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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, 05 February 15
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The Q1 swap has decli ...
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Showing 3216 to 3220 news of total 6871 |
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- Sindya Power Generating Company Private Ltd
- International Coal Ventures Pvt Ltd - India
- Rio Tinto Coal - Australia
- Directorate General of MIneral and Coal - Indonesia
- Independent Power Producers Association of India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Globalindo Alam Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- AsiaOL BioFuels Corp., Philippines
- Ministry of Finance - Indonesia
- ICICI Bank Limited - India
- Mercator Lines Limited - India
- Bukit Baiduri Energy - Indonesia
- Star Paper Mills Limited - India
- Bhatia International Limited - India
- Thai Mozambique Logistica
- Electricity Authority, New Zealand
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- Chamber of Mines of South Africa
- GAC Shipping (India) Pvt Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Coal Blending Company Limited - Australia
- Tata Chemicals Ltd - India
- ASAPP Information Group - India
- Latin American Coal - Colombia
- Miang Besar Coal Terminal - Indonesia
- Ministry of Mines - Canada
- London Commodity Brokers - England
- Africa Commodities Group - South Africa
- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- SMG Consultants - Indonesia
- Deloitte Consulting - India
- Aditya Birla Group - India
- Petrochimia International Co. Ltd.- Taiwan
- PNOC Exploration Corporation - Philippines
- Vizag Seaport Private Limited - India
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- Sree Jayajothi Cements Limited - India
- Price Waterhouse Coopers - Russia
- Karaikal Port Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Central Electricity Authority - India
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- Ind-Barath Power Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Barasentosa Lestari - Indonesia
- Directorate Of Revenue Intelligence - India
- Eastern Coal Council - USA
- Kaltim Prima Coal - Indonesia
- Metalloyd Limited - United Kingdom
- The State Trading Corporation of India Ltd
- Power Finance Corporation Ltd., India
- Indo Tambangraya Megah - Indonesia
- Renaissance Capital - South Africa
- Indian Energy Exchange, India
- Medco Energi Mining Internasional
- Bangladesh Power Developement Board
- Cigading International Bulk Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- Pipit Mutiara Jaya. PT, Indonesia
- Mintek Dendrill Indonesia
- South Luzon Thermal Energy Corporation
- Oldendorff Carriers - Singapore
- Indian Oil Corporation Limited
- White Energy Company Limited
- Coalindo Energy - Indonesia
- Australian Coal Association
- Australian Commodity Traders Exchange
- PTC India Limited - India
- Dalmia Cement Bharat India
- Indogreen Group - Indonesia
- Madhucon Powers Ltd - India
- Romanian Commodities Exchange
- Anglo American - United Kingdom
- Meralco Power Generation, Philippines
- PowerSource Philippines DevCo
- Larsen & Toubro Limited - India
- Krishnapatnam Port Company Ltd. - India
- Coal and Oil Company - UAE
- VISA Power Limited - India
- Heidelberg Cement - Germany
- Iligan Light & Power Inc, Philippines
- McConnell Dowell - Australia
- Standard Chartered Bank - UAE
- Energy Link Ltd, New Zealand
- The University of Queensland
- Alfred C Toepfer International GmbH - Germany
- San Jose City I Power Corp, Philippines
- Savvy Resources Ltd - HongKong
- India Bulls Power Limited - India
- Grasim Industreis Ltd - India
- Kumho Petrochemical, South Korea
- Mercuria Energy - Indonesia
- New Zealand Coal & Carbon
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Goldman Sachs - Singapore
- Minerals Council of Australia
- OPG Power Generation Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Kideco Jaya Agung - Indonesia
- Kartika Selabumi Mining - Indonesia
- GVK Power & Infra Limited - India
- Singapore Mercantile Exchange
- Sical Logistics Limited - India
- Baramulti Group, Indonesia
- Orica Australia Pty. Ltd.
- Thiess Contractors Indonesia
- Aboitiz Power Corporation - Philippines
- Therma Luzon, Inc, Philippines
- Meenaskhi Energy Private Limited - India
- GMR Energy Limited - India
- Port Waratah Coal Services - Australia
- Global Green Power PLC Corporation, Philippines
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Siam City Cement - Thailand
- Attock Cement Pakistan Limited
- TeaM Sual Corporation - Philippines
- Videocon Industries ltd - India
- Parliament of New Zealand
- Rashtriya Ispat Nigam Limited - India
- The Treasury - Australian Government
- Ministry of Transport, Egypt
- Bulk Trading Sa - Switzerland
- Jindal Steel & Power Ltd - India
- CNBM International Corporation - China
- Wilmar Investment Holdings
- Parry Sugars Refinery, India
- SMC Global Power, Philippines
- European Bulk Services B.V. - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Orica Mining Services - Indonesia
- Tamil Nadu electricity Board
- Neyveli Lignite Corporation Ltd, - India
- Bayan Resources Tbk. - Indonesia
- Economic Council, Georgia
- PetroVietnam Power Coal Import and Supply Company
- Mjunction Services Limited - India
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- CIMB Investment Bank - Malaysia
- MS Steel International - UAE
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Maheswari Brothers Coal Limited - India
- Global Business Power Corporation, Philippines
- Sakthi Sugars Limited - India
- Eastern Energy - Thailand
- Kobexindo Tractors - Indoneisa
- Salva Resources Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Borneo Indobara - Indonesia
- Indonesian Coal Mining Association
- Carbofer General Trading SA - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bharathi Cement Corporation - India
- Energy Development Corp, Philippines
- Gujarat Sidhee Cement - India
- Siam City Cement PLC, Thailand
- Semirara Mining and Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Antam Resourcindo - Indonesia
- Bukit Makmur.PT - Indonesia
- Commonwealth Bank - Australia
- Kapuas Tunggal Persada - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Vedanta Resources Plc - India
- Banpu Public Company Limited - Thailand
- Cement Manufacturers Association - India
- Uttam Galva Steels Limited - India
- Altura Mining Limited, Indonesia
- Edison Trading Spa - Italy
- Electricity Generating Authority of Thailand
- Marubeni Corporation - India
- TNB Fuel Sdn Bhd - Malaysia
- Trasteel International SA, Italy
- Sinarmas Energy and Mining - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Timah Investasi Mineral - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Petron Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Central Java Power - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sojitz Corporation - Japan
- Vijayanagar Sugar Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- IEA Clean Coal Centre - UK
- Jaiprakash Power Ventures ltd
- Planning Commission, India
- Makarim & Taira - Indonesia
- Kohat Cement Company Ltd. - Pakistan
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