Insolvency and anticipatory breach. More from Singapore

In The STX Mumbai [2015] SGCA 3; [2016] 1 Lloyd’s Rep 157, the Singapore Court of Appeal has held that the doctrine of anticipatory breach does apply to executed contracts and in appropriate circumstances a party’s insolvency is capable of amounting to an anticipatory breach. Bunkers had been supplied to a vessel with payment to be made within 30 days. A company in the corporate group of which the shipowning company was a part had become insolvent and the bunker supplier took the view that payment was unlikely to be made. Accordingly, three days before the due date for payment, they demanded immediate payment by the close of business, and when that was not forthcoming, arrested the vessel the following day. At first instance the in rem proceedings were struck out as legally unsustainable as the insolvency of an associated company in the shipowner’s corporate group did not amount to an anticipatory breach by the shipowner. Futhermore, the Judge expressed the view that the doctrine of anticipatory breach applied only to executory contracts and not to an executed contract such as the present.

The Court of Appeal disagreed. The doctrine could apply to executed contracts. Although insolvency in itself would not constitute an anticipatory breach, it might well do so in the proper context. Much would depend on the precise facts, which could only be adduced if the action went to trial. The evidence showed some plausible connection between the insolvent company and the shipowner such that it was not completely unarguable that the former’s insolvency could well have made it impossible for the latter to make timely payment under the bunker supply contract in respect of the vessel. Accordingly, the bunker supplier’s case was not legally unsustainable and its claim would not be struck out.

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Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to seven editions (soon to be eight) and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance.

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