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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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- Indika Energy - Indonesia
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- Wood Mackenzie - Singapore
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- Eastern Coal Council - USA
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- LBH Netherlands Bv - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
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- Kapuas Tunggal Persada - Indonesia
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- White Energy Company Limited
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- Goldman Sachs - Singapore
- Sojitz Corporation - Japan
- Kideco Jaya Agung - Indonesia
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- Oldendorff Carriers - Singapore
- Globalindo Alam Lestari - Indonesia
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
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- Bhushan Steel Limited - India
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- Planning Commission, India
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- Coalindo Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Minerals Council of Australia
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- Dalmia Cement Bharat India
- Semirara Mining and Power Corporation, Philippines
- CNBM International Corporation - China
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- Binh Thuan Hamico - Vietnam
- Manunggal Multi Energi - Indonesia
- Ministry of Mines - Canada
- McConnell Dowell - Australia
- ICICI Bank Limited - India
- Global Coal Blending Company Limited - Australia
- MS Steel International - UAE
- Karbindo Abesyapradhi - Indoneisa
- Kaltim Prima Coal - Indonesia
- Grasim Industreis Ltd - India
- Chettinad Cement Corporation Ltd - India
- Iligan Light & Power Inc, Philippines
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- SN Aboitiz Power Inc, Philippines
- GN Power Mariveles Coal Plant, Philippines
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- Kumho Petrochemical, South Korea
- Mercuria Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- Star Paper Mills Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Carbofer General Trading SA - India
- IHS Mccloskey Coal Group - USA
- Straits Asia Resources Limited - Singapore
- Lanco Infratech Ltd - India
- Uttam Galva Steels Limited - India
- Sindya Power Generating Company Private Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Metalloyd Limited - United Kingdom
- Borneo Indobara - Indonesia
- Formosa Plastics Group - Taiwan
- Trasteel International SA, Italy
- Edison Trading Spa - Italy
- Energy Development Corp, Philippines
- The State Trading Corporation of India Ltd
- Bangladesh Power Developement Board
- Asmin Koalindo Tuhup - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Renaissance Capital - South Africa
- Ambuja Cements Ltd - India
- Malabar Cements Ltd - India
- Indogreen Group - Indonesia
- The University of Queensland
- Independent Power Producers Association of India
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- CIMB Investment Bank - Malaysia
- Bulk Trading Sa - Switzerland
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- Antam Resourcindo - Indonesia
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- Samtan Co., Ltd - South Korea
- Power Finance Corporation Ltd., India
- Australian Commodity Traders Exchange
- Romanian Commodities Exchange
- Banpu Public Company Limited - Thailand
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- Altura Mining Limited, Indonesia
- The Treasury - Australian Government
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- Orica Australia Pty. Ltd.
- London Commodity Brokers - England
- Therma Luzon, Inc, Philippines
- Madhucon Powers Ltd - India
- Bhoruka Overseas - Indonesia
- Larsen & Toubro Limited - India
- Savvy Resources Ltd - HongKong
- Rashtriya Ispat Nigam Limited - India
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- GMR Energy Limited - India
- Holcim Trading Pte Ltd - Singapore
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- Aditya Birla Group - India
- Directorate Of Revenue Intelligence - India
- SMC Global Power, Philippines
- Energy Link Ltd, New Zealand
- International Coal Ventures Pvt Ltd - India
- Tamil Nadu electricity Board
- IEA Clean Coal Centre - UK
- Cigading International Bulk Terminal - Indonesia
- Electricity Authority, New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Electricity Generating Authority of Thailand
- Bukit Makmur.PT - Indonesia
- Georgia Ports Authority, United States
- PNOC Exploration Corporation - Philippines
- ASAPP Information Group - India
- Indo Tambangraya Megah - Indonesia
- Ministry of Transport, Egypt
- New Zealand Coal & Carbon
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- Siam City Cement - Thailand
- Marubeni Corporation - India
- Orica Mining Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Economic Council, Georgia
- Bank of Tokyo Mitsubishi UFJ Ltd
- GVK Power & Infra Limited - India
- Bharathi Cement Corporation - India
- GAC Shipping (India) Pvt Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Meenaskhi Energy Private Limited - India
- Barasentosa Lestari - Indonesia
- Deloitte Consulting - India
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Eastern Energy - Thailand
- Xindia Steels Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Pipit Mutiara Jaya. PT, Indonesia
- Posco Energy - South Korea
- Ind-Barath Power Infra Limited - India
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- PTC India Limited - India
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