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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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Wednesday, 28 January 15
CAPES CONTINUED THEIR UPWARD MOVEMENT LAST WEEK - INTERMODAL
COALspot.com: The Dry Bulk market displayed a mirror performance of that of the week prior, with the Capesize market correcting further upwards and ...
Tuesday, 27 January 15
Q1 FOB INDONESIA COAL SWAP CLOSED AT $ 47.87 FOR WEEK ENDING JAN. 23
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 gain week over week and declined month on month.
The Q1 swap has decline US$ 0.9 ...
Tuesday, 27 January 15
Q2 FOB NEWCASTLE COAL SWAP UP 4.5% W-O-W
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery declined US$ 0.28 per MT (-0.54%) month over month and increased US$ 1.23 ( ...
Monday, 26 January 15
OVERSUPPLY, AMPLE STOCKPILES, AND LACKLUSTER UNDERLYING STEEL DEMAND KEPT COKING COAL PRICES LOW IN 2014
COALspot.com: Coking coal prices (FOB & CFR) fell 15% and 18% respectively during the year, amidst persistent oversupply, ample inventory and s ...
Monday, 26 January 15
FOB RICHARDS BAY Q2 COAL SWAP CLOSED LOWER THAN Q1 CLOSING
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q1' 2015 declined month over month and day on day.
The Q1 swap has fell ...
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- Africa Commodities Group - South Africa
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- Bhushan Steel Limited - India
- Price Waterhouse Coopers - Russia
- Heidelberg Cement - Germany
- Lanco Infratech Ltd - India
- MS Steel International - UAE
- Videocon Industries ltd - India
- Trasteel International SA, Italy
- LBH Netherlands Bv - Netherlands
- Bhatia International Limited - India
- Asmin Koalindo Tuhup - Indonesia
- New Zealand Coal & Carbon
- Altura Mining Limited, Indonesia
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bangladesh Power Developement Board
- Petron Corporation, Philippines
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Sidhee Cement - India
- PNOC Exploration Corporation - Philippines
- South Luzon Thermal Energy Corporation
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- Economic Council, Georgia
- Kapuas Tunggal Persada - Indonesia
- Banpu Public Company Limited - Thailand
- CNBM International Corporation - China
- Medco Energi Mining Internasional
- McConnell Dowell - Australia
- Grasim Industreis Ltd - India
- Meenaskhi Energy Private Limited - India
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- Minerals Council of Australia
- Georgia Ports Authority, United States
- Straits Asia Resources Limited - Singapore
- Simpson Spence & Young - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Standard Chartered Bank - UAE
- Planning Commission, India
- Agrawal Coal Company - India
- Indian Oil Corporation Limited
- Romanian Commodities Exchange
- SMC Global Power, Philippines
- Gujarat Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Iligan Light & Power Inc, Philippines
- Thiess Contractors Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate Of Revenue Intelligence - India
- Jorong Barutama Greston.PT - Indonesia
- Malabar Cements Ltd - India
- Essar Steel Hazira Ltd - India
- Port Waratah Coal Services - Australia
- GN Power Mariveles Coal Plant, Philippines
- GVK Power & Infra Limited - India
- India Bulls Power Limited - India
- San Jose City I Power Corp, Philippines
- Sinarmas Energy and Mining - Indonesia
- Ind-Barath Power Infra Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Tata Chemicals Ltd - India
- The Treasury - Australian Government
- Aditya Birla Group - India
- Orica Australia Pty. Ltd.
- Sical Logistics Limited - India
- Semirara Mining and Power Corporation, Philippines
- IEA Clean Coal Centre - UK
- Maheswari Brothers Coal Limited - India
- Renaissance Capital - South Africa
- Bukit Baiduri Energy - Indonesia
- Cement Manufacturers Association - India
- Global Coal Blending Company Limited - Australia
- Leighton Contractors Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- PTC India Limited - India
- IHS Mccloskey Coal Group - USA
- Samtan Co., Ltd - South Korea
- Kaltim Prima Coal - Indonesia
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- Karaikal Port Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- PowerSource Philippines DevCo
- Energy Link Ltd, New Zealand
- Orica Mining Services - Indonesia
- Indian Energy Exchange, India
- The University of Queensland
- Savvy Resources Ltd - HongKong
- TeaM Sual Corporation - Philippines
- Singapore Mercantile Exchange
- Merrill Lynch Commodities Europe
- Energy Development Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- Uttam Galva Steels Limited - India
- Siam City Cement - Thailand
- Formosa Plastics Group - Taiwan
- Australian Commodity Traders Exchange
- Parry Sugars Refinery, India
- Latin American Coal - Colombia
- Interocean Group of Companies - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Gujarat Mineral Development Corp Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Dalmia Cement Bharat India
- Mintek Dendrill Indonesia
- The State Trading Corporation of India Ltd
- Miang Besar Coal Terminal - Indonesia
- Central Electricity Authority - India
- Antam Resourcindo - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Coalindo Energy - Indonesia
- Semirara Mining Corp, Philippines
- Power Finance Corporation Ltd., India
- London Commodity Brokers - England
- Wood Mackenzie - Singapore
- Independent Power Producers Association of India
- Attock Cement Pakistan Limited
- GMR Energy Limited - India
- Chamber of Mines of South Africa
- Bharathi Cement Corporation - India
- Manunggal Multi Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Rashtriya Ispat Nigam Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
- Indika Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Riau Bara Harum - Indonesia
- Bayan Resources Tbk. - Indonesia
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- Toyota Tsusho Corporation, Japan
- Vizag Seaport Private Limited - India
- Timah Investasi Mineral - Indoneisa
- Larsen & Toubro Limited - India
- Chettinad Cement Corporation Ltd - India
- Bhoruka Overseas - Indonesia
- Mercator Lines Limited - India
- Bukit Makmur.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Indo Tambangraya Megah - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Edison Trading Spa - Italy
- Tamil Nadu electricity Board
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Global Green Power PLC Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Electricity Authority, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Global Business Power Corporation, Philippines
- Posco Energy - South Korea
- Mjunction Services Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CIMB Investment Bank - Malaysia
- Thai Mozambique Logistica
- Aboitiz Power Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- GAC Shipping (India) Pvt Ltd
- Jaiprakash Power Ventures ltd
- Intertek Mineral Services - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Ceylon Electricity Board - Sri Lanka
- Indogreen Group - Indonesia
- Anglo American - United Kingdom
- Kepco SPC Power Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Central Java Power - Indonesia
- Jindal Steel & Power Ltd - India
- Eastern Energy - Thailand
- ICICI Bank Limited - India
- White Energy Company Limited
- Makarim & Taira - Indonesia
- Binh Thuan Hamico - Vietnam
- Ministry of Transport, Egypt
- Ambuja Cements Ltd - India
- Metalloyd Limited - United Kingdom
- Sree Jayajothi Cements Limited - India
- Oldendorff Carriers - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Mercuria Energy - Indonesia
- Deloitte Consulting - India
- Borneo Indobara - Indonesia
- Kumho Petrochemical, South Korea
- SMG Consultants - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Parliament of New Zealand
- Coal and Oil Company - UAE
- Madhucon Powers Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Star Paper Mills Limited - India
- ASAPP Information Group - India
- Xindia Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- VISA Power Limited - India
- Indonesian Coal Mining Association
- Marubeni Corporation - India
- Kideco Jaya Agung - Indonesia
- Pendopo Energi Batubara - Indonesia
- Baramulti Group, Indonesia
- Sojitz Corporation - Japan
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- Rio Tinto Coal - Australia
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