UK: Commodities Bulletin - December 2009

Last Updated: 4 January 2010

Repudiating Contract By An Accumulation Of Words And Conduct (And Silence)

Article by Alisair Feeney

In its recent judgment in SK Shipping (S) Pte Limited v. Petroexport Limited (24 November 2009) the Commercial Court considered the circumstances in which there may be an anticipatory repudiatory breach of a contract and whether silence can ever amount to such a breach.

The case arose from a voyage charter under which SK Shipping chartered "PRO VICTOR" to Petroexport to carry a cargo of naphtha from Karachi to a port in the Far East to be nominated by Charterers.

During the vessel's voyage to the loadport, Charterers made proposals which would have involved significant departures from the agreed charter terms.

First, they proposed that the vessel discharge at Aqaba, Jordan and then return to the Far East on time charter. Owners considered this proposal, and suggested possible freight and hire rates. Charterers then appeared to drop the proposal.

Then, Charterers suggested a three month time charter. Owners considered this, quoted rates and sent a fixture recap to Charterers. Again, no revised deal was concluded.

Meanwhile, with the vessel approaching Karachi, Charterers gave orders via brokers that she should slow to the minimum safe speed and not enter the port. Charterers also ordered the vessel not to send a notice of readiness to the port authorities or the cargo suppliers.

There followed several communications between the parties concerning whether Charterers would perform the charter as agreed. Owners eventually sent a message calling upon Charterers to confirm that they would perform. Charterers did not reply.

Owners terminated the charter, asserting that they had accepted the Charterers' conduct as an anticipatory repudiatory breach. Owners contended that taken as a whole, the Charterers' conduct showed they intended not to perform. Charterers argued that Owners' termination was itself a repudiation of the charter and they counterclaimed for damages.

The Court identified the critical question as being whether, by their words or conduct, Charterers had shown a clear and absolute intention not to perform the charter. It concluded that whilst no individual message or action satisfied this requirement, the accumulation of Charterers' words and actions amounted to a renunciation of the charter, entitling Owners to terminate.

In its judgment, the Court considered whether silence, particularly Charterers' failure to respond to the Owners' request for confirmation that they would perform, could be sufficient to amount to renunciation. Charterers argued that silence could not amount to renunciation because it is equivocal. However, the Court held that silence could be treated as a renunciation of a contract if viewed together with other circumstances, and that that was the case in this instance.

Wheat Export Marketing In Australia

Article by Hazel Brasington

It is two years since the abolition of the monopoly held by the former Australian Wheat Board in relation to the export of wheat from Australia. Currently, companies wishing to export bulk wheat from Australia must be accredited by Wheat Exports Australia ("WEA"). Strict probity and performance tests must be met by exporters.

This current system is under review. The Australian Productivity Commission, which is an independent research and advisory body, is to assess the operation of the current wheat export marketing arrangements and report to the Australian Government. It has been asked to consider whether these arrangements are working effectively and to identify aspects which require change.

Issues under consideration include:

  • the suitability of the current eligibility criteria for export accreditation
  • conditions of accreditation
  • whether WEA should continue to play an important role
  • whether the current supply chain from farm gate to export loadport is sufficiently competitive
  • availability and transparency of market information

Some within the Australian wheat industry advocate the removal of the accreditation system altogether by 2012. They argue that the Australian bulk wheat industry will have matured sufficiently by then from a single-desk system to a sophisticated and competitive market. However, there are concerns that exporters who control the bulk wheat storage and handling facilities may not provide fair and open access to other exporters unless compelled to do so by government.

The Productivity Commission is due to publish a draft report in March 2010. Submissions on the draft report from interested parties must be made by mid-April 2010. Hearings on the draft report will be held between mid-April and mid-May 2010. The final report will be published on 1 July 2010.

The Productivity Commission's enquiry continues to fuel interest among market participants who are hopeful that it will lead to beneficial changes to wheat export marketing and infrastructure arrangements.

HFW is involved in the enquiry process and will provide updates as it progresses.

HFW Opens Sydney Office

Article by Alex Baykitch

HFW's new Sydney office opened for business on 1 December 2009.

Since the opening of the firm's Melbourne office in 2006, HFW's practice in Australia has grown steadily. The opening of the Sydney office further enhances HFW's presence in Australia, particularly in the field of international commercial arbitration and dispute resolution, reinforcing the firm's position as a leading player in the Australian legal market.

Stephen Thompson, a senior associate specialising in commodities matters, will move from the Melbourne office to develop HFW's Trade & Energy practice in Sydney.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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