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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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Tuesday, 23 December 14
SHIPOWNERS ARE FINALIZING MORE DEALS AS YEAR END COMES CLOSER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS WORLDWIDE
With the 2014 year just a few days before waving goodbye, shipowners are looking to close their pending deals in both the newbuilding and S&P m ...
Monday, 22 December 14
Q2'15 CFR SOUTH CHINA COAL SWAP CLOSED $ 0.30 LOWER THAN Q1'15 CLOSING
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery has decreased by US$ 3.67 (-5.81%) month over month and US$ 0.35 (-0.58%) ...
Monday, 22 December 14
API 5 FOB NEWCASTLE COAL SWAPS ARE HEADING SOUTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 1.71 per MT (-3.24%) and closed at US$ 51.02 on 19 December month ...
Sunday, 21 December 14
PANAMAX COAL FREIGHT FROM INDONESIA TO INDIA FALLS FURTHER
COALspot.com: The BDI continued its fall as cape index lost heavily week on week.
The BDI was down 6.95 percent week over week and closed at 8 ...
Friday, 19 December 14
HOW WILL LOWER BUNKER PRICES AFFECT THE SUBSTANTIAL OVERCAPACITY IN DRY BULK MARKET? - BIMCO
As bunker fuel costs have come down from USD 600 per tonnes to USD 330 per tonnes in the past 6 months, much talk about increased ship speed have s ...
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- Minerals Council of Australia
- Rio Tinto Coal - Australia
- Kideco Jaya Agung - Indonesia
- Australian Coal Association
- Romanian Commodities Exchange
- Xindia Steels Limited - India
- Bukit Baiduri Energy - Indonesia
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Energy Link Ltd, New Zealand
- Central Java Power - Indonesia
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Global Coal Blending Company Limited - Australia
- Renaissance Capital - South Africa
- Uttam Galva Steels Limited - India
- Meenaskhi Energy Private Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Binh Thuan Hamico - Vietnam
- Vedanta Resources Plc - India
- Heidelberg Cement - Germany
- Kumho Petrochemical, South Korea
- Ministry of Transport, Egypt
- Ministry of Finance - Indonesia
- Thai Mozambique Logistica
- Indo Tambangraya Megah - Indonesia
- Orica Australia Pty. Ltd.
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- SMC Global Power, Philippines
- New Zealand Coal & Carbon
- Intertek Mineral Services - Indonesia
- McConnell Dowell - Australia
- Videocon Industries ltd - India
- Eastern Energy - Thailand
- International Coal Ventures Pvt Ltd - India
- Georgia Ports Authority, United States
- Ind-Barath Power Infra Limited - India
- Anglo American - United Kingdom
- Bank of Tokyo Mitsubishi UFJ Ltd
- Posco Energy - South Korea
- Trasteel International SA, Italy
- Directorate Of Revenue Intelligence - India
- Oldendorff Carriers - Singapore
- Edison Trading Spa - Italy
- Semirara Mining and Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Energy Development Corp, Philippines
- India Bulls Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- Marubeni Corporation - India
- PowerSource Philippines DevCo
- Ambuja Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Sree Jayajothi Cements Limited - India
- Meralco Power Generation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bayan Resources Tbk. - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Chettinad Cement Corporation Ltd - India
- Sojitz Corporation - Japan
- Siam City Cement - Thailand
- Kohat Cement Company Ltd. - Pakistan
- SN Aboitiz Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Electricity Authority, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- TeaM Sual Corporation - Philippines
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Larsen & Toubro Limited - India
- Australian Commodity Traders Exchange
- Karaikal Port Pvt Ltd - India
- London Commodity Brokers - England
- Carbofer General Trading SA - India
- The University of Queensland
- PetroVietnam Power Coal Import and Supply Company
- Bhatia International Limited - India
- Sindya Power Generating Company Private Ltd
- Parliament of New Zealand
- Barasentosa Lestari - Indonesia
