Chugga Chugg Pty Ltd v Privinvest Holding SAL [2025] EWHC 585 (Comm)

[2025] EWHC 585 (Comm)

Case No CL-2022-000105

IN THE HIGH COURT OF JUSTICE

KING'S BENCH DIVISION

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

COMMERCIAL COURT

Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NL

Date 14 March 2025

Before

The Honourable Mrs Justice Dias

Between

CHUGGA CHUGG PTY LTDClaimant

PRIVINVEST HOLDING SALDefendant

Mr Tim Akkouh KC and Mr Sebastian Mellab (instructed by Slaughter and May) for Claimant

Ms Rani Noakes and Mr Jacob Haddad (instructed by Preston Turnbull LLP) for Defendant

Hearing Hearing dates: 11-13, 17, 20 February 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on 14 March 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

A: Introduction and Background

[1]This is a claim under a guarantee.

[2]The Claimant (“Chugga Chugg”) is a company which, amongst other things, procures the design and construction of superyachts. Its ultimate beneficial owner is an Australian businessman, Mr Brett Blundy who uses it as a special purpose vehicle for his maritime ventures. Mr Blundy is also a director of the company and himself a yachting enthusiast.

[3]The Defendant (“Privinvest”) is the Lebanese holding company of an international shipbuilding group (the “Privinvest Group”). The primary beneficial owner and CEO of the Privinvest Group until his death on 29 January 2024 was Mr Iskandar Safa. One of the companies in the Privinvest Group was a German company, Nobiskrug GmbH (“Nobiskrug”) which specialised in the design and construction of superyachts at its shipyard in Rendsburg.

[4]By a contract dated 16 November 2018 (the “Contract”), Nobiskrug as builder undertook to design, build and deliver to Chugga Chugg a 79.99 metre luxury motor yacht. Chugga Chugg was represented in its dealings with Nobiskrug by a consultancy and project management company, Burgess Technical Services Ltd (“Burgess”), acting principally by its CEO, Mr Jonathan Beckett, and by Mr Edmund Beckett, a naval architect in the New Construction Team. This was the third yacht that Mr Blundy had commissioned, the first having been built in 2006 by a sister company of Nobiskrug and the second by a different shipyard in 2017.

[5]The contract price was €99,550,000 and the contractual delivery date was 31 August 2022. As is usual, the purchase price was payable in instalments upon reaching stipulated milestones in the construction process. What was less usual was that the second and third instalments were to be paid into escrow and only to be released at a much later stage of the construction. In practical terms this meant that the Contract was substantially self-financed by Nobiskrug.

[6]The Contract also required a parent company guarantee to be provided by Privinvest. This was issued on about 30 November 2018 (the “Guarantee”),guaranteeing the “due and punctual performance of all of [Nobiskrug’s] obligations under the Contract up to an aggregate maximum amount of €9,955,000…” The amount of the Guarantee (the “Guarantee Amount”)was equivalent to the amount of the first instalment payable under the Contract.

[7]Both the Contract and the Guarantee were expressly governed by English law but whereas the Contract contained an LMAA arbitration clause, the Guarantee was subject to the exclusive jurisdiction of the English courts.

[8]It is common ground that the project proceeded smoothly to start with. Chugga Chugg duly paid the first instalment of the purchase price (around €10 million) to Nobiskrug and the second instalment (€5 million) into escrow. However, by late March 2020, delays of around 3 months had accrued for a number of reasons, including financial issues at Nobiskrug. It is unnecessary to explore these in detail, but there seems to be little doubt that the company had been badly managed and had concluded a number of contracts, including the Contract, which turned out to have been seriously under-priced and badly co-ordinated leading to capacity shortages at the yard. In late 2019, the old management team was replaced by, among others, Mr Johan Valentijn, who was brought in as Managing Director and interim CEO, essentially to sort things out. Mr Safa also injected funds into Nobiskrug in early 2020 which resulted in an improvement in the situation. It is undisputed that around 25 March 2020, Nobiskrug proposed a recovery plan which was accepted by Burgess as being realistic, albeit extremely challenging, and one which might at least prevent further slippage. It also prepared an updated master schedule which projected delivery on 30 September 2022, i.e., one month late. At around the same time, however, the Covid global pandemic was declared and on 30 March 2020, Nobiskrug emailed a notice of force majeure to Chugga Chugg. In a letter the following day it further explained that due to the restrictions in force it had taken the decision to close access to its shipyards.

[9]During the course of April 2020, a number of telephone conversations took place between, variously, Mr Beckett, Mr Blundy, Mr Safa, Mr Valentijn and Mr Fadi Pataq, Nobiskrug’s Marketing and Sales Director. What exactly was said during these calls is hotly disputed. Chugga Chugg’s case is that Mr Beckett sought to explore the possibility of a consensual termination in the light of substantial delays to the construction schedule, the recent closure of Nobiskrug’s yards and its apparent financial difficulties. Privinvest’s case is that Mr Beckett stated that Mr Blundy “wanted out” and that this amounted to a renunciation of the Contract, which it accepted by notice dated 8 June 2020 (the “Nobiskrug Termination Notice”).

[10]Chugga Chugg denies that it renounced the Contract but asserts that, even if it did, such renunciation was thereafter withdrawn or cured and/or that Nobiskrug in any event affirmed the Contract prior to sending the Nobiskrug Termination Notice. Accordingly, Nobiskrug’s purported termination was ineffective.

[11]For its part, on 17 June 2020, Chugga Chugg served notice pursuant to the Contract asserting that Nobiskrug was in material breach of contract and calling upon it to cure such breach within 20 business days. On 16 July 2020, following the expiry of the stipulated period without any steps having been taken by Nobiskrug, Chugga Chugg served its own notice of termination (the “Chugga Chugg Termination Notice”).

[12]While it was accordingly common ground between Chugga Chugg and Nobiskrug that the Contract had come to an end, there was a dispute between them as to when and on what basis it had terminated.

[13]On 9 June 2020, Nobiskrug commenced arbitration proceedings against Chugga Chugg pursuant to an arbitration clause in the Contract and in due course, Mr David Owen QC was appointed as sole arbitrator. In the arbitration, Nobiskrug claimed damages for repudiation on the basis that the Contract had been validly terminated by virtue of the Nobiskrug Termination Notice. Chugga Chugg, however, contended that the only repudiation was by Nobiskrug and that the Contract had in fact been terminated as a result of the Chugga Chugg Termination Notice. It counterclaimed the sums already paid to Nobiskrug. Pleadings were exchanged culminating in Chugga Chugg’s Reply to Defence to Counterclaim Submissions served on 16 December 2020.

[14]On 12 April 2021, Nobiskrug entered into preliminary insolvency in Germany and Mr Hendrik Gittermann was appointed by the German insolvency court as a provisional or preliminary insolvency administrator.

[15]On 13 April 2021, Chugga Chugg applied for security for costs in the arbitration, essentially on the basis that Nobiskrug had gone into administration. On 14 April 2021, the arbitrator ordered that both parties should provide security for the tribunal’s fees. On 24 April 2021, he further ordered that security for Chugga Chugg’s costs should be provided by Nobiskrug in the sum of £600,000 by 21 May 2021. Payment was not made and eventually on 23 June 2021, the arbitrator made a peremptory order for payment to be made by 22 July 2021.

[16]On 1 July 2021, formal insolvency proceedings were opened in Germany and Mr Gittermann was appointed as Nobiskrug’s Insolvency Administrator.

[17]On 22 July 2021 (being the deadline for payment of security for costs), the German law firm, KDB, which had assumed conduct of the arbitration on behalf of Nobiskrug in place of its former solicitors, Ince, notified the arbitrator that the Insolvency Administrator was unable actively to pursue Nobiskrug’s claim and proposed to discontinue it. His reasons were stated to include an alleged conflict with German insolvency law. KDB sought clarification of how the tribunal and Chugga Chugg wished to proceed with Chugga Chugg’s counterclaim.

[18]On 16 August 2021, the arbitrator made a final award (the “First Award”) dismissing Nobiskrug’s claims summarily for failure to provide security for costs. This was notwithstanding KDB’s objections that to do so was inconsistent with German insolvency law. Chugga Chugg’s counterclaim remained extant.

[19]On 27 August 2021, Chugga Chugg filed a claim in Nobiskrug’s insolvency including a claim for repayment of the first instalment of the purchase price under the Contract but the claim was provisionally rejected at that stage pending further consideration.

