Debate resolved: One late hire payment isn’t enough (in itself), but where does this leave owners faced with late payments?
Any uncertainty about whether an owner can automatically terminate a charterparty and claim damages for a single late payment of hire has been resolved by the decision of the Court of Appeal in Grand China Logistics Holding (Group) Ltd v Spar Shipping AS  EWCA Civ 982 (7 October 2016). [click on case name for a link to the judgment]
Before today a debate raged about whether a single late (or less than full) hire payment was sufficient to entitle owners to terminate a charterparty and claim damages for the balance of the charterparty.
The NYPE forms give owners the right to withdraw the vessel if hire is not paid in full and on time (subject to any anti-technicality clause). The effect of this is to terminate the charterparty, but such a termination does not give owners the right to claim damages (save under the NYPE 2015 form, which was not in issue in this case). To entitle owners to claim damages, either the hire payment clause has to be considered to be a “condition” of the contract, or the conduct of the charterers has to be sufficiently serious to be a repudiatory breach.
In The Astra  the Commercial Court found that the hire payment clause was a condition, and therefore that one late or partial payment was enough to permit termination and a damages claim. However, in Spar Shipping at first instance , a different Commercial Court judge found that the hire payment clause was not a condition, and that one late or partial payment did not automatically trigger a right to terminate and claim damages.
The Court of Appeal has today resolved the debate, finding that the obligation to pay hire is not a condition, and therefore that one late or partial payment will not automatically entitle an owner to terminate and claim damages for the loss of the balance of the charterparty.
An owner therefore can only terminate and claim damages in circumstances where the conduct of the charterers in totality amounts to a repudiatory breach. The Court of Appeal found that there would be a repudiatory breach where “a reasonable owner would have no, certainly no realistic, expectation that the charterer would in the future pay hire punctually in advance”.
Where does this leave an owner faced with one or more late or partial payments?
Some would say back in a position of uncertainty, as before The Astra decision.
Following the Court of Appeal decision today, it can now be said with reasonable confidence that one late or partial payment is not enough (it being difficult to meet the repudiatory breach test on the basis of only one late payment).
The point at which a charterer’s late payments and behaviour are such as to put them in repudiatory breach is highly fact specific question depending on the totality of the circumstances, and in our experience is often a difficult judgement for owners (and for lawyers). This is especially so when the number of irregular payments is few but the duration of the charter is long.
Owners of course must tread the path to termination with extreme caution, given that if it is found subsequently that Charterers’ behaviour was not quite enough to meet the repudiatory breach test, owners themselves would have terminated wrongfully, and would lose their right to claim damages. It is a high stakes game.
In the present case the Court of Appeal found that the Charterers’ arrears and behaviour were such as to be repudiatory – showing an intention to turn the charterparties concerned into something radically different from their terms.
In similar cases of ours the charterers’ arrears and general behaviour have been less severe and much closer to the line than in Spar Shipping. Questions of possible termination draw upon all of our experience.