Shipbuilding Law Blog

The claimant, an insurance company issued advance payment guarantees (“APGs”) to the defendants, (i.e. the first defendant and its subsidiary the second defendant), guaranteeing the repayment of payments made by the defendants under three shipbuilding contracts signed between the defendants and a Korean shipbuilder, Huen Woo Steel Co Ltd (“HWS”). Later, HWS merged with another company, the new company was re-named Buyoung Heavy Industries Co Ltd (“Buyoung”). Some months later, Buyoung partitioned its shipbuilding business and its blockbuilding business. Buyoung continued took on the blockbuilding business while a newly incorporated company, Asia Heavy Industries Co Ltd (“Asia Heavy”) undertook the shipbuilding business. Subsequently, Asia Heavy went into financial difficulties and the defendants served notice of default, terminated the contracts and demanded repayment of the money paid under the contracts with interest. Asia Heavy Industries did not pay any of these demands and the d

In a recent case [1], the High Court held that a liquidated damages clause in a yacht construction contract was not a penalty and therefore enforceable. In so doing, the Court granted summary judgement in favour of the claimant. Azimut-Benetti SpA, a luxury yacht builder in Italy (claimant) had contracted to construct a 60 metre yacht for Shoreacres Ltd, (buyer) an Isle of Man special purpose company wholly owned by the defendant at a contract price of €38 million, payable by instalments. Scheduled delivery date was 30 November 2011. A personal guarantee was issued by the defendant. Clause 16 of the Yacht Construction Contract dated 25 September 2008 and in particular clause 16.3, provided as follows: 16.1 In addition to such rights as it may have at general law the Builder may suspend construction of the Yacht and/or terminate this Contract at any time by written notice to the Buyer: (a) if the Buyer fails to pay any sum due and owing under this Contract within forty-five days after