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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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Friday, 30 January 15
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COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.9 million short tons (mmst) of coal ...
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Oversupply of tonnage has always been in the back of the head of ship owners when it comes to taking advantage of favorable market conditions. As s ...
Thursday, 29 January 15
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New patterns emerging as energy demand growth decoupled significantly from GDP growth for the first time in 2014
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Thursday, 29 January 15
CAPE MARKET IS STILL STRUGGLING WITH LOW DEMAND AND LOW COMMODITY PRICES
Handy
Supramax rates are heading south with slipping rates all across the block. USG activity is slow with mid-week levels in the mid 8.000s, Fea ...
Wednesday, 28 January 15
MARKET INSIGHT - STELIOS KOLLINTZAS
With most traders having returned to action from year end festivities, we have already seen signs of activity in the specialized product markets. L ...
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- Borneo Indobara - Indonesia
- Power Finance Corporation Ltd., India
- Singapore Mercantile Exchange
- Standard Chartered Bank - UAE
- Kohat Cement Company Ltd. - Pakistan
- Star Paper Mills Limited - India
- Orica Australia Pty. Ltd.
- Parry Sugars Refinery, India
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- Indian Energy Exchange, India
- Mintek Dendrill Indonesia
- Anglo American - United Kingdom
- Global Coal Blending Company Limited - Australia
- New Zealand Coal & Carbon
- Australian Commodity Traders Exchange
- Australian Coal Association
- Siam City Cement - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Straits Asia Resources Limited - Singapore
- Cigading International Bulk Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Directorate Of Revenue Intelligence - India
- GVK Power & Infra Limited - India
- Bhoruka Overseas - Indonesia
- Xindia Steels Limited - India
- Bhushan Steel Limited - India
- Posco Energy - South Korea
- Tata Chemicals Ltd - India
- PowerSource Philippines DevCo
- CIMB Investment Bank - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- Antam Resourcindo - Indonesia
- Malabar Cements Ltd - India
- The State Trading Corporation of India Ltd
- SMG Consultants - Indonesia
- London Commodity Brokers - England
- Africa Commodities Group - South Africa
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- Independent Power Producers Association of India
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- SN Aboitiz Power Inc, Philippines
- OPG Power Generation Pvt Ltd - India
- Interocean Group of Companies - India
- LBH Netherlands Bv - Netherlands
- Manunggal Multi Energi - Indonesia
- Edison Trading Spa - Italy
- IEA Clean Coal Centre - UK
- Mjunction Services Limited - India
- European Bulk Services B.V. - Netherlands
- Energy Link Ltd, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Banpu Public Company Limited - Thailand
- ICICI Bank Limited - India
- Global Business Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Central Electricity Authority - India
- Bayan Resources Tbk. - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Altura Mining Limited, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GN Power Mariveles Coal Plant, Philippines
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- Bahari Cakrawala Sebuku - Indonesia
- Electricity Generating Authority of Thailand
- Gujarat Sidhee Cement - India
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- Globalindo Alam Lestari - Indonesia
- Goldman Sachs - Singapore
- Economic Council, Georgia
- White Energy Company Limited
- Bulk Trading Sa - Switzerland
- Romanian Commodities Exchange
- Chamber of Mines of South Africa
- Oldendorff Carriers - Singapore
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Sakthi Sugars Limited - India
- Eastern Coal Council - USA
- GAC Shipping (India) Pvt Ltd
- Port Waratah Coal Services - Australia
- MS Steel International - UAE
- Binh Thuan Hamico - Vietnam
- Petrochimia International Co. Ltd.- Taiwan
- Coal and Oil Company - UAE
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Meralco Power Generation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Orica Mining Services - Indonesia
- Wood Mackenzie - Singapore
- International Coal Ventures Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Barasentosa Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Grasim Industreis Ltd - India
- Maheswari Brothers Coal Limited - India
- Merrill Lynch Commodities Europe
- PNOC Exploration Corporation - Philippines
- PTC India Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asmin Koalindo Tuhup - Indonesia
- Carbofer General Trading SA - India
- Kobexindo Tractors - Indoneisa
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- Kapuas Tunggal Persada - Indonesia
- Vizag Seaport Private Limited - India
- Sree Jayajothi Cements Limited - India
- Petron Corporation, Philippines
- ASAPP Information Group - India
- Vedanta Resources Plc - India
- Bhatia International Limited - India
- Kumho Petrochemical, South Korea
- Price Waterhouse Coopers - Russia
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Finance - Indonesia
- Therma Luzon, Inc, Philippines
- Formosa Plastics Group - Taiwan
- Samtan Co., Ltd - South Korea
- Miang Besar Coal Terminal - Indonesia
- Indian Oil Corporation Limited
- The Treasury - Australian Government
- South Luzon Thermal Energy Corporation
- Central Java Power - Indonesia
- Ind-Barath Power Infra Limited - India
- Indonesian Coal Mining Association
- Larsen & Toubro Limited - India
- Ministry of Mines - Canada
- Pendopo Energi Batubara - Indonesia
- Salva Resources Pvt Ltd - India
- Ambuja Cements Ltd - India
- Metalloyd Limited - United Kingdom
- Alfred C Toepfer International GmbH - Germany
- Gujarat Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- Electricity Authority, New Zealand
- Kaltim Prima Coal - Indonesia
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Minerals Council of Australia
- AsiaOL BioFuels Corp., Philippines
- Trasteel International SA, Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Timah Investasi Mineral - Indoneisa
- Wilmar Investment Holdings
- Deloitte Consulting - India
- Attock Cement Pakistan Limited
- SMC Global Power, Philippines
- Makarim & Taira - Indonesia
- Thai Mozambique Logistica
- PetroVietnam Power Coal Import and Supply Company
- Planning Commission, India
- Jorong Barutama Greston.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Simpson Spence & Young - Indonesia
- Sojitz Corporation - Japan
- Dalmia Cement Bharat India
- Kideco Jaya Agung - Indonesia
- Bukit Baiduri Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Renaissance Capital - South Africa
- Parliament of New Zealand
- TeaM Sual Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Ministry of Transport, Egypt
- CNBM International Corporation - China
- McConnell Dowell - Australia
- The University of Queensland
- Aditya Birla Group - India
- Sarangani Energy Corporation, Philippines
- Bharathi Cement Corporation - India
- Baramulti Group, Indonesia
- Rio Tinto Coal - Australia
- Neyveli Lignite Corporation Ltd, - India
- Riau Bara Harum - Indonesia
- Sical Logistics Limited - India
- VISA Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- Intertek Mineral Services - Indonesia
- Energy Development Corp, Philippines
- Billiton Holdings Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- India Bulls Power Limited - India
- Uttam Galva Steels Limited - India
- Aboitiz Power Corporation - Philippines
- Mercator Lines Limited - India
- Meenaskhi Energy Private Limited - India
- Latin American Coal - Colombia
- Videocon Industries ltd - India
- Eastern Energy - Thailand
- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Heidelberg Cement - Germany
- Kalimantan Lumbung Energi - Indonesia
- Madhucon Powers Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indogreen Group - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Tamil Nadu electricity Board
- San Jose City I Power Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Global Green Power PLC Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Commonwealth Bank - Australia
- Coalindo Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Medco Energi Mining Internasional
- Cement Manufacturers Association - India
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