[20]On 22 September 2021, Chugga Chugg filed and served documentary and witness evidence in the arbitration relating to its counterclaim. No evidence was served by Nobiskrug. On 6 October 2021, KBD confirmed that the Insolvency Administrator had withdrawn from the arbitration and would not be actively participating further. A substantive hearing of the counterclaim was fixed for 8 November 2021 and Nobiskrug was provided with copies of the hearing bundles but did not comment or respond in any way.

[21]On 2 November 2021, KDB informed the arbitrator and Chugga Chugg that:(a) The Insolvency Administrator consented to the release of the monies in escrow; It was not disputed that this was on the basis that they did not form part of Nobiskrug’s estate. and

(b) Chugga Chugg’s claims against Nobiskrug in the sum of €14,021,585.82 were “accepted and will be registered with the insolvency table, to participate in the insolvency quota.”

[22]On 4 November 2021, KDB wrote to Chugga Chugg’s solicitors stating that they understood Chugga Chugg’s need for an award but were not in a position to agree any further steps given that the Insolvency Administrator had withdrawn from the proceedings. However, they confirmed that they would not object to any application by Chugga Chugg in the arbitration for an award, noting that “From the point of view of the German insolvency administrator, the acknowledgment of the claim by the insolvency administrator within the provisions of the German Insolvency Code is already full satisfaction, based on your application…”

[23]By letter dated 9 November 2021, Mr Gittermann confirmed that his previous objection to Chugga Chugg’s claim had been withdrawn and that it was approved in the sum of €14,021,585.82. This amount comprised the first instalment and other sums previously paid by Chugga Chugg to Nobiskrug under the Contract, together with some £3.5 million representing liabilities incurred to third parties.

[24]In these circumstances, the arbitration hearing was vacated and on 5 November 2021, Chugga Chugg made a formal application for an award and provided written submissions and further materials for the consideration of the arbitrator. No comment or response was received from Nobiskrug and on 22 November 2021, the arbitrator issued a second final award (the “Second Award”)confirming that Chugga Chugg was entitled to recover, amongst other things, sums previously paid to Nobiskrug under the Contract (including €9,955,000 in respect of the first instalment), and directing Nobiskrug to pay these sums to Chugga Chugg forthwith.

[25]The grounds of his decision can be summarised as follows:(a) By virtue of admitting Chugga Chugg’s claim in the insolvency proceedings, Nobiskrug had accepted that Chugga Chugg was entitled to payment in respect of that claim and Chugga Chugg had thereby sufficiently established its case with regard to such claim;

(b) Further or alternatively, he found on the basis of the material before him that Chugga Chugg did not renounce or repudiate the Contract and that its termination notice was accordingly valid.

[26]No appeal or other challenge was made to the Second Award.

[27]On 21 December 2021, Chugga Chugg sent a letter of demand (the “Demand Letter”)to Privinvest under the Guarantee enclosing the First and Second Awards. The Demand Letter asserted that Nobiskrug was obliged to pay the first instalment to Chugga Chugg but had failed to do so, and that Privinvest was accordingly required to pay the Guarantee Amount under the Guarantee. B: The Guarantee

[28]It is convenient at this point to set out the relevant provisions of the Guarantee which was headed “Parent Company Guarantee (Refund)”:

“1: … upon and with effect from the Builder’s receipt of the first instalment of the Contract Price pursuant to Clause 6.1.1(a) of the Contract in full and without set-off, as security for the payment and performance of the Builder’s obligations under the Contract (as may be amended from time to time with or without our knowledge or approval), or arising by reason or in consequence of any breach or termination of the Contract (as may be amended from time to time) we hereby guarantee to you the due and punctual performance of all of the Builder’s obligations under the Contract up to an aggregate maximum amount of €9,955,000 (nine, million, nine hundred and fifty five thousand Euros)… 2. If an alleged breach or termination is uncontested by the Builder, we shall procure performance or pay as required, on first demand being made by the Owner. If the alleged breach or termination is contested by the Builder, we shall procure performance or pay as required against presentation of both (a) a final unappealable award in favour of the Owner issued by the Arbitral Tribunal as per Clause 20.2(c) of the Contract It was common ground that this should have been a reference to clause 20.2.4 of the Contract. , and (b) a written demand by the Owner stating that the Builder is obliged to pay the amount(s) or perform the obligations referring to the relevant clause of the Contract and which the Builder did not pay or perform. … 4(a) We agree that the Owner may proceed against us as primary obligor, without first pursuing the Builder, in the event the Builder defaults under the Contract (subject to the terms in Clause 2 above being complied with). Nothing in this Guarantee will prevent the Owner from pursuing concurrently or successively any rights and remedies available to the Owner, under the Contract or any other document, at law or in equity, against any persons, firms, or other entities and in particular, but without limitation, the Owner may sue on the Contract and exercise any other rights available to the Owner under this Guarantee or any other document related to the Contract. (b) We agree that our liability will not be affected by (i) the insolvency or liquidation of the Builder; (ii) any extension of time or forbearance that may be granted by the Owner under the Contract or any other related documents; (iii) any failure or election not to pursue any remedies the Owner may have against the Builder;… or (vii) any matter or occurrence which but for this provision would operate to release or diminish our liability under this Guarantee.”

[29]Work under the Contract commenced on 15 November 2018 and it was not in dispute that Chugga Chugg paid the first instalment of the purchase price due under the Contract by the required date, in full and without set-off, in the sum of €9,955,000. It was also undisputed that Chugga Chugg made all further payments under the Contract in full and on time in a total sum of €10,001,141. C: The rival cases in outline

[30]Chugga Chugg’s case is that in the light of the facts and matters set out above, the requirements for a valid demand under the Guarantee were satisfied. Either Nobiskrug’s breach was “uncontested” given the Insolvency Administrator’s acceptance of Chugga Chugg’s claims in the insolvency, or it was “contested” and Chugga Chugg had qualifying final awards in its favour. The Guarantee is a demand guarantee and Privinvest is accordingly bound to pay irrespective of whether Nobiskrug was in breach of the Contract or not. Privinvest cannot therefore dispute liability by reference to the existence or extent of Nobiskrug’s liability to Chugga Chugg.

[31]Alternatively, Chugga Chugg submits that Nobiskrug was in fact in breach of the Contract and liable to Chugga Chugg for damages for repudiation and/or for certain contractual remedies, such that Privinvest is in any event liable to Chugga Chugg for the Guarantee Amount.

[32]For its part, Privinvest contends that the Guarantee was not a demand guarantee but an instrument of secondary liability which only responded in the event of an actual breach of Contract by Nobiskrug. It submits that Nobiskrug did not repudiate the Contract. Rather the Contract was renounced by Chugga Chugg and validly terminated by Nobiskrug’s Termination Notice which accepted that renunciation.

[33]Further, Chugga Chugg’s demand did not satisfy the requirements of the Guarantee: Nobiskrug’s alleged breach was neither “contested” nor “uncontested” within the meaning of Clause 2 of the Guarantee because “contestation” for this purpose requires Nobiskrug to have participated fully in the arbitration and disputed liability throughout such that any resulting award was rendered on the merits. Neither of the awards in Chugga Chugg’s favour was rendered in circumstances of “contestation”: the First Award because it was a default award and not an award on the merits, and the Second Award because it was issued after the Insolvency Administrator had withdrawn from the proceedings and without the benefit of any evidence or submissions from Nobiskrug. D: The Issues

[34]The parties had agreed a lengthy List of Issues prior to trial. However, as the argument unfolded it became apparent that they could be refined considerably. Ultimately, they fall under two main heads as follows: (1). Guarantee Issues(a) Whether the Guarantee is a demand guarantee payable upon satisfaction of the requirements in clause 2, or an instrument of secondary liability which has the effect of making Privinvest’s liability conditional upon establishing Nobiskrug’s liability under the Contract;

(b) The circumstances in which an alleged breach of the Contract by Nobiskrug is either “contested” or “uncontested” and whether it is possible for an alleged breach to be neither “contested” nor “uncontested”;

(c) In the light of the answer to (b) above and the facts as found, whether Nobiskrug’s alleged breach was “contested” or “uncontested” or neither within the meaning of clause 2;

(d) Whether the requirements of clause 2 of the Guarantee were met. (2). Renunciation Issues

(e) Whether Chugga Chugg unequivocally renounced the Contract by virtue of its conduct on 6-8 April 2020;

(f) If so, whether such renunciation was subsequently withdrawn or cured prior to service of the Nobiskrug Termination Notice such that Nobiskrug’s purported termination was ineffective;

(g) Whether Nobiskrug in any event affirmed the Contract prior to sending the Nobiskrug Termination Notice such that by 9 June 2020 it no longer had the right to terminate. E: The Witnesses

[35]On behalf of the Claimant, I heard oral evidence from Mr Blundy, Mr Beckett and Mr Edmund Beckett, all of whom gave evidence in person. The Defendant called oral evidence from Mr Valentijn and Mr Pataq. Mr Pataq gave evidence in person but Mr Valentijn gave evidence by video-link pursuant to permission granted pre-trial for him to participate remotely from Wisconsin on the grounds that health conditions made it difficult for him to travel. The Defendant also adduced the signed statement of Mr Safa under section 2 of the Civil Evidence Act 1995.

