Parbulk Ii A/S v Heritage Maritime Ltd SA

A demand for future hire does not waive a contractual right to terminate where, when the demand is made, the relevant grace period has not expired and no right to terminate yet exists. Waiver must be assessed by reference to the conduct alleged to constitute it and the circumstances then prevailing.

Where payment of hire is expressly made of the essence, failure to pay after the contractual grace period may constitute a breach of condition and justify termination. The totality of persistent non-payment and inability to pay may also amount to repudiatory conduct.

A contractual termination notice need not identify the precise default relied upon unless the contract requires it. An event of default arising before the notice may therefore support termination even if not particularised in the notice.

This was an appeal under section 69 of the Arbitration Act 1996 from an award concerning the termination of a bareboat charterparty for non-payment of hire. The tribunal had held that the owners validly terminated the charterparty and were entitled to substantial compensation.

The charterers challenged the award on questions concerning waiver, the effect of their conduct as a repudiatory breach, whether the termination notice operated at common law, and whether the owners could rely on an event of default not specifically identified in the notice.

1. Waiver and timing. The court upheld the award on the principal question. Even assuming that successive demands for future hire could operate as automatic waivers, the demand of 8 June 2009 did not waive the owners’ right to terminate for non-payment of hire for 1–15 June. When that demand was made, the three-banking-day grace period had not expired and no contractual right to terminate for that non-payment yet existed. The question had to be determined by reference to the alleged waiving conduct when it occurred; subsequent events were irrelevant.
2. Repudiatory breach. The agreement that time was of the essence made payment of hire a condition, subject to the contractual grace period. Non-payment of hire for 16–30 June was therefore sufficient to uphold the award. In addition, the totality of the charterers’ conduct, including persistent non-payment and inability to pay, amounted to repudiatory breach. Any earlier waiver did not necessarily prevent reliance on later conduct or on the overall course of conduct.
3. Common-law acceptance. The termination letter, fairly construed, communicated reliance on the charterers’ repudiatory breach as well as contractual termination. The owners could therefore bring the charterparty to an end at common law.
4. Contents of the termination notice. The relevant clauses required notice after an event of default but did not require the notice itself to identify the precise default or to be comprehensive. The notice was valid because an event of default had arisen following the notice of 16 June and expiry of the stipulated period. The court rejected the contrary reasoning of the tribunal.
5. The court declined to decide the wider general principle concerning retrospective justification of termination, having reached conclusions sufficient to uphold the award. The parties were directed to seek agreement on an order, including costs.

1. High Court (Commercial Court): On an appeal under section 69 of the Arbitration Act 1996, the court upheld the arbitral award. Leave to appeal had previously been granted by David Steel J.
2. Arbitration: The tribunal had awarded the owners US$27,031,759.04 and held that the charterparty had been validly terminated.