Court Finds Payment Of Charter Hire Is Not A Condition: Astra Not Followed

Spar Shipping AS v. Grand China Logistics Holding (Group) Co. Ltd [2015] EWHC 718 (Comm)

In a decision handed down on 18 March 2015, a Commercial Court judge has declined to follow Flaux J's decision in The Astra and has concluded that payment of hire by the Charterers was not a condition of the charterparty. Mr Justice Popplewell reached his decision following a careful consideration of the authorities on this issue and, in particular, The Astra [2013] EWHC 865 (Comm).

The Court also considered issues concerning repudiatory breach, the validity of the charterparty guarantees and assessment of damages for repudiatory breach of charter. These issues are not discussed in this alert, but a more detailed article on the judgment will appear in our Spring 2015 Shipping E-Brief.

Brief background facts

By three charters dated 5 March 2010 on amended NYPE 1993 forms, three supramax bulk carriers were let on long term time charter to Grand China Shipping (Hong Kong) Co Ltd. The charters provided for performance guarantees to be issued by the Defendant ("GCL") which is the parent company of the Charterers. By April 2011, the Charterers had fallen behind with their hire payments under the charters and, in September 2011, the vessels were withdrawn from service and the charters were terminated. The Owners claimed under the guarantees in respect of the loss of the balance of the charters.

The decision in The Astra

Mr Justice Flaux reviewed in detail the various previous cases which, over the last 100 years or so, have touched upon the question of whether a failure to pay hire amounts to a breach of condition as opposed to a breach of an innominate term (a breach of an innominate contractual term only entitles an innocent party to terminate the contract where the breach is sufficiently serious, whereas a breach of condition entitles the innocent party to terminate a contract regardless of the severity of the breach). Having reviewed the authorities, Mr Justice Flaux reached the conclusion that payment of hire is a condition of the contract and therefore that the failure to pay a single hire payment entitled the Owners to withdraw the vessel and claim loss of profit for the remaining charter period.

The Commercial Court decision

Mr Justice Popplewell also reached his conclusion following a detailed analysis of the authorities and, in particular, following a careful analysis of the principles set out in The Astra. Popplewell J considered and dismissed each...