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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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Monday, 09 February 15
Q2' CFR SOUTH CHINA COAL SWAP DECLINED 3.28% TO $ 56.92 W-O-W
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 1.93 (-3.28%) per MT month over month and US$ 0.10 (-0 ...
Sunday, 08 February 15
BDI FELL CONTINUOUSLY HIT A THREE DECADES LOW
COALspot.com: This week Baltic Exchange Dry Freight Index (BDI) fell continuously hit a three decades low.
The BDI continuously fell and was d ...
Friday, 06 February 15
WEEKLY U.S. COAL PRODUCTION UP AN ESTIMATED 1.1% FROM LAST WEEK - EIA
COALspot.com – United States the world's one of the largest coal producers, produced approximately 20.1 million short tons (mmst) of coal ...
Friday, 06 February 15
SHIP DAMAGED BY FIRE CAUSED BY PIRATES FOUND TO BE CONSTRUCTIVE TOTAL LOSS - TAYLOR WESSING
KNOWLEDGE TO ELEVATE
The High Court was asked to determine a number of preliminary issues, including whether a vessel was a constructive total ...
Thursday, 05 February 15
BDI HAS NOW FALLEN A LEVEL CLOSE TO THE INDEX'S HISTORIC LOW - INTERMODAL
They say a picture is worth a thousand words and in this instance just one look at the tables above is enough to understand the great pressure the ...
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- Antam Resourcindo - Indonesia
- Trasteel International SA, Italy
- Chamber of Mines of South Africa
- The Treasury - Australian Government
- Krishnapatnam Port Company Ltd. - India
- Bhoruka Overseas - Indonesia
- Indo Tambangraya Megah - Indonesia
- Mercator Lines Limited - India
- ICICI Bank Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Heidelberg Cement - Germany
- Bulk Trading Sa - Switzerland
- Chettinad Cement Corporation Ltd - India
- Xindia Steels Limited - India
- Star Paper Mills Limited - India
- Malabar Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- Parliament of New Zealand
- PTC India Limited - India
- PNOC Exploration Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Indogreen Group - Indonesia
- Metalloyd Limited - United Kingdom
- McConnell Dowell - Australia
- Maheswari Brothers Coal Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Medco Energi Mining Internasional
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- Timah Investasi Mineral - Indoneisa
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- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Miang Besar Coal Terminal - Indonesia
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Orica Mining Services - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- ASAPP Information Group - India
- Edison Trading Spa - Italy
- Central Java Power - Indonesia
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- Tamil Nadu electricity Board
- San Jose City I Power Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IHS Mccloskey Coal Group - USA
- Bahari Cakrawala Sebuku - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Jorong Barutama Greston.PT - Indonesia
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- Karbindo Abesyapradhi - Indoneisa
- Power Finance Corporation Ltd., India
- Bhatia International Limited - India
- CNBM International Corporation - China
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Authority, New Zealand
- Semirara Mining and Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Africa Commodities Group - South Africa
- Attock Cement Pakistan Limited
- Eastern Coal Council - USA
- Vizag Seaport Private Limited - India
- Kartika Selabumi Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- GAC Shipping (India) Pvt Ltd
- Coastal Gujarat Power Limited - India
- Parry Sugars Refinery, India
- Ministry of Finance - Indonesia
- Karaikal Port Pvt Ltd - India
- Marubeni Corporation - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Borneo Indobara - Indonesia
- The State Trading Corporation of India Ltd
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- European Bulk Services B.V. - Netherlands
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Siam City Cement - Thailand
- Rio Tinto Coal - Australia
- Bhushan Steel Limited - India
- Wood Mackenzie - Singapore
- GVK Power & Infra Limited - India
- Bharathi Cement Corporation - India
- Kumho Petrochemical, South Korea
- Economic Council, Georgia
- Renaissance Capital - South Africa
- Kapuas Tunggal Persada - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Mintek Dendrill Indonesia
- PowerSource Philippines DevCo
- Binh Thuan Hamico - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- Wilmar Investment Holdings
- Agrawal Coal Company - India
- PetroVietnam Power Coal Import and Supply Company
- Jaiprakash Power Ventures ltd
- Bukit Makmur.PT - Indonesia
- Ministry of Mines - Canada
- Ambuja Cements Ltd - India
- Ministry of Transport, Egypt
- Maharashtra Electricity Regulatory Commission - India
- Altura Mining Limited, Indonesia
- Globalindo Alam Lestari - Indonesia
- The University of Queensland
- Kideco Jaya Agung - Indonesia
- IEA Clean Coal Centre - UK
- Global Coal Blending Company Limited - Australia
- Bangladesh Power Developement Board
- Sical Logistics Limited - India
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Sidhee Cement - India
- Georgia Ports Authority, United States
- SN Aboitiz Power Inc, Philippines
- Bayan Resources Tbk. - Indonesia
- Aditya Birla Group - India
- Toyota Tsusho Corporation, Japan
- Aboitiz Power Corporation - Philippines
- Simpson Spence & Young - Indonesia
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- Global Business Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- Goldman Sachs - Singapore
- Deloitte Consulting - India
- Sarangani Energy Corporation, Philippines
- VISA Power Limited - India
- Leighton Contractors Pty Ltd - Australia
- Port Waratah Coal Services - Australia
- South Luzon Thermal Energy Corporation
- Sindya Power Generating Company Private Ltd
- Kobexindo Tractors - Indoneisa
- Siam City Cement PLC, Thailand
- Savvy Resources Ltd - HongKong
- Banpu Public Company Limited - Thailand
- Holcim Trading Pte Ltd - Singapore
- Videocon Industries ltd - India
- Sinarmas Energy and Mining - Indonesia
- MS Steel International - UAE
- Directorate Of Revenue Intelligence - India
- Kohat Cement Company Ltd. - Pakistan
- Uttam Galva Steels Limited - India
- Standard Chartered Bank - UAE
- Meenaskhi Energy Private Limited - India
- Jindal Steel & Power Ltd - India
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Electricity Generating Authority of Thailand
- Oldendorff Carriers - Singapore
- Interocean Group of Companies - India
- Ceylon Electricity Board - Sri Lanka
- Intertek Mineral Services - Indonesia
- Romanian Commodities Exchange
- Indian Oil Corporation Limited
- Indonesian Coal Mining Association
- London Commodity Brokers - England
- Independent Power Producers Association of India
- Australian Commodity Traders Exchange
- Eastern Energy - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Thiess Contractors Indonesia
- Kepco SPC Power Corporation, Philippines
- Samtan Co., Ltd - South Korea
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Posco Energy - South Korea
- Commonwealth Bank - Australia
- Planning Commission, India
- Mjunction Services Limited - India
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- Carbofer General Trading SA - India
- Sree Jayajothi Cements Limited - India
- Lanco Infratech Ltd - India
- Coal and Oil Company - UAE
- Australian Coal Association
- Singapore Mercantile Exchange
- Directorate General of MIneral and Coal - Indonesia
- Indika Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- Minerals Council of Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Ind-Barath Power Infra Limited - India
- Central Electricity Authority - India
- Baramulti Group, Indonesia
- GMR Energy Limited - India
- Riau Bara Harum - Indonesia
- Energy Link Ltd, New Zealand
- Petrochimia International Co. Ltd.- Taiwan
- India Bulls Power Limited - India
- Kaltim Prima Coal - Indonesia
- Cement Manufacturers Association - India
- Barasentosa Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Meralco Power Generation, Philippines
- Global Green Power PLC Corporation, Philippines
- Vedanta Resources Plc - India
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