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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, 30 January 15
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COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.9 million short tons (mmst) of coal ...
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Thursday, 29 January 15
CAPE MARKET IS STILL STRUGGLING WITH LOW DEMAND AND LOW COMMODITY PRICES
Handy
Supramax rates are heading south with slipping rates all across the block. USG activity is slow with mid-week levels in the mid 8.000s, Fea ...
Wednesday, 28 January 15
MARKET INSIGHT - STELIOS KOLLINTZAS
With most traders having returned to action from year end festivities, we have already seen signs of activity in the specialized product markets. L ...
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- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- Iligan Light & Power Inc, Philippines
- CNBM International Corporation - China
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- Australian Commodity Traders Exchange
- Deloitte Consulting - India
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- Marubeni Corporation - India
- Manunggal Multi Energi - Indonesia
- Indo Tambangraya Megah - Indonesia
- Rio Tinto Coal - Australia
- Tata Chemicals Ltd - India
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- Kepco SPC Power Corporation, Philippines
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- MS Steel International - UAE
- Uttam Galva Steels Limited - India
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- International Coal Ventures Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Parliament of New Zealand
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- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
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- Australian Coal Association
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- Coalindo Energy - Indonesia
- The University of Queensland
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- Renaissance Capital - South Africa
- Goldman Sachs - Singapore
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- SMG Consultants - Indonesia
- Neyveli Lignite Corporation Ltd, - India
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- Merrill Lynch Commodities Europe
- AsiaOL BioFuels Corp., Philippines
- Lanco Infratech Ltd - India
- Kartika Selabumi Mining - Indonesia
- Port Waratah Coal Services - Australia
- Price Waterhouse Coopers - Russia
- Sakthi Sugars Limited - India
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- Pendopo Energi Batubara - Indonesia
- Intertek Mineral Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ministry of Mines - Canada
- Sojitz Corporation - Japan
- Chamber of Mines of South Africa
- Ministry of Transport, Egypt
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- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indogreen Group - Indonesia
- Bayan Resources Tbk. - Indonesia
- Bukit Makmur.PT - Indonesia
- Energy Link Ltd, New Zealand
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Karaikal Port Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Bulk Trading Sa - Switzerland
- Kideco Jaya Agung - Indonesia
- San Jose City I Power Corp, Philippines
- Binh Thuan Hamico - Vietnam
- PNOC Exploration Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Thiess Contractors Indonesia
- Cigading International Bulk Terminal - Indonesia
- Siam City Cement PLC, Thailand
- Kobexindo Tractors - Indoneisa
- Maharashtra Electricity Regulatory Commission - India
- Semirara Mining Corp, Philippines
- Wilmar Investment Holdings
- Anglo American - United Kingdom
- Essar Steel Hazira Ltd - India
- Interocean Group of Companies - India
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
- GAC Shipping (India) Pvt Ltd
- Parry Sugars Refinery, India
- TNB Fuel Sdn Bhd - Malaysia
- TeaM Sual Corporation - Philippines
- Star Paper Mills Limited - India
- The Treasury - Australian Government
- Coastal Gujarat Power Limited - India
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- Indian Energy Exchange, India
- OPG Power Generation Pvt Ltd - India
- PowerSource Philippines DevCo
- Directorate General of MIneral and Coal - Indonesia
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Planning Commission, India
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- Romanian Commodities Exchange
- Vizag Seaport Private Limited - India
- Kaltim Prima Coal - Indonesia
- Altura Mining Limited, Indonesia
- GVK Power & Infra Limited - India
- India Bulls Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Mercator Lines Limited - India
- Gujarat Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Mintek Dendrill Indonesia
- Bhoruka Overseas - Indonesia
- IHS Mccloskey Coal Group - USA
- Bukit Asam (Persero) Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Mjunction Services Limited - India
- Straits Asia Resources Limited - Singapore
- Holcim Trading Pte Ltd - Singapore
- Mercuria Energy - Indonesia
- Global Business Power Corporation, Philippines
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- Rashtriya Ispat Nigam Limited - India
- Economic Council, Georgia
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- Savvy Resources Ltd - HongKong
- Orica Australia Pty. Ltd.
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- Orica Mining Services - Indonesia
- Energy Development Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
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- Coal and Oil Company - UAE
- Meenaskhi Energy Private Limited - India
- Central Electricity Authority - India
- Videocon Industries ltd - India
- Simpson Spence & Young - Indonesia
- Metalloyd Limited - United Kingdom
- Singapore Mercantile Exchange
- Wood Mackenzie - Singapore
- Miang Besar Coal Terminal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Africa Commodities Group - South Africa
- South Luzon Thermal Energy Corporation
- SN Aboitiz Power Inc, Philippines
- Siam City Cement - Thailand
- VISA Power Limited - India
- LBH Netherlands Bv - Netherlands
- Xindia Steels Limited - India
- Medco Energi Mining Internasional
- Power Finance Corporation Ltd., India
- Timah Investasi Mineral - Indoneisa
- Baramulti Group, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
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- The State Trading Corporation of India Ltd
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Meralco Power Generation, Philippines
- Commonwealth Bank - Australia
- Posco Energy - South Korea
- Independent Power Producers Association of India
- ICICI Bank Limited - India
- Leighton Contractors Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Eastern Coal Council - USA
- White Energy Company Limited
- Borneo Indobara - Indonesia
- Sindya Power Generating Company Private Ltd
- New Zealand Coal & Carbon
- Ministry of Finance - Indonesia
- Aditya Birla Group - India
- Carbofer General Trading SA - India
- Kumho Petrochemical, South Korea
- Krishnapatnam Port Company Ltd. - India
- European Bulk Services B.V. - Netherlands
- PetroVietnam Power Coal Import and Supply Company
- Agrawal Coal Company - India
- London Commodity Brokers - England
- Standard Chartered Bank - UAE
- Grasim Industreis Ltd - India
- Bhatia International Limited - India
- Electricity Authority, New Zealand
- Larsen & Toubro Limited - India
- Central Java Power - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Sree Jayajothi Cements Limited - India
- Attock Cement Pakistan Limited
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- Bangladesh Power Developement Board
- Banpu Public Company Limited - Thailand
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- GMR Energy Limited - India
- CIMB Investment Bank - Malaysia
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