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England and Wales High Court (Commercial Court) Decisions
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Cite as:  EWHC 2917 (Comm)
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QUEEN'S BENCH DIVISION
Royal Courts of Justice
Rolls Building, London, EC4A 1NL
B e f o r e :
| PARBULK II A/S
|- and -
|HERITAGE MARITIME LTD SA
David Lewis (instructed by Wikborg Rein) for Parbulk
Hearing dates: 4 October 2011
Crown Copyright ©
Mr Justice Eder:
"28. Termination (See also Clauses 46 and 47)…
(b) Owners' Default
If the Owners shall by any act or omission be in breach of their obligations under this Charter to the extent that the Charterers are deprived of the use of the vessel and such breach continues for a period of fourteen (14) days after written notice thereof has been given by the Charterers to the Owners, the Charterers shall be entitled to terminate this Charter with immediate effect, by written notice to the Owners. In case of cancellation by the Charterers as set out in Clause 28(b), the vessel shall be deemed to be off-hire from the time notice in accordance with line 821 is received by Owners. "
38 CHARTER HIRE
38.1 The Charterers shall throughout the Charter Period pay charter hire (the "Charter Hire") to the Owners, calculated from the first day of the Charter Period, at a rate of USD 38,5000 net per day.
38.2 Subject to the terms of this Agreement, hire shall be paid continuously throughout the Charter Period;
38.3 The Charterers shall pay hire due to the Owners in accordance with the terms of this Charter punctually, in respect of which time shall be of essence. The Charter Hire shall be paid monthly in advance with the first instalment falling due on the Delivery Date in respect of a period up to the end of that calendar month and with subsequent instalments on the 1st day of every calendar month (each, a "Payment Date"), however, where there is a failure to make punctual payment of hire due to oversights, negligence or omissions on the part of the Charterers or the Charterers' bankers, the Charterers shall be allowed the number of Banking Days indicated in Box 34 in which to rectify the failure, and when so rectified within that number of Banking Days, the payment shall stand as regular and punctual.
38.4 Notwithstanding anything to the contrary contained in this Charter, all payments by the Charterers hereunder (whether by way of hire or otherwise) shall be made as follows:-
38.4.1 On the relevant Payment Date; and… "
46. EVENTS OF DEFAULT
46.1 Each of the following events and the events referred to in Clause 28(a) shall be a "Event of Default" for the purposes of this Charter:-
46.1.1 If any instalment of Charter Hire or any other sum payable by the Charterers under this Charter shall not be paid on its due date, or in the case only of sums expressed to be payable by the Charterers on demand, within five (5) Banking Days following the date of demand therefore, and such failure to pay is not remedied within three (3) Baking Days' of receipt by the Charterers of written notice from the Owners notifying the Charterers of such failure and requesting remedial action; or
46.2 The occurrence of an Event of Default shall entitle the Owners by notice to the Charterers with immediate effect to terminate the chartering of the Vessel under this Charter by withdrawing the Vessel from the service of the Charterers, and to recover any and all amounts due and payable hereunder and/or resulting from such termination."
47. OWNERS' RIGHTS ON TERMINATION
47.1 At any time after an Event of Default shall have occurred and be continuing under this Charter, the Owners may, by notice of the Charterers immediately, on such date as the Owners shall specify, terminate the Charter, whereupon the Vessel shall no longer be in the possession of the Charterers with the consent of the Owners, and the Charterers shall redeliver the vessel to the owners in accordance with Clause 15.
47.3 If the Owners pursuant to Clause 47.1 hereof give notice to terminate the chartering by the Charterers of the Vessel, the Charterers shall pay to the Owners on the date of such termination (the "Termination Date") or such later date as the Owners shall specify:-
47.3.1 all hire due and payable, but unpaid, under this Charter up to (and including) the Termination Date together with interest accrued thereon pursuant to Clause 38.7 hereof from the due date for payment hereof from the date for payment thereof of the Termination Date;
47.3.2 any sums, other than hire, due and payable, but unpaid under this Charter together with interest accrued thereon pursuant to Clause 38.7 to the Termination Date; and
47.3.3 all costs, expenses, damages and losses incurred by the Owners as a consequence of this Charter having terminated prior to the expiry of the agreed Charter Period (including, but not limited to, loss of Charter Hire and expenses incurred in recovering possession of, and in moving, laying-up, insuring and maintaining the Vessel and in carrying out any works or modifications required to cause the Vessel to conform with the provisions of Clauses 15,29 and 52 hereof), provided always that the Owners shall take reasonable steps to mitigate their losses so incurred."
47.4 When making payment to the Owners in accordance with Clauses 47.3.1 through 47.3.3 above, no deduction shall be made by the Charterers in respect of the Sellers' Credit which, pursuant to its terms, is immediately forgiven by the Sellers upon the termination of the Charter, by the Owners following the occurrence of a Termination Event hereunder, it being understood by both parties that amount is a reasonable pre-estimate of minimum damages and is not a penalty and an amount equivalent to the Sellers' Credit shall be deducted from the amount of any claim the Owners have against the Charterers in respect of the terminated Charter. For the avoidance of doubt, if the Sellers' Credit does not cover the Owners' loss, the Owners shall be able to claim further compensation for such loss.
47.5 For the avoidance of doubt, in the event of termination of this Charter by the Owners or the Charterers, each of the Owners and the Charterers shall be entitled to all contractual, legal, statutory or equitable remedies, regardless of whether the reasons for such termination would give rise to an independent right of termination as a matter of law.
