limited, Indonesia
- Larsen & Toubro Limited - India
- CNBM International Corporation - China
- Posco Energy - South Korea
- Anglo American - United Kingdom
- Essar Steel Hazira Ltd - India
- London Commodity Brokers - England
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- India Bulls Power Limited - India
- McConnell Dowell - Australia
- PNOC Exploration Corporation - Philippines
- Orica Mining Services - Indonesia
- Jaiprakash Power Ventures ltd
- Sindya Power Generating Company Private Ltd
- Asmin Koalindo Tuhup - Indonesia
- Kapuas Tunggal Persada - Indonesia
- TeaM Sual Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Vedanta Resources Plc - India
- Therma Luzon, Inc, Philippines
- Edison Trading Spa - Italy
- Global Business Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- IEA Clean Coal Centre - UK
- Interocean Group of Companies - India
- Planning Commission, India
- Georgia Ports Authority, United States
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- Attock Cement Pakistan Limited
- Standard Chartered Bank - UAE
- Bhatia International Limited - India
- Meralco Power Generation, Philippines
- Formosa Plastics Group - Taiwan
- Central Java Power - Indonesia
- Indian Energy Exchange, India
- Simpson Spence & Young - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Power Finance Corporation Ltd., India
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
- Grasim Industreis Ltd - India
- Makarim & Taira - Indonesia
- Sree Jayajothi Cements Limited - India
- Riau Bara Harum - Indonesia
- Economic Council, Georgia
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- GN Power Mariveles Coal Plant, Philippines
- Kumho Petrochemical, South Korea
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Wood Mackenzie - Singapore
- Electricity Authority, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Cigading International Bulk Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
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