Kuwait Rocks Co v AMN Bulkcarriers The Astra
Kuwait Rocks Co v AMN Bulkcarriers Inc (The “Astra”)
English Commercial Court: Flaux J:  EWHC 865 (Comm): 18 April 2013
TIME CHARTER: WHETHER CHARTERERS’ CONDUCT REPUDIATORY: WHETHER OBLIGATION TO PAY HIRE IS A CONDITION: RIGHT TO CLAIM LOSS OF PROFIT FOR REPUDIATION OR BREACH OF HIRE PAYMENT OBLIGATION
Josephine Davies and Rupert Hamilton (instructed by Watling & Co) for KRC/Charterers
Robert Bright QC (instructed by Reed Smith LLP) for AMN/Owners
Note: In its decision of 7 October 2016 in the case of Grand China Logistics Holding (Group) v Spar Shipping AS  EWCA Civ 982, the Court of Appeal said that the decision in this case on the 'condition' point was wrong.
Charterers’ obligation to pay hire, together with the anti-technicality provision (and arguably even without the anti-technicality provision) was a condition of the charter, breach of which entitled owners both to terminate the charter and to claim damages for loss of profit over the remaining minimum period of the charter.
Case note by Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), Solicitor of England & Wales, Foreign Qualified Lawyer (Practising Foreign Law) in Singapore, Associate at Hill Dickinson LLP and International Contributor to DMC’s CaseNotes 
The “Astra” was chartered in 2008 by AMN Bulkcarriers Inc as disponent owners (‘owners’) to Kuwait Rocks Co (‘charterers’) on an amended NYPE 1946 form for a period of five years (‘the charter’).
Of particular significance in the charter were:
(1) Clause 5, the hire payment provision, which required “punctual and regular payment” of hire 30 days in advance, breach of which would give owners the contractual right to withdraw the vessel; and
(2) Clause 31, the anti-technicality provision, which required owners to give charterers two banking days’ notice following failure to pay hire on time to rectify the failure, before they would be entitled to withdraw the vessel.
Charterers defaulted in the payment of hire on several occasions by reason of their financial difficulties and they also threatened on several occasions to seek insolvency if owners did not agree to substantial concessions over the hire rate. Following expiry of one such concession agreement, charterers continued to pay hire at the concession rate instead of at the full contractual hire rate as required. This state of affairs led to owners giving an anti-technicality notice to charterers. When charterers did not pay hire by the expiry of the anti-technicality deadline, owners withdrew the “Astra”.
Owners commenced arbitration, claiming damages for loss of profit from the date of withdrawal of the vessel for the remaining minimum unexpired period of the charter. The tribunal did not accept that clause 5 of the charter was a condition. The tribunal did, however, find on the facts that charterers’ conduct amounted to a repudiation of the charter. That entitled owners to damages for loss of profit. The judgment given by Flaux J was an appeal against a London arbitration award on three questions of law. Only two of the questions are relevant for present purposes. The first arose on charterers’ appeal on the issue of whether charterers had repudiated the charter. The second arose by way of cross-appeal by owners on the issue of whether clause 5 was a condition of the charter.
On review of the law on the legal test to determine whether or not a contract has been repudiated, and in consideration of the facts found and reasons given by the arbitral tribunal, the judge concluded that charterers had repudiated the charter. The judge considered that, on the totality of the evidence presented, charterers had intended to perform the balance of the charter in a manner which was not consistent with the terms of the charter. In particular, the judge noted that the tribunal was clearly of the view, when the evidence was considered objectively, that charterers had had no intention of paying the full hire rate but were instead only prepared to pay a substantially lesser amount of hire for the more than three years remaining of the charter. The judge was of the view that this was sufficient to conclude that charterers had repudiated the charter (a breach which went to the root of the contract), and that the tribunal had made no error of law in this regard.
The judge undertook a comprehensive and detailed consideration of the leading cases spanning some 88 paragraphs. The judge gave four reasons, by way of summary of his analysis, for his decision that clause 5 (whether or not accompanied by clause 31 but even more so when with clause 31) is a condition of the charter:
(1) The wording of clause 5 makes clear that there is a right to withdraw whenever there is a failure to make punctual payment (irrespective of whether the breach is otherwise repudiatory), which is a strong indication that the intention was that failure to pay hire promptly would go to the root of the contract, which made the provision a condition;
(2) The general rule in mercantile contracts, where there is a “time” provision requiring something to be done by a deadline, is that time is considered to be of the essence, which is consistent with dicta of the House of Lords, and although contrary to a first instance judgment on clause 5 (The “Brimnes” fn.1), clause 31 provided a valid ground of distinction in this case;
(3) The importance to businessmen of certainty in commercial transactions – if the law was that the right to withdraw the vessel for non-payment of hire left owners with no remedy in damages on a falling market owners would be left in a position of uncertainty as to whether to withdraw the vessel or to “wait and see” until such time that charterers were clearly in repudiatory breach; and
(4) The conclusion that clause 5 is a condition is supported by dicta both in the Court of Appeal and in the House of Lords. In view of that judicial support, albeit only persuasive in nature, the courts need not show any reluctance to hold that a “time” obligation is a condition and, indeed, should usually do so.
The judge went further by stating that he would have declined (“albeit with some hesitation”) to follow The “Brimnes” (as he was entitled to do) for a number of reasons:
(1) The conclusion that clause 5 is not an essential term cannot really be reconciled with the dicta of the House of Lords to the effect that time is generally of the essence in mercantile contracts;
(2) The reasoning was based in large measure upon the decision in The “Georgios C” (fn.2) which was subsequently overruled by the House of Lords in The “Laconia” (fn.3); and
(3) The conclusion involved acceptance of the argument that the word “punctual” added little or nothing to the word “payment” standing alone in clause 5 (an argument the validity of which depended on the correctness of The “Georgios C”), although the speeches in The “Laconia” made quite clear that the House of Lords regarded punctual payment of hire as being of considerable commercial importance, discrediting the argument that “punctual” added nothing to “payment”.
The judgment is relevant to all time charters and not just those that use the NYPE 1946 form wording of clause 5 and include an anti-technicality provision (which is now the norm).
The judgment will be of particular significance to time charter disputes concerning withdrawal or early redelivery of vessels in arbitration and litigation at present, as well as current and future performance of and disputes concerning time charters.
The question of whether or not the judgment is binding on tribunals and courts is not a straightforward one to answer. On balance, while there are good prospects for the judgment to be followed and confirmed by the first instance and appeal courts in future, the position is not sufficiently clear at present to justify recommending reliance on the judgment unless owners are prepared to take the not insubstantial risk that the judgment will not be followed by tribunals and courts or later confirmed by the appeal courts.
Fn.1:  2 Lloyd’s Rep 465
Fn.2:  1 QB 488
Fn.3:  1 Lloyd’s Rep 315