47.7 Following termination of the chartering of the Vessel hereunder pursuant to Clause 47.1 hereof the Charterers (i) shall continue to comply with their obligations under this Charter until the Vessel is redelivered to the Owners in accordance with Clauses 15,29 and 52.
47.8 In the event of termination of this Charter, the Owners and the Mortgagee shall be entitled to assume and take over Charterers' position as party to any charterparties exceeding 13 months' (including optional periods) subsequently entered into between the Charterer and sub-charterers so that the Owners will substitute the Charterer under such charterparties. The Charterers undertake to assist the Owners and/or the Mortgagee, as the case may be, to accomplish the aforesaid substitution."
"14. The evidence from Parbulk was that prior to March 2009 there had been no major problems with the payment of hire. Clearly Heritage were not immune to the effects of the collapse in freight rates that started in the autumn of 2008. On 20 January 2009 Parbulk agreed to Heritage's request that for the period from February to July 2009 hire should be paid on the first and fifteenth of each month rather than monthly in advance as provided for in the charterparty. However, despite this concession, no hire was paid from 16 April 2009 until the termination of the charterparty by Parbulk on 22 June 2009. Parbulk set out their summary of the instalments of hire that were not paid in a table as follows:-
|Date||Period||Outstanding hire (USD)|
|15.6.2009||16-22.6.2009||7/15 x 577,500 = 269,500|
|Total outstanding hire up to 22 June 2009 2,618,000||Total outstanding hire up to 22 June 2009 2,618,000||Total outstanding hire up to 22 June 2009 2,618,000|
15.….. In so far as it should be necessary, we find as a fact that Parbulk's summary of the instalments that were not paid by Heritage is accurate.
16. When the instalment that was due on 16 April 2009 was not paid, Parbulk sent the following "Notice of outstanding bareboat hire" to Heritage:-
On behalf of Parbulk II AS we hereby tender notice pursuant to clause 46.1.1 of the Bareboat Charter, and ask you to settle the Charter Hire due on 16th April 2009, promptly. We remind you that if your failure to pay is not remedied within 3 Banking Days of your receipt of this notice, the non-payment will constitute an Event of Default under the Bareboat Charter, ref clause 46.
Please settle the outstanding Charter Hire due on 16th April 2009 + one month's Libor 0,448 + 2% = 2,45% per annum calculated on basis of the number of days from 16th April 2009 until payment is made, ref. clause 38.7 pf the Bareboat Charter.
We hereby reserve all our rights under the Bareboat Charter
17. Virtually identical notices, with only the dates and sums amended as appropriate, were sent in respect of each unpaid instalment up to and including the instalment that was due on 15 June 2009.
"18. Mr Wilhelm Magelssen worked for Parbulk's managers and had been involved in the structuring of the whole scheme. He was one of the people from Parbulk who was in regular contact with Heritage and in particular their Captain B Thanabalasingam to try and obtain payment of the outstanding hire. It was Mr Magelssen's evidence that prior to the non-payment of the instalment of 16 April 2009 Captain Thanabalasingam had been able to ensure that modest delays in the payment of hire were quickly resolved.
19. On 26 May 2009 Captain Thanabalasingam sent the following email to Mr Magelssen:-
"Dear Mr Wilhelm Magelssen
Our circumstances have changed. As you are aware that right now the shipping companies are facing the one of the worst economic crisis. We are unable to afford the agreed monthly repayments at the present time.
Our situation was mainly due to Golden Ocean who has prematurely redelivered the vessel and had not paid us the charter hire sum.
As you can see we have no money left to pay our credit commitments. At the moment we do have enough to meet even our basic needs.
We view of our circumstances and we ask that you allow us to get the fund so that we can make payments to you. We are at the present moment trying our level best to collect all our payments due to us from other companies.
We sincerely hope you will give kind consideration to our circumstances, and of course if our circumstances do improve we will definitely make all payments.
We thank you for your attention to this matter, and we look forward to hearing from you soon.
As agents only for and on behalf of Heritage Maritime SA".
20. On 5 June 2009 a meeting took place in Singapore between Mr Chris Grieveson of Messrs Ince & Co (who by then had been instructed by Parbulk) and Mr Mas Gram of Parbulk's managers on the one hand and Captain Thanabalasingam on the other hand. It was Mr Magelssen's evidence that after the instalment of hire due on 16 April 2009 had not been paid, it became clear to him that Captain Thanabalasingam was not a true decision make within the Heritage organisation who had the power of decision over what payments were made to which creditors. Mr Magelssen's evidence was that Mr Anton Sumarlin and Mr P Soekasah, respectively the CEO and CFO of PT Humpuss Intermoda Tansportasi TbK and clearly "decision makers", were meant to attend the meeting but did not do so.
21. That evening Mr Grieveson sent an email to the two Heritage representatives who had not attended which read in part:-
"The money owed by the Heritage under the bareboat Charter presently stands at a little over US$2.43 million, by the end of June this will be approximately US$2.9 million. As Heritage is in default under the bareboat Charter, it is now open to the Owners at any point to serve notice on Heritage in accordance with the Bareboat Charter that the vessel be re-delivered to owners and the bareboat Charter be terminated. In the event that the Charter is terminated because of Heritage's default then heritage will become liable to Owners for the entirety of their losses under the bareboat Charter contract. These losses will equate to approximately US$36 million. As you know, PT Humpuss have guaranteed the entirety of these losses so PT Humpuss will also become liable to Owners for US$36m as soon as the charter is terminated.
Therefore it is undeniably in PT Humpuss/Heritage interests to make an immediate commercial proposal as to how the outstanding hire will be paid to our clients. In the event that our clients have to repossess the vessel and their claim becomes US$36million, there are number of options to our clients in order to obtain security for these claims.
