Web alert: payment of hire: is it a condition? An update

Spar Shipping vs. Grand China Logistics [1]

Nearly two years after Mr Justice Flaux’s controversial decision in The Astra [2] holding that payment of hire is a condition, Mr. Justice Popplewell has held that payment of hire is an innominate term, not a condition.   

This Spar Shipping judgement is in keeping with the previously accepted view that punctual payment of hire is not a condition. In order to recover future losses following a withdrawal, an owner therefore must be able to demonstrate a default of sufficient seriousness amounting to repudiation by the charterer. ‘Sufficiently serious’ is defined as substantially the whole benefit of the contract.
 
A failure to pay is not the same as a refusal to pay and can be effectively remedied by an owner’s prompt withdrawal and the ship’s re-hire to a new charterer. It is not disputed that an owner is authorised to recover outstanding (earned) hire up to and until withdrawal.
 
In reaching this judgement, the judge made comprehensive use of substantial case law and gave significant attention to commercial reasoning. The issue will most likely make its way to the Court of Appeal, but this judgement is now the latest word. A more comprehensive discussion on this important High Court decision will be published by the club shortly. 
 
Defence cover is, by its very nature, discretionary in that the club must be satisfied as to the merits and quantum of the claim in question and the likelihood of achieving a successful outcome, if it is to lend support. 
 
Members requiring further information on this topic should direct their enquiries to either their usual contact at the club or to olivia.furmston@ctplc.com. The club wishes to thank Charlotte Baly for her valued contribution to this article.

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1. [2015] EWHC 718 (Comm)
2. [2013] EWHC 865 (Comm)