[36]It will be apparent from the factual outline above that the telephone conversations in April 2020 are critical to the resolution of this case and that the credibility of the witnesses is therefore of particular importance.

[37]Mr Blundy was a genial witness. Unsurprisingly for billionaire entrepreneur, he was not much involved in the detail of day-to-day operations and he gave evidence at a fairly high level of generality. Even so, I found him surprisingly hesitant and uncertain on a number of matters where I would have expected him to have a better grasp, such as how payments on behalf of Chugga Chugg were managed and whether or not the terms of the Contract were favourable to Chugga Chugg when compared to industry standards. He maintained resolutely that he had begun to harbour very grave concerns about the project from early 2020, regarding both delay and Nobiskrug’s financial position, but insisted that he had never indicated that he wanted to get out of the Contract or instructed Mr Beckett to convey that impression to Nobiskrug. However, as will appear below, I believe that this is to overstate the case and that the true position was rather more nuanced than the picture which he presented.

[38]As to Mr Blundy’s own financial position, when cross-examined about this he became very defensive, rebutting many of the suggestions put to him as “preposterous” or “ridiculous” rather than engaging with the question. Moreover, despite having signed a statement of truth attesting to the matters set out in Chugga Chugg’s Reply, Mr Blundy was unable to assist in relation to some of the matters pleaded which he might have been expected to recall, for example the dates on which Chugga Chugg had commenced negotiations for and eventually purchased a vessel called the “SAN LORENZO”.

[39]Subject to these caveats, I am satisfied that Mr Blundy was overall a witness of truth.

[40]Mr Beckett was an assured and confident witness, although he seemed somewhat uncomfortable when cross-examined about the lack of any contemporaneous notes of what were clearly important conversations with Nobiskrug. He too maintained that he had never told Nobiskrug that Mr Blundy wanted to get out of the Contract but I did not find his evidence about the contents of the critical conversations entirely convincing and I am not persuaded that I was given quite the full story.

[41]Mr Edmund Beckett was a straightforward, measured and honest witness and I was satisfied that I could accept his evidence without reservation.

[42]Mr Valentijn can only be described as one of a kind. He was blunt, uncompromising and completely straightforward. Whilst most people might have taken exception to being described as abrasive or aggressive, he rather seemed to regard such descriptions as a badge of honour. “Some people call me abrasive, but hey that is my style and that’s fine. I just need to get the job done and I do whatever it needs to get it done, and if people don’t like it then go away.” When it was put to him by Mr Tim Akkouh KC on behalf of Chugga Chugg that it was “your way or the highway” (an expression he had not encountered before) he was positively delighted. “It is a pretty nice expression. I like that, yes.” He was clearly an enabler who was more interested in solving whatever challenges came his way than in strict legalities. This is not to say that he had a disregard for contractual obligations; rather his view was that it would almost always be possible to negotiate a commercial solution to a problem regardless of what any contract said. He described himself as an eternal optimist and a person who would always find a way to make things work. While in less forceful characters such an attitude might be regarded as unrealistic bravado or mere Micawberism, in Mr Valentijn’s case I am sure that he almost always succeeded.

[43]Mr Pataq was a much more emollient character. He was a Marketing and Sales Manager, not a lawyer or a financial expert, and as such his role was to maintain client relationships. As he said, he was the middleman who was always called in whenever there was any trouble and it was his job to be reasonable with clients. I bear this well in mind in considering his evidence. I also take account of the fact that he was not a native English speaker and that the language used by him in some of the contemporaneous documents and in his witness statement may not have been as precise or exact as it could have been. He was certainly not legally trained and in all the circumstances, it is unrealistic to have expected him to express himself with the precision of a lawyer drafting a document in anticipation of it being subjected to detailed legal scrutiny. I found him to be an honest witness who was doing his best to assist the court.

[44]Both Nobiskrug’s witnesses were cross-examined at some length by Mr Akkouh regarding discrepancies between their respective witness statements, the contemporaneous documents and their oral evidence. However, the complexities of memory and the process of recollection are now well-known to the courts, particularly the difficulty of distinguishing between reconstructed memory and genuine recollection, which may fade with time, or conversely be triggered at a later date by a random association. Discrepancies in the recollection of a witness at one particular time rather than another do not therefore necessarily suggest unreliability. Similarly, different people perceive and remember in different ways and two people’s recollection of the same event may well emphasise different aspects. Indeed, an account of events which is perfectly consistent between different witnesses and remains so over time may be more indicative of reconstruction and rehearsal and for that reason less compelling than unvarnished recollection. Ultimately, I found this particular debate rather sterile. None of the criticisms seemed to me to be particularly telling, and none caused me to alter my impression of the witnesses.

[45]As regards Mr Safa, the Claimant invited me to disregard his evidence altogether save in so far as it was confirmed by reliable contemporaneous documentation. It relied on Mozambique v Credit Suisse International,

[2024] EWHC 1957 (Comm)

(the “Tuna Bonds” litigation). This concerned bribery and corruption in Mozambique in which the Privinvest group (albeit not the Defendant in this case) was involved. In that case Robin Knowles J rejected as untrue Mr Safa’s evidence that he and the Privinvest Group would not pay bribes and was satisfied that they were prepared to promise or pay whomever it took to procure the projects in question. The Claimant accepted that it could not rely on these findings as evidence of the truth of the matters stated but nonetheless contended that the findings were in themselves evidence which I was entitled to take into account in assessing Mr Safa’s evidence.

[46]However, the facts and context of that litigation are worlds away from what is in issue before me. As Ms Noakes pertinently pointed out on behalf of Privinvest, this is not a fraud case and there is no pleaded allegation that Mr Safa acted dishonestly in any respect. Moreover, Robin Knowles J did not find that Mr Safa was generally dishonest or was deliberately attempting to mislead the court. Mr Safa’s evidence in this case is materially supported by contemporaneous documentation and by the oral evidence of other witnesses, including Mr Blundy himself, and in order to disbelieve it I would also have to disbelieve that of the corroborative witnesses. I can therefore see no basis on which I should treat Mr Safa’s evidence as being in a different category to, or of lesser weight than, that of any other witness.

[47]Both parties relied on expert evidence of German law in relation to the various issues of German insolvency which arose. The Claimant’s expert, Dr Richard Scholz, is a leading bankruptcy and restructuring lawyer who formerly practised as an insolvency administrator. He was assisted in the research for and preparation of his report by a colleague, Dr Thomas Fallak. The Defendant’s expert, Dr Gerhard Liening, is also a registered specialist in insolvency and restructuring, and a partner in the firm of Dr Schackow & Partner, Bremen where he is head of the firm’s insolvency department. Both men knew Mr Gittermann professionally but neither had had any involvement in the administration and subsequent liquidation of Nobiskrug and I am satisfied that there was no conflict of interest.

[48]The issues of German law on which the experts were invited to express an opinion fell broadly into two categories:(a) The duties of an insolvency administrator and, more specifically, the factors which an administrator should or should not take into account in determining whether to adopt arbitration proceedings previously commenced by the insolvent company, and/or whether to accept claims made against the company in the insolvency;

(b) The interaction between German insolvency law and the arbitration proceedings, particularly with regard to the tribunal’s orders for security for costs and whether the administrator was positively precluded by German insolvency law from actively pursuing Nobiskrug’s claims in the arbitration or otherwise participating in the proceedings.