"23. Parbulk found out that under the time charter that Heritage were performing, the vessel had not called at Singapore as previously advised but had instead put into Port Klang for bunkers on her voyage to China. Parbulk arrested the "MAHAKAM" there on 12 June 2009. They did so in support of an admiralty action in rem against vessel "Mahakam" which named as defendants the demise charterers of the vessel. The endorsement of claim pursuant to which the warrant of arrest issued by the High Court of Malaya was as follows:-
Indorsement of claim
The Plaintiff's claim against the Defendants, who are and were at all material times the demise charterers of the Vessel is for USD 2,348,500, being the charter hire sum due under a demise charter dated 11 December 2007 for the period between April to June, 2009, and, for damages for breach of contract and/or duty and/or negligence and/or a declaration that the Defendants are liable to the Plaintiffs in respect of any and all losses and/or damage and/or costs and/or expenses and/or claims and/or liabilities whatsoever incurred and/or to be incurred arising out of and/or in connection with the Defendant's breach of the demise charter and/or duty and/or negligence but not limited to all hire and other earnings due and payable by Defendants under the demise charter including interest and costs. "
"24. On 17 June 2009 Heritage filed an application to the Malaysian court for an order that all further proceedings be stayed pending reference to arbitration in London in accordance with clause 30(a) of the bareboat charterparty, that the arrest be set aside and an enquiry be made into Heritage's losses due to the wrongful arrest of the vessel. The main grounds for the application were that all disputes between the parties were to be referred to arbitration. It was also alleged that the warrant of arrest was not executed validly because the vessel was outside port limits at the time.
25. While matters were pending before the Malaysian court, there were apparently no meaningful discussions between the parties either as to the settlement of Parbulk's claims or the provision of security.
26. On 22 June 2009 the chairman of Parbulk, Mr Christian Due, faxed the following letter to Heritage:-
"To: Heritage Maritime Ltd S.A.
C/o Humpuss Sea Transport TbK
C/o Granadi Building 7th -8th Floor
Jln.HR Rasuna Sald Kav. X-1 No 8-9
Jakarta 12950, Indonesia
Attention: Tatok Hardiono
22nd June 2009
We refer to our notices for outstanding bareboat charter hire dated 16 April 2009, 4 May 2009, 18 May 2009 and 2 June 2009 under the Bareboat Charterparty for the vessel "MAHAKAM" ("Vessel") dated 11 December 2007 between Charterers and Owners ("Charterparty").
In breach of your obligations under Charterparty, you have failed to pay charterhire and your guarantors, PT Humpuss Transportasi TbK ("Guarantors") has failed to make payment despite our notices of 21 April 2009, 8 May 2009 and 27 May 2009 to them. You have further failed to remedy your default to date.
Your actions and/or those of the Guarantors clearly constitutes Events of Default under Clauses 46.1.1, 46.1.3 and 46.1.7. Accordingly, we hereby withdraw the Vessel from your service and terminate the Charterparty with immediate effect.
Charterers are to redeliver the Vessel to Owners at Port Klang, Malaysia, immediately and make payment of all outstanding charterhire pursuant to clause 47.3.
Please confirm immediately to Owners and the vessel's agents at Port Klang:
Veerasamy Muniratnam, Assistant Operation Manager-West Malaysia
Wilhelmsen Ships Service Malaysia Sdn Bhd Port Klang
Tel: +603 3101 2331 (Ext 168) Fax: +603 31012313/Mobile: +60123987212
that Charterers crew will now facilitate a proper handover of the vessel to owners crew who are now standing by in Port Klang including providing a full familiarisation of the vessel, as required by the ISM code.
Take notice that Owners will be conducting an off-hire survey later today, you are invited to send a surveyor participate on a joint survey basis. However, the owners survey will go ahead irrespective of whether you send a surveyor to participate and owners will not permit the survey to be delayed pending the arrival of Charterers appointed surveyor. Please advise owners agent immediately if a surveyor will attend on behalf of charterers.
All our rights remain fully reserved.
Parbulk II AS
27. The "MAHAKAM" was redelivered to Parbulk on 23 June 2009 and was released from arrest on 24 June 2009."
a) the failures to pay hire identified in the termination notice of 22 June 2009 (quoted in paragraph 26 at the Award) and the effect of those failures as a result of clauses 46.1.1, 46.2 and 47.1;
b) the failure to pay the fifth unpaid invoice which was dated 8 June 2009 and was for the period from 16 to 30 June 2009, relying on clause 46.1.1 of the charterparty; and
c) the Charterers' repeated failures to pay hire and their evident inability to pay which Owners argued constituted repudiatory breaches of the charterparty at common law and which Owners were entitled to accept as terminating the charterparty."
"59. It is therefore clear that there is no settled and established principle of landlord and tenant law that a demand for rent will constitute a waiver of the landlord's right to terminate the tenancy for a failure to pay rent. Judgments involving charterparty disputes such as the "LIBYAVILLE", the "MIHALIOS XILAS" and the "LACONIA" indicated that that guidance could be obtained from the principles of landlord and tenant law since time charters are analogous to leases. However, in all the shipping cases cited to us the courts considered all the factual circumstances of the cases to determine whether waiver had been established.
60. That is scarcely surprising. In this context, waiver means the unequivocal affirmation of the continuation of a contract with knowledge of a breach justifying termination of the contract. In cases of the acceptance of rent, it has become a binding principle in landlord and tenant law that the requirements of waiver are thereby made good. However, it would require clear evidence of the existence of such a principle and its application being so automatic that a court or arbitration tribunal could not investigate the surrounding facts to satisfy itself that the requirements for waiver had been established. We were not persuaded by Heritage's arguments that there was a principle that was so well established that it precluded investigation of surrounding circumstances in landlord and tenant cases involving demands for, as opposed to, receipts of rent, never mind its automatic and obligatory extension to charterparty disputes.
