AZIMUT-BENETTI SPA V HEALEY

[2010] EWHC 2234 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Blair, 3 September 2010

Contracts - Contract for construction of yacht - Whether termination clause a penalty or liquidated damages

The claimant was a luxury yacht builder based in Italy. By a yacht construction contract dated 25 September 2008 the claimant agreed to construct, and S, a special purpose company wholly owned by the defendant, H, agreed to purchase and take delivery of, a 60 m yacht. The price was €38 million payable in instalments, and the scheduled delivery date was 30 November 2011. The construction contract contained a termination and liquidated damages clause. The defendant gave his personal guarantee for S's performance of the contract, also dated 25 September 2008. The claimant claimed against the defendant under the guarantee, following the termination of the construction contract and sought summary judgment. The defendant resisted summary judgment on the basis that the liquidated damages clause upon which the claimant sued in the contract with S was a penalty, so that there was no liability on which the guarantee could fasten. The claimant maintained that the defendant did not have an arguable case in that regard; alternatively that by the terms of the guarantee the guarantor was liable even if the clause was unenforceable, and the principal debtor was not, or that an estoppel arose.