[49]Both experts were eminently well-qualified to give evidence and, as one would expect with such senior and respected practitioners, I had no hesitation in accepting their evidence as an honest reflection of their respective opinions. Unsurprisingly, they were agreed on many things and the points on which they differed did not affect my conclusions below. F: Renunciation Issues

[50]It is accepted by Privinvest that unless the Contract was validly terminated on 9 June 2020 by the Nobiskrug Termination Notice, then the Chugga Chugg Termination Notice was effective to bring it to an end and Privinvest has no defence to the claim under the Guarantee. In those circumstances, both parties agreed that the critical issue was whether there was a renunciatory or repudiatory breach by Chugga Chugg which Nobiskrug was entitled to accept on 9 June 2020 and I accordingly address that matter first. (1). Renunciation: the law

[51]Unsurprisingly, there was no dispute between the parties as to the principles applicable to questions of renunciatory breach. In essence:(a) Renunciation occurs where one party by words or conduct clearly and unequivocally evinces an intention not to perform its obligations under the contract in some essential respect;

(b) Inability to perform is equated with a refusal for this purpose;

(c) The test is objective, namely whether a reasonable person in the position of the innocent party would conclude that there was a clear, unequivocal and absolute refusal or inability to perform. See Chitty on Contracts, (35th ed.) (Sweet & Maxwell) at §28-056; The Hermosa, [1982] 1 Lloyd’s Rep. 570, 572-3.

[52]In the context of the present case the question is whether, in the reasonable understanding of Nobiskrug, Mr Blundy (whether through Mr Beckett or otherwise) clearly and unequivocally indicated that Chugga Chugg was unwilling and/or unable to perform the Contract. If he did, I agree with Ms Noakes that it is irrelevant that he may in fact have been able to continue with the project and subjectively wanted and intended to do so.

[53]This is a highly fact-sensitive enquiry and it is accordingly necessary to set out the relevant course of events in some detail. (2). Renunciation: the facts

[54]It was not disputed that by the start of 2020, the project was delayed by around 3 months and that Nobiskrug was experiencing significant cashflow problems which had led to some suppliers not being paid. The root cause of these problems appears to have lain with the previous management team which had concluded a number of contracts which were disadvantageous from Nobiskrug’s point of view for any or all of the following reasons:(a) They were underpriced;

(b) The instalments of the purchase price did not match the yard’s cash flow requirements;

(c) The construction schedules for the different vessels overlapped and conflicted causing capacity problems both with regard to engineering/design and physical construction.

[55]At a Project Meeting held at the shipyard on 30 January 2020 and attended by Mr Uwe Regensdorf (Nobiskrug’s Project Manager for this particular yacht) and Mr Edmund Beckett amongst others, Mr Valentijn openly acknowledged the problems but said that he had given instructions to the various project managers that all the vessels had to be delivered on time and that a rescue package was being prepared for submission to Mr Safa including a consolidated schedule which took account of all ongoing projects.

[56]In its February 2020 Progress Report prepared on 2 March 2020, Burgess reported that it had been told by Mr Valentijn at a further Project Meeting that:(a) additional funds were being injected into the yard at the end of each month which would put the yard back into a self-sustaining position;

(b) suppliers were now being paid in order of priority;

(d) a multi-project schedule had been developed which considered the requirements of all projects.

[57]The Burgess report noted that there was certainly some improvement as far as suppliers were concerned, and that Nobiskrug’s status was improving. Nonetheless, it was thought that the reality of the situation probably lay somewhere between the more optimistic picture painted by Mr Valentijn and Burgess’s previous reports.

[58]By email dated 23 March 2020 (just as the Covid pandemic was starting to take hold), Mr Regensdorf set out a proposed recovery plan which contemplated that the steel-cutting and keel-laying milestones would be maintained but that there would then be a three-month production freeze to allow completion of the engineering drawings and progress on production of standard components. Outfitting capacity would then be increased by introducing double- or even triple-shift working in order to recover the delay. Mr Regensdorf concluded as follows:

“You know me now since almost a year and from day onwards… we played with open cards. The above plan is a challenging one. Could it work? Yes Is it unrealistic? No Challenging? Sure it is and will be Give us a chance!”

Two days later an updated Master Schedule was provided which contemplated delivery of the yacht on 30 September 2022, one month later than the contractual delivery date but within the grace period allowed under the Contract. Could it work? Yes Is it unrealistic? No Challenging? Sure it is and will be Give us a chance!”

Challenging? Sure it is and will be

[59]On 25 March 2020, Mr Edmund Beckett commented on the plan in an internal status update. He stated that it was difficult to assess the true financial status of the yard at that time but there was evidence that the recovery package had been having a positive effect, although he understood that the pandemic was resulting in some payments to suppliers again being restricted. As regards Mr Regensdorf’s email, his assessment was that the plan had merit and that, even if it did not allow all the accrued delay to be recouped, it might avoid further slippage.

[60]On 30 March 2020, Nobiskrug served notice declaring the outbreak of Covid-19 and its impact to be an event of force majeure. It stated that it was monitoring the impact and consequences of the situation but was meanwhile doing its utmost to mitigate the effects of any delay and would co-operate in reviewing and adjusting production schedules and milestones wherever possible. On 31 March 2020, the shipyard was closed in order to comply with German Covid restrictions.

[61]In an email dated 1 April 2020 sent to his private investment firm, BBRC, Mr Blundy referred to the need to update his cash flow forecast in the light of the current construction schedule so as to reflect future payments more accurately. He noted that he had €29 million in term deposits which would shortly be coming free. We do not know what, if any conversation, took place between Mr Blundy and BBRC following this email.

[62]On 4 April 2020, Mr Blundy called Mr Beckett and asked him to approach Nobiskrug to broach the possibility of a consensual termination of the project. Exactly what Mr Blundy’s instructions were was a matter of dispute. Mr Blundy said that by this stage he was seriously concerned about Nobiskrug’s financial ability to build the vessel and also very concerned about the existing delay. He said that any one of these problems was serious but that in combination he could see a “train smash” coming. He was also aware that there were very likely to be alternative vessels available at competitive prices on the yacht market. Although he said he still very much wanted the yacht built, he wondered whether in these circumstances it might be in the interests of both parties to agree a consensual termination, thereby ridding Nobiskrug of a loss-making contract and leaving him free to pursue opportunities elsewhere. He therefore told Mr Beckett that it might be easier for Nobiskrug to let Chugga Chugg out of the Contract and asked him to explore that option with Nobiskrug. He was adamant that he had not yet made a final decision but thought it sensible at least to discuss the possibility of termination so as to understand what the potential costs might be.

[63]Mr Beckett’s account of the conversation was broadly similar, namely that he was given instructions by Mr Blundy to explore with Nobiskrug whether it might have an interest in terminating the Contract and to indicate that, if so, it was something Mr Blundy was prepared to entertain if the price was right. He denied that Mr Blundy said he could no longer afford the yacht, or that he wanted to take advantage of a better deal. However, he acknowledged that Mr Blundy did say that there would surely be other vessels to look at if Nobiskrug was interested in cancelling. Mr Beckett was clear that Mr Blundy never communicated a settled intention to cancel the Contract and did not instruct Mr Beckett to “get him out of it”.

[64]It is unfortunate that neither man made a note of the conversation or confirmed its contents contemporaneously in any other manner. However, I bear in mind that Mr Beckett was called out of the blue on a Saturday afternoon when he was in the garden and I do not accept that this was a deliberate ploy to avoid creating any written record of the instructions given by Mr Blundy. They were in any event confirmed, at least to some extent, by Mr Beckett’s internal email summarising the actual conversation he subsequently had with Nobiskrug (see paragraph 68(a) below).

[65]On 5 April 2020, Mr Blundy emailed Ryan Benner (a director of BBRC), commenting on a draft response to Nobiskrug’s force majeure notice which he had received from Mr Benner the previous morning. It is clear from this email that Mr Blundy was concerned to ensure that the yard did not use force majeure as a cloak for recovering pre-existing delays which were nothing to do with the pandemic and in his comments he exhorted Mr Benner to remain focused on the outcome “Which is getting our boat out on time in the quality expected. Not using a force majeure or event to their advantage by being false, staring to [sic] early finishing too late.” This was an entirely understandable and reasonable position to adopt in the circumstances.

[66]Around midday on 6 April 2020, Mr Beckett emailed Mr Safa under the heading “NOBISKRUG – BRETT BLUNDY” asking if they could have a call later that day “re Brett Blundy”.

