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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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Tuesday, 17 February 15
FOB SUB-BIT INDONESIA COAL SWAP UP 8% MONTH OVER MONTH
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 rose week over week and month on month.
The Q2 swap up US$ 3.58 (+8.00%) month o ...
Tuesday, 17 February 15
Q2' FOB RICHARDS BAY COAL SWAP CLOSED AT $63.45; $ 1.85 HIGHER COMPARED TO Q4 CLOSING
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 surge month over month, week on week and day on day.
The Q2 swap has ...
Monday, 16 February 15
COAL MINING SLUMP A BLESSING IN DISGUISE - THE JAKARTA POST
The growth of the coal-mining industry, which has diminished in the last two years, is expected to slump even further this year following weakening ...
Monday, 16 February 15
FOB NEWCASTLE COAL SWAPS SURGE WEEK ON WEEK
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery rose US$ 1.31 per MT (+2.59%) week over week and US$ 4.35 (+9.13%) month on ...
Monday, 16 February 15
Q2' 15 - CFR SOUTH CHINA COAL SWAP ROSE 5.22% M-O-M
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery rose US$ 2.88 (+5.22%) per MT month over month and US$ 1.08 (+1.90% ...
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- Commonwealth Bank - Australia
- Port Waratah Coal Services - Australia
- Bangladesh Power Developement Board
- Bharathi Cement Corporation - India
- Indian Oil Corporation Limited
- McConnell Dowell - Australia
- SMG Consultants - Indonesia
- Indo Tambangraya Megah - Indonesia
- Economic Council, Georgia
- Siam City Cement PLC, Thailand
- Energy Link Ltd, New Zealand
- Agrawal Coal Company - India
- Georgia Ports Authority, United States
- Ambuja Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Bahari Cakrawala Sebuku - Indonesia
- Bulk Trading Sa - Switzerland
- AsiaOL BioFuels Corp., Philippines
- Carbofer General Trading SA - India
- Deloitte Consulting - India
- Planning Commission, India
- Indogreen Group - Indonesia
- Bayan Resources Tbk. - Indonesia
- Mercuria Energy - Indonesia
- Ministry of Finance - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Attock Cement Pakistan Limited
- Latin American Coal - Colombia
- Bukit Baiduri Energy - Indonesia
- Oldendorff Carriers - Singapore
- Edison Trading Spa - Italy
- CNBM International Corporation - China
- Timah Investasi Mineral - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Therma Luzon, Inc, Philippines
- Standard Chartered Bank - UAE
- Australian Coal Association
- Goldman Sachs - Singapore
- Baramulti Group, Indonesia
- Intertek Mineral Services - Indonesia
- IHS Mccloskey Coal Group - USA
- Heidelberg Cement - Germany
- Indonesian Coal Mining Association
- Wilmar Investment Holdings
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- Karbindo Abesyapradhi - Indoneisa
- Global Business Power Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Sakthi Sugars Limited - India
- Semirara Mining and Power Corporation, Philippines
- Vedanta Resources Plc - India
- Larsen & Toubro Limited - India
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- Kaltim Prima Coal - Indonesia
- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- Parliament of New Zealand
- LBH Netherlands Bv - Netherlands
- Straits Asia Resources Limited - Singapore
- Iligan Light & Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Parry Sugars Refinery, India
- Holcim Trading Pte Ltd - Singapore
- Metalloyd Limited - United Kingdom
- New Zealand Coal & Carbon
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- Kalimantan Lumbung Energi - Indonesia
- The State Trading Corporation of India Ltd
- Lanco Infratech Ltd - India
- Borneo Indobara - Indonesia
- India Bulls Power Limited - India
- SN Aboitiz Power Inc, Philippines
- Merrill Lynch Commodities Europe
- The University of Queensland
- Pipit Mutiara Jaya. PT, Indonesia
- Kapuas Tunggal Persada - Indonesia
- PNOC Exploration Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Antam Resourcindo - Indonesia
- Orica Australia Pty. Ltd.
- Mercator Lines Limited - India
- Jaiprakash Power Ventures ltd
- Anglo American - United Kingdom
- Indika Energy - Indonesia
- Renaissance Capital - South Africa
- Coal and Oil Company - UAE
- Central Electricity Authority - India
- Romanian Commodities Exchange
- Thiess Contractors Indonesia
- Trasteel International SA, Italy
- Sojitz Corporation - Japan
- Madhucon Powers Ltd - India
- Central Java Power - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Power Finance Corporation Ltd., India
- Semirara Mining Corp, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Jindal Steel & Power Ltd - India
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Toyota Tsusho Corporation, Japan
- Indian Energy Exchange, India
- Sarangani Energy Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- PTC India Limited - India
- CIMB Investment Bank - Malaysia
- Coastal Gujarat Power Limited - India
- Miang Besar Coal Terminal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Xindia Steels Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Uttam Galva Steels Limited - India
- Bhushan Steel Limited - India
- IEA Clean Coal Centre - UK
- Rio Tinto Coal - Australia
- Aditya Birla Group - India
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Jorong Barutama Greston.PT - Indonesia
- Star Paper Mills Limited - India
- OPG Power Generation Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Sidhee Cement - India
- Ind-Barath Power Infra Limited - India
- Sree Jayajothi Cements Limited - India
- London Commodity Brokers - England
- Singapore Mercantile Exchange
- Energy Development Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate Of Revenue Intelligence - India
- White Energy Company Limited
- Aboitiz Power Corporation - Philippines
- Petron Corporation, Philippines
- Posco Energy - South Korea
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Meenaskhi Energy Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- Bhatia International Limited - India
- Formosa Plastics Group - Taiwan
- Mintek Dendrill Indonesia
- Kepco SPC Power Corporation, Philippines
- Altura Mining Limited, Indonesia
- Electricity Authority, New Zealand
- Dalmia Cement Bharat India
- ASAPP Information Group - India
- Barasentosa Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sinarmas Energy and Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Orica Mining Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Meralco Power Generation, Philippines
- Videocon Industries ltd - India
- Cement Manufacturers Association - India
- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- South Luzon Thermal Energy Corporation
- Africa Commodities Group - South Africa
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- TeaM Sual Corporation - Philippines
- Independent Power Producers Association of India
- Eastern Coal Council - USA
- Banpu Public Company Limited - Thailand
- GAC Shipping (India) Pvt Ltd
- Sindya Power Generating Company Private Ltd
- VISA Power Limited - India
- Salva Resources Pvt Ltd - India
- Sical Logistics Limited - India
- Savvy Resources Ltd - HongKong
- Kumho Petrochemical, South Korea
- Electricity Generating Authority of Thailand
- Global Coal Blending Company Limited - Australia
- Neyveli Lignite Corporation Ltd, - India
- Bukit Asam (Persero) Tbk - Indonesia
- Coalindo Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- GMR Energy Limited - India
- Manunggal Multi Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Vizag Seaport Private Limited - India
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
- Minerals Council of Australia
- Price Waterhouse Coopers - Russia
- Maheswari Brothers Coal Limited - India
- Tata Chemicals Ltd - India
- Global Green Power PLC Corporation, Philippines
- Thai Mozambique Logistica
- Gujarat Mineral Development Corp Ltd - India
- GVK Power & Infra Limited - India
- Malabar Cements Ltd - India
- ICICI Bank Limited - India
- Kartika Selabumi Mining - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Bukit Makmur.PT - Indonesia
- Ministry of Transport, Egypt
- SMC Global Power, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Essar Steel Hazira Ltd - India
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