The original case revolved around the failure of MYT to repay a €38 million loan facility provided by Rothschild’s financial vehicle, Swallowfalls Ltd in order to complete the project, the construction of which had been sub-contracted to Cantieri San Marco in Italy. In that instance the judge ruled in favour Swallowfalls’ demand for repayment but refused to pass summary judgment pending the resolution of MYT’s counter-claim that Swallowfalls had breached the implied terms of the loan agreement.
Now under appeal by both parties, it was held that the original decision regarding Swallowfalls’ repayment demands was correct. However the court also accepted MYT’s counter-argument that the implied terms of the loan had been breached. Therefore, proceedings have again been referred to arbitration with no compensation awarded to either party as yet.
Commenting on the court’s acknowledgement of a buyer’s ‘implied obligation to cooperate in the performance of the contract’, Stephenson Harwood senior associate, Ezio Dal Maso said:
“The court held that if such a term was to be applied in the building contract, so also it had to be implied into the loan agreements, because the primary method of repayment of the loan was that the loan was to be reduced by the corresponding amount of the instalment due on the achievement of the relevant milestone. The fact that it was implied into the building contract did not make it duplicative when implied into the loan agreement, since the agreements set out their own separate obligations with separate procedures for enforcement.”
And Dal Maso believes the implications for future superyacht purchases conducted under the auspices of English law, could be far–reaching. “The judgment is of great importance for the buyers of yachts and their representatives as the English courts have affirmed that a buyer must cooperate with the builder throughout the construction and the failure to have a buyer's representative at the yard or to countersign stage certificates when the milestone is achieved might result in liability."
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