61. We are not, for a moment, suggesting that principles relating to the waiver of contractual rights cannot be a general application and have to be compartmentalised by reference to the subject matter of the contract. Of course we accept, as indeed did the judgments in the charterparty disputes referred to above, that potentially the right to withdraw a vessel could be waived by an owner. We have simply concluded that, contrary to the position argued for by Heritage, there is no well established principle of landlord and tenant law that a mere demand for rent (as opposed to the acceptance of rent) will lead to waiver of the right to terminate a lease for breaches of it; nor is there any authority that concludes that such a principle (to the extent that it does exist) is automatically applicable in charterparty disputes without full consideration of all surrounding circumstances. In this case we had to consider the actions of the parties and their effect and the response to the other party to those actions."
"65. We agreed with Heritage's case that Parbulk's arguments as to the effect of the notices prior to that of 2 June 2009 identified in the termination letter of 22 June 2009 overlooked the evidence of Mr Magelssen to the effect that initially Parbulk understandably were anxious to keep the bareboat charter alive. The hire rate in the charterparty was above the then prevailing market rate and a substitute charterparty, if one could be concluded at all, would not have been close to the bareboat charterparty rate payable by Heritage. Parbulk hoped that Heritage, or more probably their guarantors, would be able to pay the outstanding and future instalments of hire. Finally, Parbulk had been created as a single purpose company for the purposes of performing the sale and leaseback and the bareboat charterparty; it was not structured to trade the vessel, in the spot or period bulk market.
66. It was clear from Mr Magelssen's evidence that despite the notices of outstanding charter hire served on 16 April, 4 May, 18 May and 2 June 2009 at the times when those notices were issued, Parbulk were still prepared to keep the charterparty contract alive. However, both from the exchanges between the parties and from Mr Magelssen's evidence, it was clear that Parbulk's attitude changed significantly after the meeting of 5 June 2009 to which Heritage sent no decision makers. The message sent by Mr Grieveson on 5 June 2009, in Mr Magelssen's own words, made it clear to Heritage that:-
"…you need to pay up immediately and you need to come up with a viable commercial solution for how we take this forward unless we are free to…terminate the bareboat charter [whenever] we want".
67. In the event, nothing was paid and Heritage did not come forward with "a viable commercial solution" as envisaged by Mr Magelssen. Furthermore, the vessel was arrested on 12 June 2009. Again Heritage did not approach Parbulk about the provision of security but instead on 17 June 2009 Heritage filed their application to set aside the arrest, stay the Malaysian proceedings and claim damages for wrongful arrest.
68. If there had been no communications between the parties other than the invoices for 15 day instalments of hire and the notices of outstanding bareboat hire there would have been some force in Heritage's argument that Parbulk had waived the right to terminate the charterparty for the non-payments of hire. However, the meeting of 5 June 2009 and the email sent that evening on behalf of Parbulk by Mr Grieveson broke that pattern and the significance that could properly be attached not only to the invoice of 8 June 2009 and the notice of outstanding bareboat hire of 16 June 2009 but also to the earlier notice of outstanding hire of 2 June 2009. The notice of 2 June 2009 required payment to be made within three banking days (in other words by 5 June 2009) failing which the failure to make payment constituted an "Event of Default" under the charterparty. The expiry of the three day deadline coincided with the email sent by Mr Grieveson on behalf of Parbulk. The instruction of solicitors which was explained in that email as well as the text of the email made it quite clear that Heritage could no longer assume that Parbulk would tolerate the non-payment of instalments of hire and unless Heritage or their guarantors made an immediate commercial proposal as to how the unpaid instalments of hire were to be paid Parbulk would terminate the charterparty and repossess the vessel.
69. Far from Parbulk, making an election to keep the contract alive and communicating the election to Heritage, they were expressly telling Heritage that unless arrangements that were satisfactory to Parbulk were made to pay the outstanding hire promptly, they would elect to exercise their right to terminate the charterparty. It is often said that a party cannot "approbate and reprobate". However, Parbulk were quite clear that whatever approbation might have gone on in the past, from 5 June 2009 onwards they would reprobate unless matters were resolved promptly to their satisfaction.
70. Against the background of what happened on and after 5 June 2009, we considered that the invoice of 8 June 2009 for hire payable for the period between 15 and 30 June 2009 and the notice of outstanding bareboat hire of 16 June 2009 could not be considered either objectively or subjectively by the parties as an unequivocal affirmation by Parbulk of the continuation of the charterparty with knowledge of Heritage's breaches of the charterparty. On 8 June 2009 (the date of the invoice) and 16 June 2009 (the date of the notice) the charterparty had not been terminated. All the two documents in question did was to record Parbulk's continuing contractual entitlements both as to hire and to the consequences of Heritage's failure to pay the further instalment. Following the emails sent on behalf of Parbulk on 5 June 2009, they did not constitute a waiver of the right to terminate the charterparty following the notice of 2 June 2009 which was the last of the notices specifically referred to in the termination message of 22 June 2009. Under clause 46.1.1 the Event of Default occurred three banking days after service of the notice of 2 June 2009, service taking place on 3 June 2009. 3 June 2009 was a Wednesday so that the Event of Default occurred on Monday 8 June 2009. Additionally or in the alternative if it is appropriate to consider solely clause 46.1.3, the Event of Default occurred 14 days later on 17 June 2009 (Parbulk having allowed a day for delivery of the original notice).