- Africa Commodities Group - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Rashtriya Ispat Nigam Limited - India
- Kobexindo Tractors - Indoneisa
- Mjunction Services Limited - India
- Kapuas Tunggal Persada - Indonesia
- Bangladesh Power Developement Board
- White Energy Company Limited
- Orica Mining Services - Indonesia
- Riau Bara Harum - Indonesia
- PNOC Exploration Corporation - Philippines
- Planning Commission, India
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- Global Green Power PLC Corporation, Philippines
- Iligan Light & Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- GAC Shipping (India) Pvt Ltd
- ICICI Bank Limited - India
- SMG Consultants - Indonesia
- Mercator Lines Limited - India
- Bulk Trading Sa - Switzerland
- Kalimantan Lumbung Energi - Indonesia
- Attock Cement Pakistan Limited
- Power Finance Corporation Ltd., India
- Alfred C Toepfer International GmbH - Germany
- Sarangani Energy Corporation, Philippines
- IEA Clean Coal Centre - UK
- Economic Council, Georgia
- Karbindo Abesyapradhi - Indoneisa
- Indonesian Coal Mining Association
- Price Waterhouse Coopers - Russia
- Globalindo Alam Lestari - Indonesia
- Vizag Seaport Private Limited - India
- Eastern Coal Council - USA
- Formosa Plastics Group - Taiwan
- Altura Mining Limited, Indonesia
- Tamil Nadu electricity Board
- IHS Mccloskey Coal Group - USA
- Indika Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Coastal Gujarat Power Limited - India
- LBH Netherlands Bv - Netherlands
- The State Trading Corporation of India Ltd
- Kaltim Prima Coal - Indonesia
- Medco Energi Mining Internasional
- GVK Power & Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Global Business Power Corporation, Philippines
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Petron Corporation, Philippines
- Interocean Group of Companies - India
- Salva Resources Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Gujarat Mineral Development Corp Ltd - India
- Jindal Steel & Power Ltd - India
- Kepco SPC Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Indian Energy Exchange, India
- Bukit Makmur.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Star Paper Mills Limited - India
- CNBM International Corporation - China
- Agrawal Coal Company - India
- Samtan Co., Ltd - South Korea
- Mercuria Energy - Indonesia
- GMR Energy Limited - India
- Bhoruka Overseas - Indonesia
- Tata Chemicals Ltd - India
- Straits Asia Resources Limited - Singapore
- Sical Logistics Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Sinarmas Energy and Mining - Indonesia
- Indogreen Group - Indonesia
- Lanco Infratech Ltd - India
- Simpson Spence & Young - Indonesia
- Chamber of Mines of South Africa
- Bharathi Cement Corporation - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Grasim Industreis Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aditya Birla Group - India
- Mintek Dendrill Indonesia
- Cement Manufacturers Association - India
- Siam City Cement PLC, Thailand
- Coalindo Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Electricity Generating Authority of Thailand
- PTC India Limited - India
- Savvy Resources Ltd - HongKong
- Miang Besar Coal Terminal - Indonesia
- Latin American Coal - Colombia
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- Leighton Contractors Pty Ltd - Australia
- Sakthi Sugars Limited - India
- Semirara Mining Corp, Philippines
- Antam Resourcindo - Indonesia
- The Treasury - Australian Government
- San Jose City I Power Corp, Philippines
- ASAPP Information Group - India
- Vijayanagar Sugar Pvt Ltd - India
- Baramulti Group, Indonesia
- MS Steel International - UAE
- Timah Investasi Mineral - Indoneisa
- Parry Sugars Refinery, India
- Standard Chartered Bank - UAE
- Indian Oil Corporation Limited
- Wilmar Investment Holdings
- Maheswari Brothers Coal Limited - India
- Gujarat Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- Commonwealth Bank - Australia
- Pendopo Energi Batubara - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Thiess Contractors Indonesia
- Malabar Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- Essar Steel Hazira Ltd - India
- Borneo Indobara - Indonesia
- Merrill Lynch Commodities Europe
- Port Waratah Coal Services - Australia
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