[67]Because of Mr Safa’s untimely demise, we do not know what his reaction to this email was. Mr Valentijn said that Mr Safa told him that Mr Beckett had asked to speak about the yacht. Mr Valentijn did not appreciate at that stage that the call would necessarily be about Mr Blundy. Mr Pataq likewise said that he did not know that the call would be about Mr Blundy; Mr Safa had simply asked him if he knew what it was all about. For his part he was looking forward to the call because he thought the approach from Burgess meant that there might finally be a chance to get into the brokerage business.

[68]At all events, the call took place later on 6 April between Mr Beckett on behalf of Mr Blundy/Chugga Chugg and Mr Safa, Mr Valentijn and Mr Pataq on speaker phone on behalf of Nobiskrug.

(a) By Mr Beckett to Mr Edmund Beckett:

“I had a good chat with Sandy Safa, Fadi Pateq and Johan Valentijn at 4:30pm UK this afternoon. I explained Brett’s request. They took it remarkably “sitting down”

. They are going to investigate the possibility of Brett cancelling the Project and what % of funds can be passed back to Brett. They need to investigate what they have spent and committed to date. This will take 1-2 weeks before we get a reply. I have relayed this to Brett in a phone call this afternoon. He is probably going to call Sandy directly himself also. Brett does not want to ruffle too many feathers at this time as he may still continue with the build. He is just looking at his options.” (b) By Mr Valentijn to Mr Safa (copied to Mr Pataq and Mr Safa’s personal lawyer, David Langford):

“Dear Sandy, This is to confirm the telephone conference call with Jonathan Becket of Burgess who represents the owner of Cloud 9.2, Mr. Brett Bundy [sic]. Jonathan informed us that the owner intends to cancel the contract due to the change of business climate caused by the Coronavirus pandemic. We will study the financial impact this has on our ongoing business plan.”

We will study the financial impact this has on our ongoing business plan.” (c) By Mr Pataq to Mr Langford (copied to Mr Safa and Mr Valentijn):

“Dear David, … Jonathan Beckett of Buegess [sic] announced today that Mr Brett Blundy decided to terminate the 797 contract. He explained that the client’s retails [sic] and hedge fund businesses are struggling due to the COVID-19 epidemic. Attached is a summary of the teleco and participants.”

The attached summary stated:

“Jonathan Beckett the CEO of Burgess Yachts and the client’s representative of project 797 informed us today that their client Brett Blundy will cancel his yacht order. Brett Blundy is under financial pressure due to the COVID-19 epidemic, his retail businesses and hedge fund portfolios are suffering greatly.”

Attached is a summary of the teleco and participants.” The attached summary stated:

[69]About a week later, Nobiskrug began preparing a “timeline” of the communications with Burgess and Mr Blundy relating to the question of cancellation. The entry for 6 April 2020 records as follows:

“… Jonathan Beckett of Burgess announced that Mr Brett Blundy decided to terminate the 797 contract, he went on to explain that Brett’s retails [sic] businesses/fashion business are struggling due to the COVID-19 epidemic. Mr Safa asked Jonathan if Jack Cowin (Bret Blundy’s business associate/longtime friend) would be interested in buying out 797, and the answer was NO unless we meet Jack’s requested bank guarantees for the project. Jonathan Beckett mentioned that Brett Blundy would be interested to terminating the agreement that if he gets the escrow back plus half of the 10 million paid in. Johan answered that we would do an analysis how much money we have spent first before discussing how to resolve this. Jonathan agreed that was a good approach. Jonathan Beckett, CEO of Burgess went on to explain the following: • Every day there has been a new superyacht listed for sale and a high number of them are distressed sales. • New build business will suffer the most, no new clients will commit to a build contract during the Covid-19 epidemic, and most of the new build contracts will be cancelled (797 is a good example). • If the Mediterranean lockdown continues until July, we will miss the yachting season of 2020 and this can be catastrophic for the recovery period which will extend to the Mediterranean season of 2021. • Most of the yachts that are financed will most likely be owned by banks by the end of 2020. • The charter market is dead for the season, 90% of the brokerage community survives on charter fees and not sales, so you can do the math! • Consolidation and partnerships will be one of the only method of survival for the big players in yachting. • It’s going to be a long recovery, so brace for impact.” • Every day there has been a new superyacht listed for sale and a high number of them are distressed sales. • New build business will suffer the most, no new clients will commit to a build contract during the Covid-19 epidemic, and most of the new build contracts will be cancelled (797 is a good example). • If the Mediterranean lockdown continues until July, we will miss the yachting season of 2020 and this can be catastrophic for the recovery period which will extend to the Mediterranean season of 2021. • Most of the yachts that are financed will most likely be owned by banks by the end of 2020. • The charter market is dead for the season, 90% of the brokerage community survives on charter fees and not sales, so you can do the math! • Consolidation and partnerships will be one of the only method of survival for the big players in yachting. • It’s going to be a long recovery, so brace for impact.”

[70]Turning to the witness evidence, Mr Beckett denied having said that Mr Blundy intended to cancel the Contract due to a change in the business climate caused by Covid, simply that he wanted to know whether Nobiskrug was interested in cancelling and that if it was, Mr Blundy might agree depending on the terms. He accepted that there was a discussion as to why Mr Blundy was making this approach and thought they talked about the pandemic generally, the financial status of Nobiskrug and the delays to the project. He also accepts that there was a discussion about the status of Mr Blundy’s retail businesses and whether they had been impacted by Covid, although he had no knowledge himself of how they were performing. He could not remember whether this discussion was prompted by Nobiskrug asking whether Mr Blundy had been impacted by Covid or whether he had initiated it. He denied that any actual figures had been discussed on 6 April, although he had indicated that Mr Blundy realised “there would be some sort of financial loss if he was extricated from the contract.” He recalled Nobiskrug mooting the possibility of Mr Blundy receiving back the monies in escrow plus half of the further c. €10 million which had been paid to date but was not entirely sure whether that was on this call or later.

[71]When shown the Nobiskrug timeline, he accepted that it accurately summarised what was discussed, except for the suggestion that Mr Blundy wanted to cancel the Contract and save for any discussion of specific amounts.

[72]In his witness statement, Mr Safa stated that Nobiskrug was told by Mr Beckett that Mr Blundy had decided to pull out of the Contract completely because of the impact of the pandemic on his business and that this had come as a surprise. He recalled a suggestion at some point that Mr Blundy would like to recover half of the money in escrow, alternatively all of the escrow monies plus half of the remainder but he was not sure exactly when that proposal was made. Nobiskrug had said that they would have to look at the figures and revert.

[73]Mr Valentijn was cross-examined at length about the conversation. He said that while the call was obviously going to be important if it involved Mr Safa personally, it had taken them completely by surprise and he could not believe what was said. He was quite clear that Mr Beckett had said that Mr Blundy wanted to get out of the Contract – not just that he was considering his options - and that they were stunned. Although he could not recall the exact words used, Mr Beckett had said that Mr Blundy had problems with the pandemic and issues with his cattle and fashion businesses and that the whole industry was in an uproar so he wanted out. He also said that Mr Beckett had mentioned problems with Mr Blundy’s personal life, although he had left that out of his statement because in his view that was a personal matter which had nothing to do with any business deal. There was no discussion of any problems at the yard.

[74]Mr Valentijn further recalled Mr Beckett saying something during the call about Mr Blundy wanting some of the escrow monies back plus some extra money, but agreed that no precise figures were discussed on that occasion. Nobiskrug’s position on 6 April was that it would respond to Chugga Chugg in a few weeks after it had looked at the costs.

[75]Mr Pataq recalled that the call started with a conversation about the general dire state of the market and that Mr Beckett then said that Mr Blundy wanted to get out of the Contract. He said that Mr Blundy’s businesses were struggling and also mentioned something about his personal life. Mr Pataq explained(a) that he understood that Mr Blundy’s retail business was in fashion, hence the specific reference to fashion in the timeline; and

(b) that when he referred to Mr Blundy’s hedge fund business in his contemporaneous email and note, this was intended to be a reference to his financial portfolio generally. Mr Pataq confirmed Mr Valentijn’s recollection that there was no discussion of Nobiskrug’s financial position and that there had been a clear indication that Mr Blundy wanted to exit the Contract, not simply to delay or pause it. He could not clearly remember what was said when about the terms of any financial deal but recalled there was some mention of what Mr Blundy could get back and that a figure of €5 million may have been mentioned. Mr Safa had said that Nobiskrug would have to look at the situation and get back to them.

