SWALLOWFALLS LTD V MONACO YACHTING & TECHNOLOGIES SAM AND ANOTHER

[2014] EWCA Civ 186, Court of Appeal, Lord Justice Longmore, Lord Justice McFarlane and Mrs Justice Proudman DBE, 27 February 2014

Ship construction - Yacht construction loan contracts - Entitlement to serve notice of demand - Whether loan repayable on demand - Implied term

This was a question of construction of the language of a series of loan agreements in relation to the construction of a large yacht. The Court of Appeal dismissed the appeal, reasoning that if a clause provided that a loan was to be repaid "on the first to occur of" a number of listed events and one of those events was the date on which the lender gave the borrower notice, the natural construction was that once such notice was given, the loan was to be repaid. On the cross-appeal the judge had been entitled to imply a term to the effect essentially that the lender would cooperate with the borrower in the achievement of "Milestones". If such a term was implied into the contract and its amendments, it must also be implied into the loan agreements. However, the Court of Appeal declined to imply the other term argued for, that the lender would not prevent the borrower from repaying the loans.