71. We are satisfied that the above analysis of the evidence is entirely consistent with the approach of Lord Goff set out in the "KANCHENJUNGA". After 5 June 2009 there was no election by Parbulk not to exercise their rights to terminate the charterparty and no communication of such an election to Heritage. Furthermore, it could not be said that thereafter there had been an unequivocal representation by Parbulk that upon which Heritage had relied to their detriment. Indeed, it seemed to us that the facts in this reference were remarkably similar to those considered by Mr Justice Cooke in the "JOTUNHEIM" on the basis of which he concluded:-
"If, however, they keep on pressing for payment and threaten withdrawal, such actions could not be seen to be inconsistent with the exercise of that right when no payment is still forthcoming.
72. We therefore concluded that Parbulk's formal termination of the charterparty on 22 June 2009 was valid.
"72….. In case our conclusion that the invoice of 8 June 2009 and the notice of 16 June did not amount to waiver of Parbulk's contractual rights is overturned on appeal, we had to consider Parbulk's second and alternative case based on Heritage's failure to pay in response to the invoice of 8 June 2009 or the notice of 16 June 2009. They argued that they could terminate pursuant to clause 46.1.1 and no issue as to waiver could arise because it was the last instalment of hire whose payment had been demanded. The only issue that arose in considering this alternative ground of termination was that it was not identified in the termination letter of 22 June 2009.
73. Parbulk referred us to passages from Chitty, the decision in Dalkia Utilities v Celtech and Stocznia Gdynia v Gearbulk Holdings. They argued that the requirement for clear notices (as laid down in the "AFOVOS" and Heisler v Anglo-Dal Limited ) did not apply on the facts of this case. Indeed, since the consequences were the same, they argued that they could simply rely on the notice of 16 June 2009 and did not need to rely on the letter of 22 June 2009.
74. We were not persuaded by Parbulk's arguments on this point. Some of the authorities upon which they relied (such as Dalkia Utilities v Celtech) were more concerned with the separate question of whether a notice had to distinguish between contractual and common law rights of termination. It seemed to us that where a party relied on a letter of termination after the instruction of lawyers who one assumes would have had a hand in the drafting of the letter and which identified specific grounds on which it relied, it was not open to it to argue, after the event, that it could rely on a separate contractual ground which it could have but had not identified at the time. We appreciate that this conclusion may seem rather artificial in the absence of any attempt by Heritage to cure any of their breaches, whether at this time identified or not. However, clause 46.2 did require a notice of termination after an Event of Default and it was to be inferred that the notice had to be comprehensive."
"80. We considered that, consistently with our findings as to the effect of Mr Magelssen's evidence (recorded in paragraph 66 above), Parbulk had elected not to terminate the charterparty for breaches of the obligation to pay hire prior to 5 June 2009. Thereafter, as already recited, Parbulk's position had changed radically. The failure to pay the instalment for the period 1-15 June 2009 was still a continuing breach of condition as at 8 June 2009 expired - it had not been waived. As of 5 June 2009 when the three banking day period of grace following service of the notice of 2 June 2009 and thereafter there was no waiver of the existing or subsequent breaches of condition. Furthermore, although the right to terminate for the earlier breaches might have been waived, it was legitimate to take into account all the unpaid instalments as evidence of Heritage's inability to pay.
81. For the above reasons we concluded that Heritage were in repudiatory breach of the charterparty. Independently of their contractual rights under the terms of the charterparty, Parbulk were entitled to accept the totality of Heritage's conduct in not paying the instalments of hire due for the periods 1-15 June and 16-30 June 2009 and in having evidenced an inability to pay as evincing an intention no longer to be bound by the charterparty contract which they could and did accept as terminating it."
Were the Owners entitled to terminate the Charterparty for the non payment of hire expressed in demands up to and including 2 June 2009 for periods up to 15 June 2009 (as relied upon in the termination letter dated 22 June 2009) when, knowing of these breaches on 8 June 2009 and the right to terminate as a result, the Owners nonetheless on 8 June 2009 knowing of the breaches identified in the letter of purported termination made a further unequivocal demand for future hire for the period 15-30 June 2009? Did this demand for future hire at law amount to a waiver of the right to terminate for the prior non-payment of hire? [See Claim Form 1-6, 10-11 and skeleton argument in support paragraphs 1-35]
Notwithstanding the Owners' waiver of the right to terminate addressed in Issue 1, were the Owners entitled to accept the totality of the Charterers' conduct in not paying hire as referred to in paragraph  of the Award as repudiatory? [See Claim Form para 12 and skeleton in support of leave paragraphs 36-39]
If the Owners' were entitled to do so, did the Owners' notice of termination in its letter dated 22 June 2009 at law amount to an acceptance such as to bring the contract to an end ?
Upon a proper construction of the Charterparty as a whole, were the Owners entitled to justify retrospectively a notice of termination for Event of Default by reference to an Event of Default not specifically identified in the notice of termination?
The Charterers' Submissions
1) The position at law was as follows: The unequivocal demand of payment of successive instalments of future hire in each case at law amounts to a waiver of the right to terminate the contract for non payment of past hire.
2) At the time of termination on 22 June 2009, the Owners had identified the non payment of 4 hire invoices which were relied upon both individually and collectively as evidence of an inability to pay debts but the right to terminate for the non payment of each of these 4 invoices had been waived as a matter of law by the unequivocal successive demand for the payment of further and future instalments of hire.
