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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, 05 February 15
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Showing 3216 to 3220 news of total 6871 |
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- Sinarmas Energy and Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement - Thailand
- Carbofer General Trading SA - India
- Ceylon Electricity Board - Sri Lanka
- Indo Tambangraya Megah - Indonesia
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- The University of Queensland
- SN Aboitiz Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Sojitz Corporation - Japan
- McConnell Dowell - Australia
- Samtan Co., Ltd - South Korea
- Therma Luzon, Inc, Philippines
- Energy Development Corp, Philippines
- Indika Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- OPG Power Generation Pvt Ltd - India
- Malabar Cements Ltd - India
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- Jaiprakash Power Ventures ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- Global Green Power PLC Corporation, Philippines
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- South Luzon Thermal Energy Corporation
- Mercator Lines Limited - India
- Kideco Jaya Agung - Indonesia
- Coalindo Energy - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Electricity Authority, New Zealand
- India Bulls Power Limited - India
- Bulk Trading Sa - Switzerland
- Iligan Light & Power Inc, Philippines
- Standard Chartered Bank - UAE
- Georgia Ports Authority, United States
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- Chettinad Cement Corporation Ltd - India
- SMC Global Power, Philippines
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- Kalimantan Lumbung Energi - Indonesia
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- Cigading International Bulk Terminal - Indonesia
- ASAPP Information Group - India
- Videocon Industries ltd - India
- Marubeni Corporation - India
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- Rashtriya Ispat Nigam Limited - India
- Toyota Tsusho Corporation, Japan
- Madhucon Powers Ltd - India
- VISA Power Limited - India
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Larsen & Toubro Limited - India
- Coastal Gujarat Power Limited - India
- Barasentosa Lestari - Indonesia
- Makarim & Taira - Indonesia
- Miang Besar Coal Terminal - Indonesia
- CNBM International Corporation - China
- Bangladesh Power Developement Board
- Merrill Lynch Commodities Europe
- Riau Bara Harum - Indonesia
- Globalindo Alam Lestari - Indonesia
- Vedanta Resources Plc - India
- PTC India Limited - India
- Energy Link Ltd, New Zealand
- Orica Australia Pty. Ltd.
- Kobexindo Tractors - Indoneisa
- Independent Power Producers Association of India
- PetroVietnam Power Coal Import and Supply Company
- SMG Consultants - Indonesia
- PowerSource Philippines DevCo
- Ministry of Finance - Indonesia
- Ministry of Transport, Egypt
- Tata Chemicals Ltd - India
- Antam Resourcindo - Indonesia
- Kartika Selabumi Mining - Indonesia
- Holcim Trading Pte Ltd - Singapore
- IEA Clean Coal Centre - UK
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- Straits Asia Resources Limited - Singapore
- Alfred C Toepfer International GmbH - Germany
- Chamber of Mines of South Africa
- MS Steel International - UAE
- GMR Energy Limited - India
- Krishnapatnam Port Company Ltd. - India
- Salva Resources Pvt Ltd - India
- Latin American Coal - Colombia
- Heidelberg Cement - Germany
- Leighton Contractors Pty Ltd - Australia
- Ministry of Mines - Canada
- GN Power Mariveles Coal Plant, Philippines
- LBH Netherlands Bv - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Cement Manufacturers Association - India
- Maheswari Brothers Coal Limited - India
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- Jindal Steel & Power Ltd - India
- Thiess Contractors Indonesia
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- Borneo Indobara - Indonesia
- Meralco Power Generation, Philippines
- Petron Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Goldman Sachs - Singapore
- IHS Mccloskey Coal Group - USA
- Ambuja Cements Ltd - India
- Port Waratah Coal Services - Australia
- Australian Commodity Traders Exchange
- CIMB Investment Bank - Malaysia
- Intertek Mineral Services - Indonesia
- Gujarat Sidhee Cement - India
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- Banpu Public Company Limited - Thailand
- Kohat Cement Company Ltd. - Pakistan
- Indonesian Coal Mining Association
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- Sree Jayajothi Cements Limited - India
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Price Waterhouse Coopers - Russia
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- Baramulti Group, Indonesia
- Renaissance Capital - South Africa
- Indian Energy Exchange, India
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- Lanco Infratech Ltd - India
- Sical Logistics Limited - India
- Eastern Coal Council - USA
- Bhoruka Overseas - Indonesia
- Wilmar Investment Holdings
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- Medco Energi Mining Internasional
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Jorong Barutama Greston.PT - Indonesia
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- Semirara Mining and Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- Bhatia International Limited - India
- Manunggal Multi Energi - Indonesia
- Power Finance Corporation Ltd., India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Africa Commodities Group - South Africa
- Agrawal Coal Company - India
- Directorate General of MIneral and Coal - Indonesia
- Commonwealth Bank - Australia
- Kaltim Prima Coal - Indonesia
- Singapore Mercantile Exchange
- Mercuria Energy - Indonesia
- The Treasury - Australian Government
- Kepco SPC Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Electricity Generating Authority of Thailand
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- Sindya Power Generating Company Private Ltd
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- Uttam Galva Steels Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Formosa Plastics Group - Taiwan
- White Energy Company Limited
- Australian Coal Association
- Posco Energy - South Korea
- Bahari Cakrawala Sebuku - Indonesia
- Directorate Of Revenue Intelligence - India
- Global Business Power Corporation, Philippines
- Trasteel International SA, Italy
- The State Trading Corporation of India Ltd
- International Coal Ventures Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Billiton Holdings Pty Ltd - Australia
- London Commodity Brokers - England
- Mintek Dendrill Indonesia
- Tamil Nadu electricity Board
- Dalmia Cement Bharat India
- Central Java Power - Indonesia
- Eastern Energy - Thailand
- Karbindo Abesyapradhi - Indoneisa
- Bukit Makmur.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement PLC, Thailand
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Deloitte Consulting - India
- TeaM Sual Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Planning Commission, India
- Indogreen Group - Indonesia
- Minerals Council of Australia
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- Sakthi Sugars Limited - India
- Parliament of New Zealand
- Attock Cement Pakistan Limited
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- Metalloyd Limited - United Kingdom
- Gujarat Mineral Development Corp Ltd - India
- Thai Mozambique Logistica
- Bukit Baiduri Energy - Indonesia
- Bharathi Cement Corporation - India
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