[76]Both Mr Valentijn and Mr Pataq gave evidence that immediately following the call, Mr Safa asked them to make a record of the call and send it to Mr Langford. It seems that they each did so, Mr Valentijn sending his email to Mr Safa and Mr Pataq sending his to Mr Langford, each with the others copied in. It was put to both witnesses that Nobiskrug had seized on Mr Beckett’s call as an opportunity to rid itself of a loss-making contract and that these emails were co-ordinated in a collusive attempt to lay a paper-trail blaming Mr Blundy so as to support a future termination by Nobiskrug.

[77]I do not accept that this was the case. For one thing, if Nobiskrug was concerned to concoct a story, it is more likely to have sent a single, much more detailed email than having each of Mr Valentijn and Mr Pataq drawing up separate and very brief notes. Moreover, both emails were sent within minutes of the call at a time when Nobiskrug could not have been entirely sure what lay behind Mr Beckett’s approach, let alone had time to decide how to react to it or devise a convincing story. It is clear that the call came as a complete surprise to them – Mr Pataq, in particular, was anticipating a very different conversation with Burgess, possibly about entering the brokerage market – and I have no doubt that their first thought would have been to buy some time to think before deciding what to do. Finally, these emails were sent to Nobiskrug’s lawyers. Ms Noakes makes a fair point in asking rhetorically what purpose would be served by seeking legal advice on the basis of inaccurate or fabricated documents and why, if Nobiskrug was prepared to go to all this trouble to concoct a false story, it did not terminate immediately rather than waiting for another two months. I therefore accept that these communications represent a genuine reaction to what Nobiskrug had just been told. It does not matter that they were brief; they succinctly recorded – contemporaneously – the gist of what Nobiskrug had understood from the call.

[78]On 8 April 2020, Mr Blundy left a voicemail message for Mr Safa stating that he wanted to have a conversation “around a potential deal”. He said in oral evidence that he wanted to talk to Mr Safa about whether it might be better to end the project. A call between the two men took place later that day during which Mr Safa assured Mr Blundy that Nobiskrug was capable of delivering the yacht. He was putting the right management team in place and was himself standing behind the yard and would put in the necessary funds and ensure that it performed. Mr Blundy said that he was much reassured by Mr Safa’s commitment and told him “That’s good enough for me” or words to that effect. At no stage during the call did he say that Chugga Chugg was terminating the Contract, although conversely he was unable to say that he positively confirmed he would be continuing. According to Mr Blundy, Mr Safa said that Nobiskrug would still continue to explore the costs involved in terminating and he, Mr Blundy, was happy for Nobiskrug to carry on doing so.

[79]According to Mr Safa’s witness statement, there was no discussion about Nobiskrug’s financial situation or any delays; Mr Blundy simply reiterated that he wanted to get out of the Contract. Mr Safa expressed regret and said that Nobiskrug was looking at its expenses and would get back to him. However, it is clear that something must have been said about Nobiskrug’s problems because the call is recorded in the Nobiskrug timeline as follows:

“In the telcon Brett Blundy said that he knew Nobiskrug had issues with subcontractors and this might be a good time to get out of 797. This was clarified by Mr Safa that Nobiskrug was on schedule while reorganizing the company because of previous management. Brett then asked about the cancellation cost of 797 and if the cost can be minimized, Mr Safa told him that we will calculate the project’s cost to date and get back to him soonest and Brett replied yes please and get back to me. Mr Safa added that he received the message from Jonathan Beckett and that the preference of Nobiskrug was to continue the contract.”

[80]In an email to Mr Edmund Beckett dated 9 April 2020, Mr Beckett confirmed being told by Mr Blundy that he was much more comfortable with Nobiskrug following his conversation with Mr Safa. He continued:

“Sandy said that the financial situation of Nobiskrug is all down to poor (previous) management and they are on a slow road to recovery. Sandy Safa said he is 100% committed to supporting Nobiskrug through to a new and better place and to make sure all of the yachts contracted get delivered. Sandy told Brett they are working on the costs of letting Brett go – but Brett feels these are likely going to be very high costs to exit – and so he will continue with the N/B project. Tim V – Brett said in one breath – no need to send him any more yachts for sale – but then he said actually I know you will keep sending them anyway and I would quite like to see what is out there....”

[81]On 10 April 2020, the timeline records a conversation between Mr Valentijn, Mr Pataq and Mr Beckett in which Mr Valentijn summarised the cancellation cost as c. €15 million excluding potential profits. Mr Beckett said that he would discuss this with Mr Blundy and asked to be sent a global figure.

[82]Mr Beckett could not recall this conversation specifically, although he accepted that it may well have taken place as recorded. Neither Mr Valentijn nor Mr Pataq was cross-examined about it although in his witness statement the latter recalled Mr Beckett saying that €15 million was not what they had been expecting.

[83]On 14 April 2020, the timeline records that Mr Pataq spoke to Mr Beckett and told him that there might be a chance for Mr Blundy to get out of the Contract for €10 million and walk away with the €5 million escrow monies. Later that day, Mr Beckett called Mr Pataq to say that Mr Blundy wanted to continue with the project as he had only been expecting a loss of €3-5 million. Mr Beckett could not clearly recall either of these conversations, although he did remember telling Nobiskrug after receiving the figures that Mr Blundy would prefer to continue as the costs were unpalatably high and he had received comfort from Mr Safa. Both Mr Valentijn and Mr Pataq confirmed being told that Mr Blundy’s preference was to continue with the project.

[84]At this point, however, Nobiskrug began to doubt Mr Blundy’s true intentions. According to Mr Valentijn, his concern was very simple. Mr Blundy had said that he wanted to get out of the Contract; a few days later he had said that he wanted to continue. The time was fast approaching when Nobiskrug would have to enter into commitments of around €45 million in order to progress the construction and he felt extremely uncomfortable about Mr Blundy’s ability to pay and whether he had sufficient funds to complete the project. He therefore put together a strategy to ask Mr Blundy to provide a personal guarantee and to agree to release the escrow monies as a condition of the yard continuing. He said that it would have been irresponsible to commit Nobiskrug for over €45 million without being sure that the customer would pay. It would have been hanging the yard out to dry. He discussed the matter with Mr Safa who said that he wanted to continue with the project but agreed that getting a personal guarantee from Mr Blundy would be a good idea.

[85]Although Mr Pataq could not clearly recall this conversation, he emailed Mr Valentijn reporting on a conversation with Mr Beckett on 15 April 2020 in which he had relayed Nobiskrug’s position in the following terms:

“- JV is a bit nervous about Brett since our first teleco and especially if we have to make a commitment of 45 million in the next 2-3 weeks. - We need to see guarantees from the client and release of escrow in order to be comfortable in committing further to the project. His response was defensive and confirmed that Brett’s cattle business is booming and there should be no issue making payments or guaranteeing by showing his financials. He also mentioned that Brett’s only leverage on the yard is the escrow since the whole story about NK not paying subcontractors etc.. I told him that this was done due to mismanagement of previous managers and has nothing to do with the finance of the yard. I asked him to send the message to Brett and that’s our position.”

I asked him to send the message to Brett and that’s our position.”

[86]It is clear that Mr Blundy and Mr Beckett were incensed by this approach. Mr Beckett’s evidence was that he regarded it as an outrageous and bizarre request. He said that in the yacht market (as opposed to the commercial ship building market) it was not normal to ask for a parent company guarantee even if the purchaser was a shell company with no assets. The purchasers tended to be very wealthy individuals and most contracts were self-funded with the yard retaining title by way of security until delivery. In his view, Nobiskrug was trying to leverage the situation so as to blame Mr Blundy for any termination on the grounds of supposed financial difficulties (for which there was no basis) when it was in fact the yard which was struggling. He pointed out that as Nobiskrug had been unable to provide a bank guarantee, they had gone to great lengths to negotiate an alternative security package for Chugga Chugg, consisting of Privinvest’s parent company guarantee and the escrow arrangement. There was therefore no reason why Mr Blundy should agree to release the escrow money.

[87]Mr Beckett nonetheless passed the request on to Mr Blundy who described it as “ridiculous”. He said it was completely untrue to suggest that his businesses had been hit by Covid to the point where he could no longer afford to pay for the yacht and it was fanciful to suppose otherwise. On the contrary, he had funds set aside to meet the costs. He saw no need to provide a personal guarantee, being under no contractual obligation to do so and, like Mr Beckett, he regarded the release of the escrow as unacceptable. Nonetheless, he agreed to provide bank statements to demonstrate his liquidity and to show that he had sufficient cash on deposit to cover the next two instalments.