3) The arbitrators erred in deciding that the invoice and unequivocal demand for the payment of future hire expressed in the documents dated 8 and 16 June 2009 and referred to above did not amount in law to a waiver of the right to terminate the Charterparty for non payment of the past hire and in particular the periods of hire covered by the notice of 2 June 2009 relied upon in the termination itself - Award  and .
4) Equally the fact that the Owners continued to demand payment of hire notwithstanding that the Charterers had made clear their own inability to pay debts due to the financial crash position was a waiver of any Event of Default under clause 46.1.7 (inability to pay debts). There is in reality no distinction between the Owners' knowledge of the Charterers' failure to pay hire and knowledge of inability to pay debts for the reasons clearly exposed by the Tribunal in the Award by the recital of the Charterers' email of 26 May 2009 [Award 19]. The Owners made it clear in the termination letter that the non payment of hire is relied upon to support the inability to pay debts.
5) The arbitrators also erred in law making a distinction between the earlier demands for future hire which they concluded did in law amount to a waiver and an election to keep the charterparty alive and the demand/notice sent respectively on 8 and 16 June 2009 which they concluded did not amount to such a waiver/ election- because the Owners in their mind wanted to preserve rights of termination – see Award  to .
6) The correct position at law is as follows:
i. Where an owner either makes an unequivocal demand for future hire or accepts the late payment of past hire the owner is in law treated as acting in a manner which will amount to a waiver of the right to terminate for breach, non payment or late payment or inability to pay the same.
ii. The starting point for the correct analysis in law is that stated in a series of landlord and tenant cases dealing with the position where a landlord knowing of an event of default and the right to terminate makes an unequivocal demand for the payment of future rent. As is clearly stated in a series of cases when a landlord so acts he is taken at law to have waived the right to terminate for the earlier breach / non payment of rent. Thus as is made clear in the Blackstone v Burnetts (West End)  1 WLR 1487 at F -G:
"In the present case the matter does arise for decision. My view both on principle and on such persuasive authority as has been cited to me, is that an unambiguous demand for future rent in advance as was made here does in law amount to an election and does constitute a waiver (of the right to terminate for breach) if at the time when it is made, the landlord has sufficient knowledge of the facts to put him to his election."
iii. It is equally clear that a demand for future rent which is expressed to be "without prejudice to the right to terminate," will equally amount to a waiver and election at law. This was the very issue before Sachs J. in Segal Securities Ltd v Thoseby  1 QB at p899. This is part of a wider principle that a party cannot approbate and reprobate - see Walkinshaw v Diniz  1 Lloyd's Rep 632 at 643 and Award . This is important, because it removes at a stroke the false and erroneous legal distinction which the Tribunal sought to draw between the earlier demands for hire and the demands made on 8 and 16 June. In the latter case the Tribunal erroneously distinguished those demands by holding that the legal effect was somehow qualified by the reservation of the right to terminate expressed on 5 June. It is not possible to read such a reservation into the demands for hire made on 8 and 16 June but in any event even if such a "qualification" were implied these demands would still be a demand for future rent or hire which at law as Mr Justice Sachs made abundantly clear would attract the legal consequence of amounting to a waiver of the right to terminate for the earlier breach.
iv. Yet further, the question of whether or not an act amounts to a waiver of a right to terminate is a question of law that turns entirely on the quality of the act in question and all consideration of the state of mind of the party making the demand is irrelevant as is the question of whether that person tried or even stated he wished to reserve his rights. This is clear not only from the decision of Sachs J (cited above) but the analysis of Lord Denning in the Court of Appeal in Central Estates (Belgravia) Limited v Woolgar (no 2)  1 WLR 1048, 1052 himself citing with approval Parker J in Matthews v Smallwood  1 Ch 777,786.
v. The principle that a demand for future rent is a classic way which may give rise to a waiver was recently endorsed in the Court of Appeal in Expert Clothing Ltd v Hillgate House  1 Ch 240, 359 D-H per Slade LJ; Thomas v Ken Thomas Ltd  EWCA Civ 1504 at  per Lord Neuberger (who also was counsel in Expert Clothing).
vi. The principle was likewise identified as being long standing in a review of the authorities by Lord Justice Thomas in Greenwood Reversions Ltd v World Environment Foundation Ltd  EWCA Civ 47 at -. The point may be open in the Supreme Court but this does not in any way undermine the settled nature of the principle which should have been applied by the Tribunal.
vii. The principle set out above is well established not only in the authorities identified above but is also identified as settled law in Smith's Leading Cases Vol 1 at p40.
viii. The Tribunal correctly accepted that in principle no distinction can or should arise in principle in the application of the principles of waiver in different forms of contract - Award  -  and see further The Brimnes  2 Lloyd's Rep 465 and The Libyaville at p554). The Tribunal, however, failed correctly to apply these principles as identified and set out above.
ix. However, the Tribunal wrongly held that there was no settled principle in landlord and tenant cases that a demand for future rent (short of acceptance) would at law amount to a waiver of the right to terminate for non payment of past rent - see Award . This was incorrect. In doing so the Tribunal wrongly referred to and placed reliance upon the obiter remarks of Lord Justice Cairns in Central Estates (Belgravia) Limited v Woolgar (no 2)  1 WLR 1048, 1057 - see Award . First, these remarks were obiter. Second, both Lord Denning and Lord Justice Buckley in the same case respectively (and it is submitted entirely correctly) both proceeded on the basis that the law was as set out in Smith's Leading Cases (i.e. demand for rent did amount to waiver) - see p1051-1052, and 1054G (ibid). Nevertheless these remarks were obiter and the point arose for decision directly in Blackstone v Burnetts and the learned judge cited all the prior cases including Lord Justice Cairn's obiter remarks in Woolgar and concluded that on the weight of authority and in principle that a demand for rent did at law amount to waiver. The Tribunal ought to have applied this principle.
