Time charter – consistent failure to pay hire timeously held to be repudiatory – obligation to pay hire timeously not a condition.
The Facts
Vessels in the same ownership were let on amended NYPE 1993 forms.
Charterers’ obligations were guaranteed by their parent company.
Clause 11 read in part:
“Failing the punctual and regular payment of hire, or on any fundamental breach whatsoever of this charterparty, the owners shall be at liberty to withdraw the vessel from the service of the charterers without prejudice to any claims they (the owners) may otherwise have on the charterers.”
After serial failures to pay hire timeously by charterers, owners withdrew their vessels and called on the guarantees. At about the same time charterers went into liquidation.
Owners claimed for loss of profits on a falling market.
Guarantors disputed the authority of the signatory to the guarantees, whether damages were payable at all, and, if so, the measure employed by the owners.
Findings
In a trial lasting four days Popplewell J found for the owners, essentially on the basis that repeated failure to pay on time amounted to repudiation entitling owners to cancel and claim damages.
In an excursus of 49 pages, arguably obiter, he found that failure to pay hire, per se, was not breach of a condition entitling owners to cancel. In this he disagreed with the contrary view of Flaux J in the Astra.
With regard to the measure of damages he adopted the approach in the Elena D’Amico to the effect that, where there is no opportunity for a replacement time charter, owners are entitled to refix their vessels at their discretion i.e. to employ the vessels on the spot market or short-term time charters as they see fit.
A number of House of Lords decisions on withdrawal holding payment of hire to be a condition might have tipped the scales in favour of Flaux J’s analysis in the Astra.
Nevertheless, the Court of Appeal, Etherton NR, Gross and Hamblen LJJ, upheld the judge on both points.
Commentary
The Court of Appeal recorded that it was not necessary to decide the condition issue.
Popplewell J’s point on the condition issue that breaches of the payment obligation could range from being trivial to material seems good.
Logically and conceptually, the conditions/warranty distinction remains an unnecessary anachronism.
The real question in this case was whether the charterers’ failure to pay hire was material. That this question was answered in the affirmative led to the result.
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