[88]This response was relayed by Mr Beckett to Mr Pataq by WhatsApp on 16 April 2020 and on the following day, Mr Beckett forwarded statements confirming funds on deposit in Mr Blundy’s name totalling €29 million which were earmarked for the next instalment payments. It seems that Mr Beckett, Mr Valentijn and Mr Pataq also spoke on that day following which Mr Beckett sent a further WhatsApp message to Mr Pataq saying “Fadi – this is bizarre in the extreme. You must realize this.”, to which Mr Pataq responded “I agree, I just wish BB would of never made the approach, we didn’t have the intention of opening such subject. Nevertheless, the dust will settle.”

[89]In his oral evidence, Mr Pataq was altogether more circumspect about whether he regarded Mr Valentijn’s request for a guarantee and release of the escrow monies as “bizarre”. He pointed out that he was a middleman whose primary concern was to maintain relationships and avoid confrontation where possible. I do not find it implausible that he therefore effectively adopted a policy of “the customer is always right”. Moreover, it must not be forgotten that it was Mr Pataq who first conveyed Mr Valentijn’s requests to Mr Beckett on 15 April and, while he accepted that it might have been regarded as “over the top” in pre-Covid times, he also pointed out that the landscape had dramatically changed with the onset of the pandemic.

[90]Be that as it may, Mr Valentijn was underwhelmed by the deposit certificates. He accepted that they gave some indication of good faith but was concerned that €29 million did not cover all of the commitments which shortly needed to be made by the yard and anyway left a very large balance of the total contract price exposed. Moreover, Chugga Chugg was a shell company and Mr Blundy could have withdrawn the deposits at any time and used the funds elsewhere as he chose. He was accordingly not satisfied that his concerns had been met.

[91]On 30 April 2020, Mr Valentijn emailed Mr Beckett in the following terms:

“On April 6, 2020, you emailed Mr. Safa and asked for a chat. That call took place with Mr. Safa that afternoon and as you know both Fadi Pataq and myself participated in the call. During the call you made it clear that the ultimate owner had been hit by the COVID-19 pandemic, both as regards his social life and as regards his businesses. You also stated twice that the owner wanted “out” of the project. In this same call you confirmed that the market for the time being is dead, both for new builds, used vessels and charters. Subsequently and at the owner’s request, the owner spoke with Mr. Safa on 8 April 2020. Once again, the owner said to Mr. Safa that he wanted out of the project and that, as you had already told us, a deal could be done around escrows monies and the advance payment. Mr. Safa told him that it was a shame as Nobiskrug wanted to continue the build, but that Mr. Safa wanted Nobiskrug to consider proposal by reference to the project money already by the shipyard. [sic] On April 14, we explained the amount that Nobiskrug was already committed for in the project. After further additional phone conversations you told us that same day that the owner wants to continue and will allocate the means to do so. As you will no doubt understand, those previous statements have however caused us some concern about the future performance of the contract. As you know, the build contract is heavily pre-financed by the yard and, when the contract was entered into with an SPV from the owner’s side, the market for partly and fully built ships was very strong. In short, as you and us fully agree, the world has changed, and we have been informed both by you and the owner that the owner wanted out. We will be happy to continue to build the boat for Mr. Blundy, to whom our sister company CMN had successfully delivered one of the previous yachts he owned. We need, however, a guarantee securing for us the completion of the contract from the owner’s side, in the same form as our parent company gave to the owner and the release of all monies, current and future, from escrow.”

[92]Mr Beckett duly forwarded this email to Mr Blundy saying that he considered it “frankly ridiculous” and had told Nobiskrug so. He also indicated that he had been told in confidence by Mr Pataq that if Mr Blundy were to speak to Mr Safa directly, the issue would just go away. Instead, it seems that Mr Blundy decided to speak to Mr Valentijn and they spoke on 1 May 2020. Mr Blundy said that he wanted to carry on and Mr Valentijn explained that the yard was €30-50m behind, meaning that it had to commit that amount in order to progress the construction and that he did not want to spend that amount without a guarantee. Mr Blundy refused point blank to give a guarantee whereupon Mr Valentijn asked whether he might be prepared to commit an additional €10 million to the project. I infer that this request was also refused as in an email reporting the outcome of the call to Mr Beckett, Mr Blundy expressed the view that the conversation had put an end to any question of further security but that he was deeply concerned about the yard’s liquidity in the light of what Mr Valentijn had said about being €30-50 million behind. In fact, Mr Blundy seems to have misunderstood what Mr Valentijn meant by this. Nobiskrug’s loss on the contract overall was much lower. He concluded with the words “Carrying on.”

[93]Meanwhile, Chugga Chugg had, to the knowledge of Nobiskrug, finalised the purchase on 5 May 2020 of a Pascoe tender for the yacht which had been under negotiation since November 2019. Whilst this was a standard tender that could have been used with alternative vessels, some of the design details were specifically tailored to the yacht. Chugga Chugg was also continuing to work on the design of the yacht itself with its designers and Burgess was liaising with Nobiskrug in this respect.

[94]On 25 May 2020, Mr Valentijn sent a further email to Mr Beckett asking for clarification of Mr Blundy’s intentions before moving forward with the project. He continued:

“The reason for this is that recently we have been receiving communications from your company, which among other things asked for an update on the construction schedule following the delays arising out of Covid 19, which are at odds with your indication on 6 April that Mr. Blundy had decided to terminate the 797 contract as a result of the impact Covid-19 has had on his businesses as well as personally and during the subsequent discussions that took place during which the buyer have [sic] failed to provide any comfort by way of buyer’s performance guarantees. In the circumstances, notwithstanding Burgess recent communications, the reality is that the Buyer plainly does not intend to perform the contract and/or is financially unable to do so. We therefore reserve and do not waive the sellers rights in relation to the buyers resulting anticipatory repudiatory breach (including the Sellers rights to terminate the contract and claim in respect of their losses which presently amount to at least Euro 14.390.172,00 being the direct losses of construction to date, which are continuing). Whilst that is our formal position, we anticipate all concerned would prefer that our longstanding good relationship continue through these difficult times and that we should continue to explore the possibilities of a negotiated solution. To that end, and on an entirely without prejudice basis, we would be willing to terminate the contract by consent on terms whereby our direct losses of construction to date are partly compensated (which we trust is accepted in principle) by taking the buyer’s offer, which was made by you and separately by Mr. Blundy, with buyer retaining the full amount of the escrow account (E5 million) and receiving half of the E10 million paid to Nobiskrug…”

[95]Mr Beckett forwarded this offer to Mr Blundy describing it as “extraordinary! Crazy!” Mr Blundy replied saying that the situation was now getting beyond ridiculous and apologising for having raised the issue in the first place. He clearly found the insinuation of financial constraint offensive and said that he was even more concerned now about the financial viability of the yard. Mr Beckett and Mr Blundy then spoke and Mr Blundy confirmed that, given the amount spent to date, he wished to continue with the project. On Mr Blundy’s instructions, Mr Beckett then emailed Mr Valentijn to say that Mr Blundy had called and said that if Mr Safa wished to call him, he would be happy to speak. In the event no such conversation took place.

[96]On 2 June 2020, Mr Valentijn pressed for clarification of Mr Blundy’s intentions with regard to the project, and for a response to Nobiskrug’s offer. He stated that the yard considered it unrealistic to be “artificially pressing” for progress updates (I return to this below) when Mr Blundy was obviously unwilling and unable to proceed. He said that they needed a decision and that the offer would remain open for 48 hours. Mr Beckett replied to say that he had passed the email to Mr Blundy and also spoken to him. Mr Blundy had been astounded by the message and asked that any further discussions should take place with him directly and not through Mr Beckett.

[97]On 3 June 2020, Mr Blundy called Mr Valentijn and they spoke by telephone. On 8 June, Mr Blundy made a note of the conversation in which he recorded that he had told Mr Valentijn that he had every intention to complete the build as demonstrated by the fact that he had complied with all his obligations to date and ordered and paid a deposit for a tender for the vessel. According to the note, Mr Valentijn reiterated that he did not believe Mr Blundy had a genuine intention to finish the yacht, whereupon Mr Blundy reminded him of Mr Safa’s assurances and said that he had taken the latter at his word. Mr Blundy was not cross-examined about this conversation and it was not mentioned in Mr Valentijn’s witness statement. In his oral evidence he confirmed that a conversation of this nature had taken place around this time but that he, Mr Valentijn, had dug his heels in and insisted on a personal guarantee and release of the escrow monies before making any further payments or placing further orders for equipment for the yacht. Mr Blundy’s position and his intention to continue was confirmed by Mr Beckett in an email the following day.

