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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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Thursday, 12 February 15
DRY BULK OWNERS SCRAP MORE VESSELS, AS MARKET REACHES HISTORICAL LOWS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market has reached historical lows this week, with the Baltic Dry Index (BDI) now trading at levels below operating expense levels for ...
Thursday, 12 February 15
INDONESIAN COAL PRICE REFERENCE INCHED DOWN 1.44% IN FEBRUARY
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia revised down Indonesian coal bench mark price this month to US$ 62.92 pe ...
Thursday, 12 February 15
NEWBUILDING ORDERING ACTIVITY DRAGS ON, AS OWNERS ARE LOOKING FOR LOWER PRICES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Ship owners appear to be waiting for lower prices in their dealings with Asian shipyards, as the dry bulk market is at historical lows. According t ...
Wednesday, 11 February 15
DRY BULK MARKET REMAINED UNDER PRESSURE : STABILIZING CAPE MARKET HARDLY HELPED SENTIMENT
COALspot.com: The Dry Bulk market remained under pressure last week, while the stabilizing Cape market hardly helped sentiment.
Greece based s ...
Wednesday, 11 February 15
BDI HITTING THE ALL-TIME LOW; FFA MARKETS NOT SHOWING ANY POSITIVE SIGNS
With the BDI hitting the all-time low and with FFA markets not showing any positive signs for a possible recovery in the near future, pessimism is ...
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- Thiess Contractors Indonesia
- Bhushan Steel Limited - India
- Indonesian Coal Mining Association
- Larsen & Toubro Limited - India
- Economic Council, Georgia
- Vizag Seaport Private Limited - India
- Lanco Infratech Ltd - India
- Anglo American - United Kingdom
- Grasim Industreis Ltd - India
- Binh Thuan Hamico - Vietnam
- Semirara Mining Corp, Philippines
- Port Waratah Coal Services - Australia
- SN Aboitiz Power Inc, Philippines
- Central Electricity Authority - India
- The State Trading Corporation of India Ltd
- Global Green Power PLC Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Chettinad Cement Corporation Ltd - India
- Merrill Lynch Commodities Europe
- Bukit Makmur.PT - Indonesia
- Ministry of Mines - Canada
- Petrochimia International Co. Ltd.- Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Marubeni Corporation - India
- Banpu Public Company Limited - Thailand
- Toyota Tsusho Corporation, Japan
- Bhoruka Overseas - Indonesia
- Bukit Baiduri Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CIMB Investment Bank - Malaysia
- Pipit Mutiara Jaya. PT, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Madhucon Powers Ltd - India
- Simpson Spence & Young - Indonesia
- Maheswari Brothers Coal Limited - India
- Petron Corporation, Philippines
- Carbofer General Trading SA - India
- Ceylon Electricity Board - Sri Lanka
- Central Java Power - Indonesia
- White Energy Company Limited
- Kartika Selabumi Mining - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- Georgia Ports Authority, United States
- Riau Bara Harum - Indonesia
- Baramulti Group, Indonesia
- Agrawal Coal Company - India
- Trasteel International SA, Italy
- Ministry of Finance - Indonesia
- Minerals Council of Australia
- Heidelberg Cement - Germany
- Medco Energi Mining Internasional
- Cigading International Bulk Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Ambuja Cements Ltd - India
- Tamil Nadu electricity Board
- The University of Queensland
- Independent Power Producers Association of India
- SMG Consultants - Indonesia
- Alfred C Toepfer International GmbH - Germany
- London Commodity Brokers - England
- Attock Cement Pakistan Limited
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- Manunggal Multi Energi - Indonesia
- New Zealand Coal & Carbon
- Bulk Trading Sa - Switzerland
- CNBM International Corporation - China
- Gujarat Mineral Development Corp Ltd - India
- Aditya Birla Group - India
- Orica Australia Pty. Ltd.