x. The Tribunal also sought to place reliance upon the fact that in surveying the law as it stood, Thomas LJ in Greenwood Reversions (supra) once again obiter observed that it was open to the Supreme Court (and possibly the Court of Appeal) to take a different view to that expressed in the authorities on point to date - see Award . This applies in many cases but the Tribunal should have applied the law as it stands today and it is sufficiently settled law to be noted in Smith's Leading Cases. The Tribunal was correct to note that it was not possible to discern from either the judgment of Lord Justice Neuberger or Lord Justice Thomas in the two cases referred to above any criticism of the law as stated in Blackstone v Burnetts.
xi. The Tribunal sought guidance from Lord Goff's speech in The Kanchenjunga  1 Lloyd's Rep 391 at 397 - Award . The speech and principles enunciated are well known, but the Tribunal failed correctly to apply the principles set out therein. The Tribunal ought to have emphasised and applied two important principles that emerge from that speech; namely (1) once the relevant conduct is identified as only being consistent with treating the contract as alive then that conduct is taken at law to amount to an election. It does not matter what the party so acting intended by his conduct or whether he intended to reserve rights. The question is a simple matter of law flowing from conduct; and (2) once an election is made or more accurately deemed to be made, it is final and is not dependent upon reliance by the other side. In other words Heritage does not need to adduce evidence as to whether and, if so, how it changed its position or relied upon the demands for future rent.
xii. The Tribunal wrongly placed reliance on a certain passage in the judgment of Cooke J in The Jotunheim  1 Lloyd's Rep 181 at  to the effect that an owner who continued to press for hire whilst reserving the right to withdraw for non payment did not lose the right to withdraw if he acted within a reasonable period of time before withdrawing - see Award  and . The Jotunheim was not a case which involved demands for future hire at all. It was a different category of case namely; where an owner made a demand for hire, and continued to press for that hire whilst reserving the right to withdraw. The question for decision in that case was whether or not there was prompt withdrawal. It is settled law that if an owner does not withdraw promptly for non payment of hire then this may amount to waiver. What amounts to a reasonable period of time will depend upon all the facts including the dialogue between the parties. As Mr Justice Cooke observed it was relevant in the assessment of a reasonable time, to note that the owner continued to press and reserve rights of withdrawal. It was held in that case that there was no waiver due to lapse of time. In the present case lapse of time and dialogue is not relevant. There was further demand of hire. As has been shown to be clear and settled law if a party continues to demand hire/ rent then this will of itself be treated as an election. It matters not whether the party making the demands for future hire did not wish to affirm / elect or wished instead to reserve rights or even communicated a reservation of rights. A demand for hire without prejudice to the right of withdrawal is still a waiver at law - see Segal Securities (supra).
xiii. Finally, the Tribunal accepted that if one had had regard to the demands for hire and the consistent refusal/ failure of the Owners to withdraw notwithstanding knowledge of the right to terminate there would be much to be said in favour of concluding that the Owners had indeed waived/ elected not to terminate for the known default in non payment of hire - see Award  to . Nevertheless the Tribunal then sought to reach a different conclusion by a wholly erroneous approach to the authorities. The Tribunal concluded that from 5 June the Owners wanted to preserve and reserve all their rights to terminate notwithstanding the further demands for hire and indeed made this clear to the Charterers by their communication on 5 June - Award  - 71]. As has already been set out clearly above this analysis displays clear errors of law.
xiv. The Owners' intentions in demanding the future hire are completely irrelevant as a matter of law - see above.
xv. Equally it is completely irrelevant as a matter of law whether the Owners attempted to reserve rights whilst committing an act only consistent with the contract remaining alive (namely demanding the payment of future hire) - see above and Segal Securities (supra).
xvi. In fact the Tribunal did not find that any such reservation was made by the Owners. Only that they intended in their mind to make such a reservation.
The Owners' Submissions
1) The principle is restricted to the landlord and tenant field. Even in that context it is regarded as an archaic, historical anachronism from the days when tenants could not get relief against forfeiture (see Neuberger LJ in Thomas v Ken Thomas Ltd  Bus LR 429 at 435; Neuberger J in Yorkshire Metropolitan Properties Ltd v Co-Operative Retail Services Ltd  L. & T.R. 26 at 88; Sachs J in Segal Securities Ltd v Thoseby  1 QB 887 at 897).
2) The principle has been trenchantly criticized by the Law Commission as: a "technical rule" for which "there seems little to be said"; "a trap for unwary landlords"; "obsolete"; "arbitrary" (see Law Com. No. 142, 21 March 1985 at 6.5, Law Com. No. 303, October 2006 at 1.10, 1.12(5), 3.106).
3) While it is clear that the acceptance of rent amounts to such an automatic waiver, whether an unqualified demand for rent has the same effect is less certain: the two first instance authorities on that point have not been enthusiastically endorsed by the Court of Appeal (see Woodfall on Landlord & Tenant, looseleaf, at 17.098; Greenwood Reversions Ltd v World Environment Foundation Ltd  HLR at 26-27 per Thomas LJ; Thomas v Ken Thomas Ltd  Bus LR 429 at 435 per Neuberger LJ; Expert Clothing Service & Sales Ltd v Hillgate House  1 Ch 340 at 359E per Slade LJ; Central Estates (Belgravia) Limited v Woolgar (no 2)  1 WLR 1048 at 1057A per Cairns LJ).
