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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, 01 January 15
FOB RICHARDS BAY COAL SWAPS CLOSED AT $63.47 PMT ON 26 DEC, SGX DATA SHOWS
COALspot.com: API 4 FOB Richards Bay Coal for delivery Q1' 2015 lost month on month and week over week.
The Q1 swap has lost US$ 3.37 (-4. ...
Wednesday, 31 December 14
COASTAL ENERGEN (C&O) COMMENCES 1ST UNIT OF 1200 MW POWER PLANT IN INDIA
COALspot.com: Coastal Energen, part of the Coal & Oil Group, announced last week the commissioning and commencement of power production at the ...
Wednesday, 31 December 14
SUB-BIT INDONESIA COAL Q2' 15 DELIVERY SWAP CLOSED 1.03% LOWER COMPARED TO AVERAGE Q1' 15 DELIVERY PRICE - SGX
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 lost month on month and gained week over week.
The Q1 swap has lost US$ 1.35 (-2 ...
Tuesday, 30 December 14
SHIP PRICES KEEP ON FALLING, SALES COME EARLY FOR SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship prices keep on falling on the back of low freight rates. According to the latest report from shipbroker Allied Shipbroking, January sales seem ...
Tuesday, 30 December 14
INDIA INC TO BENEFIT AS IMPORTED COAL PRICES SET TO FALL - RAHUL PRITHIANI
The Hindu: India‘s coal import volumes are set to rise by over 30 per cent over the next two years to 214 million tonnes in 2015-16, as domes ...
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- Uttam Galva Steels Limited - India
- Medco Energi Mining Internasional
- Bulk Trading Sa - Switzerland
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- Energy Development Corp, Philippines
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- Petron Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Gujarat Sidhee Cement - India
- Gujarat Electricity Regulatory Commission - India
- Globalindo Alam Lestari - Indonesia
- Planning Commission, India
- Malabar Cements Ltd - India
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- Singapore Mercantile Exchange
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- TeaM Sual Corporation - Philippines
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- Altura Mining Limited, Indonesia
- Timah Investasi Mineral - Indoneisa
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- Global Business Power Corporation, Philippines
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- Ministry of Transport, Egypt
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- Eastern Energy - Thailand
- The University of Queensland
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- Indonesian Coal Mining Association
- CIMB Investment Bank - Malaysia
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- SN Aboitiz Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Marubeni Corporation - India
- Holcim Trading Pte Ltd - Singapore
- Straits Asia Resources Limited - Singapore
- Energy Link Ltd, New Zealand
- Makarim & Taira - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Dalmia Cement Bharat India
- IHS Mccloskey Coal Group - USA
- Cement Manufacturers Association - India
- GMR Energy Limited - India
- Deloitte Consulting - India
- Karbindo Abesyapradhi - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Trasteel International SA, Italy
- Pendopo Energi Batubara - Indonesia
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- Antam Resourcindo - Indonesia
- Riau Bara Harum - Indonesia
- Metalloyd Limited - United Kingdom
- Interocean Group of Companies - India
- Borneo Indobara - Indonesia
- San Jose City I Power Corp, Philippines
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- SMC Global Power, Philippines
- Sakthi Sugars Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Thiess Contractors Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Commonwealth Bank - Australia
- Asmin Koalindo Tuhup - Indonesia
- London Commodity Brokers - England
- Romanian Commodities Exchange
- Leighton Contractors Pty Ltd - Australia
- Jindal Steel & Power Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining Corp, Philippines
- Toyota Tsusho Corporation, Japan
- Siam City Cement PLC, Thailand
- GN Power Mariveles Coal Plant, Philippines
- Kumho Petrochemical, South Korea
- Kaltim Prima Coal - Indonesia
- Kobexindo Tractors - Indoneisa
- Bhatia International Limited - India
- Krishnapatnam Port Company Ltd. - India
- Coal and Oil Company - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Sical Logistics Limited - India
- Semirara Mining and Power Corporation, Philippines
- Central Java Power - Indonesia
- Indian Oil Corporation Limited
- Agrawal Coal Company - India
- Kepco SPC Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Bukit Makmur.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Savvy Resources Ltd - HongKong
- Central Electricity Authority - India
- Kalimantan Lumbung Energi - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Therma Luzon, Inc, Philippines
- Aditya Birla Group - India
- Meralco Power Generation, Philippines
- Electricity Authority, New Zealand
- Salva Resources Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- IEA Clean Coal Centre - UK
- VISA Power Limited - India
- Ministry of Finance - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Meenaskhi Energy Private Limited - India
- Mjunction Services Limited - India
- AsiaOL BioFuels Corp., Philippines
- Parliament of New Zealand
- Georgia Ports Authority, United States
- GAC Shipping (India) Pvt Ltd
- New Zealand Coal & Carbon
- Africa Commodities Group - South Africa
- Mercuria Energy - Indonesia
- Latin American Coal - Colombia
- Madhucon Powers Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Australian Commodity Traders Exchange
- Coalindo Energy - Indonesia
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Power Finance Corporation Ltd., India
- Tamil Nadu electricity Board
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- Billiton Holdings Pty Ltd - Australia
- Wilmar Investment Holdings
- Miang Besar Coal Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- Merrill Lynch Commodities Europe
- Maheswari Brothers Coal Limited - India
- Iligan Light & Power Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Mineral Development Corp Ltd - India
- Wood Mackenzie - Singapore
- McConnell Dowell - Australia
- Indo Tambangraya Megah - Indonesia
- Rio Tinto Coal - Australia
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- Manunggal Multi Energi - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Attock Cement Pakistan Limited
- Aboitiz Power Corporation - Philippines
- Siam City Cement - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Oldendorff Carriers - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- CNBM International Corporation - China
- Price Waterhouse Coopers - Russia
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Carbofer General Trading SA - India
- Independent Power Producers Association of India
- Standard Chartered Bank - UAE
- Alfred C Toepfer International GmbH - Germany
- Orica Australia Pty. Ltd.
- Maharashtra Electricity Regulatory Commission - India
- OPG Power Generation Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Australian Coal Association
- White Energy Company Limited
- Mintek Dendrill Indonesia
- Thai Mozambique Logistica
- Samtan Co., Ltd - South Korea
- India Bulls Power Limited - India
- Goldman Sachs - Singapore
- Cigading International Bulk Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- Grasim Industreis Ltd - India
- Sindya Power Generating Company Private Ltd
- Kartika Selabumi Mining - Indonesia
- Barasentosa Lestari - Indonesia
- Bhushan Steel Limited - India
- The Treasury - Australian Government
- MS Steel International - UAE
- Parry Sugars Refinery, India
- Bahari Cakrawala Sebuku - Indonesia
- PowerSource Philippines DevCo
- Global Coal Blending Company Limited - Australia
- Indogreen Group - Indonesia
- Ministry of Mines - Canada
- ICICI Bank Limited - India
- South Luzon Thermal Energy Corporation
- SMG Consultants - Indonesia
- Coastal Gujarat Power Limited - India
- Videocon Industries ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Economic Council, Georgia
- Lanco Infratech Ltd - India
- The State Trading Corporation of India Ltd
- Chamber of Mines of South Africa
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- Renaissance Capital - South Africa
- Tata Chemicals Ltd - India
- Indika Energy - Indonesia
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Minerals Council of Australia
- Posco Energy - South Korea
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