- Kapuas Tunggal Persada - Indonesia
- PTC India Limited - India
- Parliament of New Zealand
- ICICI Bank Limited - India
- Therma Luzon, Inc, Philippines
- Energy Link Ltd, New Zealand
- Wood Mackenzie - Singapore
- Gujarat Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Siam City Cement - Thailand
- VISA Power Limited - India
- Kaltim Prima Coal - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Antam Resourcindo - Indonesia
- Barasentosa Lestari - Indonesia
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Power Finance Corporation Ltd., India
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- SMC Global Power, Philippines
- Australian Coal Association
- Sindya Power Generating Company Private Ltd
- Interocean Group of Companies - India
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- Price Waterhouse Coopers - Russia
- Romanian Commodities Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indian Oil Corporation Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Energy Exchange, India
- Sakthi Sugars Limited - India
- Savvy Resources Ltd - HongKong
- Oldendorff Carriers - Singapore
- India Bulls Power Limited - India
- Karaikal Port Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Sree Jayajothi Cements Limited - India
- Rio Tinto Coal - Australia
- Global Business Power Corporation, Philippines
- Parry Sugars Refinery, India
- Pendopo Energi Batubara - Indonesia
- Altura Mining Limited, Indonesia
- Uttam Galva Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Latin American Coal - Colombia
- PNOC Exploration Corporation - Philippines
- GMR Energy Limited - India
- MS Steel International - UAE
- Neyveli Lignite Corporation Ltd, - India
- Edison Trading Spa - Italy
- Orica Mining Services - Indonesia
- Coastal Gujarat Power Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ind-Barath Power Infra Limited - India
- Africa Commodities Group - South Africa
- Australian Commodity Traders Exchange
- Indo Tambangraya Megah - Indonesia
- Sarangani Energy Corporation, Philippines
- Gujarat Sidhee Cement - India
- Jaiprakash Power Ventures ltd
- Directorate General of MIneral and Coal - Indonesia
- Vedanta Resources Plc - India
- Indika Energy - Indonesia
- Videocon Industries ltd - India
- Kumho Petrochemical, South Korea
- Aboitiz Power Corporation - Philippines
- Mintek Dendrill Indonesia
- Borneo Indobara - Indonesia
- Deloitte Consulting - India
- Star Paper Mills Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Jindal Steel & Power Ltd - India
- Bayan Resources Tbk. - Indonesia
- Mercator Lines Limited - India
- Timah Investasi Mineral - Indoneisa
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- GAC Shipping (India) Pvt Ltd
- GN Power Mariveles Coal Plant, Philippines
- Kobexindo Tractors - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Meenaskhi Energy Private Limited - India
- ASAPP Information Group - India
- PetroVietnam Power Coal Import and Supply Company
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Coal and Oil Company - UAE
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- IEA Clean Coal Centre - UK
- Bukit Asam (Persero) Tbk - Indonesia
- Planning Commission, India
- Global Coal Blending Company Limited - Australia
- Coalindo Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- McConnell Dowell - Australia
- Commonwealth Bank - Australia
- Energy Development Corp, Philippines
- Eastern Energy - Thailand
- GVK Power & Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Mercuria Energy - Indonesia
- Sical Logistics Limited - India
- PowerSource Philippines DevCo
- Renaissance Capital - South Africa
- Eastern Coal Council - USA
- Xindia Steels Limited - India
- Makarim & Taira - Indonesia
- Samtan Co., Ltd - South Korea
- Tata Chemicals Ltd - India
- Salva Resources Pvt Ltd - India
- Chamber of Mines of South Africa
- Posco Energy - South Korea
- Cement Manufacturers Association - India
- Standard Chartered Bank - UAE
- Kideco Jaya Agung - Indonesia
- Bhatia International Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Singapore Mercantile Exchange
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- Goldman Sachs - Singapore
- Krishnapatnam Port Company Ltd. - India
- Malabar Cements Ltd - India
- Wilmar Investment Holdings
- Essar Steel Hazira Ltd - India
- Thai Mozambique Logistica
- Sojitz Corporation - Japan
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Indogreen Group - Indonesia
- Formosa Plastics Group - Taiwan
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