4) Where possible, the Courts have also limited the scope of the principle, on the basis either that the demand is not a pure rent demand (see Yorkshire Metropolitan, ibid, at 88-92 per Neuberger J) or that the breach is a continuing one (see Segal Securities v Thoseby  1 QB 887 at 901 per Sachs J).
5) Where the principle is not strictly applicable, the Court is entitled to look at all the circumstances of the case to consider whether conduct was unequivocal (see Expert Clothing, ibid, at 360E-F per Slade LJ, Yorkshire Metropolitan, ibid, at 94-96 per Neuberger J).
6) In short, the principle is an anomaly even in the landlord and tenant field, where it is only clearly applicable to acceptance of rent. Such an anomaly should not be transposed into other fields, a fortiori when there has only been a demand for payment, but no acceptance.
1) Other cases cast doubt on whether the House of Lords would take the same approach even on the acceptance of hire (see The Laconia  1 Lloyd's Rep. 315 at 319 per Lord Wilberforce, The Mihalos Xilas  2 Lloyd's Rep. 303 at 310 per Lord Salmon and 315-316 per Lord Scarman).
2) The general approach in the shipping field is the same as the general approach in the landlord and tenant field, namely to consider an act or conduct in its context to see if it is unequivocal (see Lord Justice Potter in The Happy Day  2 Lloyd's Rep 487 at 507).
3) There should not be a special exception to this approach for demands for hire. None of the policy background to the landlord and tenant principle applies.
4) The Kanchenjunga  1 Lloyd's Rep. 391 at 398 per Lord Goff does not advance this debate. The overarching question of whether a party has acted in a manner consistent only with treating the contract alive begs the underlying question of whether the Court looks at a particular act in isolation or in context.
5) Against that background, the Charterers' criticism of the Tribunal's reliance on The Jotunheim  1 Lloyd's Rep. 181 at 187-188, 44 per Cooke J (Award 64) is also misplaced. That case is an instance of the Court looking at all the circumstances (albeit with the focus upon waiver by failure to terminate within a reasonable time).
6) Equally, Walkinshaw v Diniz  1 Lloyd's Rep. 632 at 643 per Tomlinson J does not in any way contradict the foregoing or suggest that the landlord and tenant rule is part of a wider principle of acts that are automatic waivers at law irrespective of the context and circumstances.
7) If the Tribunal was right to reject the Charterers' alleged rule of automatic waiver, then plainly the question of whether there was a waiver in the context of all the circumstances was a mixed question of fact and law (and, for the avoidance of doubt, it is clearly this flexible principle that the Tribunal applied to the earlier hire defaults, so no inconsistency arises). Equally plain is that the Tribunal addressed the question objectively – having explained the Owners' change in attitude, the Tribunal went on to analyse how this was manifested objectively and outwardly to the Charterers (see Award 68-69). On that premise, the Charterers sensibly do not suggest that the decision was not within the permissible range of solutions open to the Tribunal.
1) If waiver is established it is effective as regards both contractual and common law rights. It is also equally established whether the non payment of hire is relied upon of and by itself, or by reference to an inability to pay debts or as evincing an intention not to be bound by the Charterparty.
2) In each case, the Owners had the knowledge referred to above and nevertheless continued to demand performance of the charterparty and demand future hire.
3) If the Charterers are correct that this conduct amounted to a waiver of the past breach then it amounted to a waiver of that past breach irrespective whether it is dressed up as non payment of hire, inability to pay hire, or refusal to perform the charterparty in accordance with its terms.
4) As at 2 June 2009, the last of the notices referred to in the termination letter, the Owners knew of each of these Events of Default and of their rights of withdrawal and yet continued to keep the charterparty alive and demand further performance in a manner which amounted to a waiver.
1) It is quite plain from the letter of termination and the Tribunal's findings that what the Owners in fact did was purport to exercise a contractual right of withdrawal and cancellation under clause 47 of the Charterparty with all the consequences entailed by that clause. The Owners did not in the letter purport to accept the Charterers' conduct as repudiatory or purport to act at common law. Crucially the Owners did not purport by this letter to bring the primary contract to an end as opposed to bring the chartering to an end by withdrawing the vessel. They did this under and not outside of clause 47. They sought to exercise a specific contractual right under clause 47 with specific contractual consequences, specific limitations and protections.
2) There are clear differences in the present charter between purporting to exercise a right of withdrawal and termination of chartering and acceptance of repudiation. The exercise of a contractual right of withdrawal and termination of chartering under Clauses 46 and 47 brings an end to the chartering of the vessel. It does not bring an end to the contract itself. This is clear from clause 46.2 and clause 47.7. Following withdrawal and termination of the chartering of the vessel, the charterer is still bound by the terms of the charter until re-delivery. It is clear from clause 46.2 that termination here is used in the specific sense of withdrawal of the vessel from service. Re-delivery took place on 23 June – see Award . In other words termination of the chartering and withdrawal did not bring an end to the obligation to insure the vessel or to comply with other charterparty obligations, including it seems payment of hire – see clause 47.7. Equally, withdrawal and termination whilst bringing the chartering to an end did not bring an end to the Charterers' obligation vis a vis substituting the Owners in charterparties of 13 months duration or more. Further, on withdrawal and termination of the chartering, a specific contractual measure of compensation under clause 47.3. is invoked. This is the claim which has been advanced and awarded to the Owners in the arbitration. Yet further, on withdrawal, provision is made for the contractual forfeiture of the Charterers' Seller's Deposit – clause 47.4. It is none to the point for the Owners to assert a common law right of acceptance of repudiation, since this is not what they did. The Owners exercised a different contractual right. It is trite law that an unaccepted repudiation is writ in water – Chitty on Contracts 30th Ed Volume 1 paragraph 24-013.