[98]On 5 June 2020, Mr Valentijn doubled down and insisted that Nobiskrug’s assertions about Mr Blundy’s lack of willingness to continue were true. He refused to engage in further correspondence which he said “makes no sense, has all the appearance of being drafted by lawyers to present a different impression to what you previously said and will not alter the underlying truth regarding Mr Blundy’s intentions.”

[99]Subsequent offers by Mr Blundy to speak directly to Mr Safa came to nothing and on 9 June, Nobiskrug sent its Termination Notice in the following terms:

“Further to our message dated 25 May we have not received any substantive response. Nothing has been provided to give us any comfort that the buyer can or will perform and we are therefore left concluding that the true position remains that the buyer does not intend and/or is financially unable to perform the contract. We therefore hold it to be in anticipatory repudiatory and/or repudiatory breach which we not accept and hereby terminate the contact. [sic] We will also claim damages for the losses incurred.”

Notice of Arbitration was served the same day.

[100]It is unnecessary to rehearse the subsequent events in any detail since it is accepted by Privinvest that unless the purported termination by Nobiskrug was valid, then Chugga Chugg validly terminated the Contract on 16 July 2020. Suffice it to say that Burgess continued to press Nobiskrug for performance but Nobiskrug did not respond and even withdrew access to the yard for Burgess’s representatives, resulting eventually in Chugga Chugg serving a 20-day default notice under clause 11.2.1 of the Contract on grounds of material breach and, subsequently, the Chugga Chugg Termination Notice. (3). Renunciation: Findings

[101]Ms Noakes realistically accepted that Nobiskrug needed to establish a renunciation by virtue of the conversations which took place on 6 and/or 8 April 2020. She conceded that if she could not make that case good, then nothing which occurred thereafter was sufficient to establish a free-standing renunciation. This was, however, without prejudice to her case that Chugga Chugg’s conduct after 8 April 2020 was equally insufficient to nullify a prior renunciation if such had in fact occurred. I return to this at paragraphs 123-127 below.

[102]Having scrutinised the correspondence and other interactions between the parties over the relevant period and listened to the oral testimony of the witnesses with care, I make the following findings on the evidence.

[103]Mr Edmund Beckett gave evidence that a 3-6 month delay before construction had even started was very unusual. But even accepting that there were likely to be some delays during actual construction, I do not regard this as anything out of the ordinary. The delay by April 2020 was not so great that it could not in theory have been recovered. The delivery date still lay some 2½ years in the future and the current schedule only projected a delay of one month. Mr Valentijn had vast experience of shipbuilding and I accept his assessment that even if the problems were “challenging”, they were not insurmountable. For example, he felt that Nobiskrug’s policy on ordering components was unduly cautious resulting in some delays against schedule which were more apparent than real. I have little doubt that, barring unforeseen difficulties caused by the pandemic, Mr Valentijn and Mr Safa between them would have made sure that the yacht was delivered without undue delay. So far as concerned delays attributable to Covid, Nobiskrug was of course protected by the force majeure clause. At the very least, Chugga Chugg could not have assumed that there would inevitably be significant delay beyond that inherent in any newbuild project during a pandemic. Accordingly, while Mr Blundy may have had some concerns by 6 April 2020 about delay and about the financial position of Nobiskrug, they were not nearly as serious as he suggested. In one rather confused passage of his evidence he said both that he was expecting Nobiskrug to build the yacht and that he was seriously concerned about its financial ability to do so.

[104]Mr Blundy himself was not in any financial difficulty that meant he could no longer afford to proceed with the Contract. He conceded that his businesses may have taken something of a hit as a result of the pandemic – as indeed was the case with most other businesses at that time – but I accept his evidence that he was at all times financially able to complete the project.

[105]Nonetheless, Mr Blundy was an astute and successful businessman. He agreed that his motto was never to let a good crisis go to waste. In fact, in late March, as soon as Covid had hit, he put all his spare cash into equities because he perceived there to be an opportunity there. He also had his finger firmly on the pulse of the yacht market and on his own admission was probably aware of every yacht that was formally being offered for sale. Given the general market turmoil at the time, he would have been aware that there were likely to be a number of distressed yachts available at a keen price. In his witness statement he stated that exiting the Contract at the right price would give him scope to pursue opportunities in the market and he admitted in cross-examination that “there is no question… that it crossed my mind that we should be on the lookout for opportunities.” Mr Beckett also accepted that Mr Blundy had said to him that there would surely be other vessels to look at if Nobiskrug was interested in cancelling. While both men sought to downplay this evidence, I have no doubt that it was a significant factor in Mr Blundy’s calculations.

[106]In these circumstances, I find that Mr Blundy’s intention was to get out of the Contract if he could, find a cheaper more or less equivalent yacht (as would certainly have been possible) and put the money thereby saved into equities or some other business opportunity. This would have had the added advantage of avoiding any incipient problems at the yard altogether.

[107]Accordingly, I am satisfied that Mr Blundy did “want out” otherwise he would never have broached the question of termination with Nobiskrug in the first place. While I am sure he is a thoroughly decent person, I did not get the impression that his altruism extended to suggesting a termination solely in the interests of the yard. It was certainly not an option that he was offering to any of his other counterparties. Mr Pataq’s speculation was therefore essentially correct: that “Mr Blundy being a savvy buyer, that there was some serious deals in the market and he wanted to test the waters…”

[108]Mr Blundy therefore indicated this intention to Mr Beckett on 4 April 2020 and instructed him to test the water with Nobiskrug. I accept that he had not at that stage made a firm decision actually to cancel the Contract, or formed a definite intention to purchase either the “SAN LORENZO” or any other vessel. For completeness, there was no evidence to suggest that Mr Blundy started negotiating to buy the “SAN LORENZO” until about October 2020, well after the Contract had been terminated, and there was insufficient other material from which I could draw any contrary inference, let alone a compelling one. The Seasearcher Report on which Ms Noakes relied to demonstrate that Mr Blundy was registered as the owner of the “SAN LORENZO” from August 2020 is not a reliable source of information in this respect and there were no certificates from any relevant Registry which might have put the matter beyond doubt.

[109]In line with his instructions, Mr Beckett did not say to Nobiskrug on 6 April 2020 that Mr Blundy was definitely cancelling the Contract there and then. Quite apart from anything else, both he and Mr Blundy would have known that this would expose Chugga Chugg to a claim for damages. Nonetheless I find that he gave the clear impression to Nobiskrug – again in line with what he had been told by Mr Blundy – that the latter wanted to terminate the Contract. I derive further support for this finding in the following:(a) Mr Blundy was prepared to accept a loss on cancellation. If (as I accept to be the case) he could perfectly well afford to pay for the yacht, then either he would get the yacht at the end of the day (which he professed to want) or – if Nobiskrug was unable to deliver – he would be able to get out of the Contract for nothing. Why, then, propose termination at a loss to himself at all unless his calculation was to pay a small price in the expectation of making much larger gains elsewhere?

(b) Mr Beckett gave evidence in cross-examination that Mr Blundy realised there would be a financial loss “if he was extricated from the contract”. His email to Mr Edmund Beckett of 6 April 2020 (paragraph 68(a) above) likewise refers to having broached “the possibility of Brett cancelling the Project” – a message which he stated Nobiskrug took “remarkably ‘sitting down’”. Language of this nature is strongly indicative of an intention on the part of Mr Blundy to get out of the Contract and an awareness on Mr Beckett’s part that he had just conveyed a surprising and unwelcome message. When Mr Beckett was asked why he used such wording when he was adamant that he never said that Mr Blundy wanted to cancel, he had no very satisfactory answer beyond the suggestion that it was loose wording. I do not accept this for one moment; Mr Beckett is far too experienced and articulate an operator for that.

[110]Conversely, whatever the difficulties facing Nobiskrug in April 2020, it had no thought or intention of terminating the Contract. It is true that the Contract was and always had been loss-making and that Nobiskrug was experiencing financial difficulties. However, Mr Safa had been and was continuing to stand behind the company. According to the Insolvency Administrator’s report, the yard had been operating at a loss since at least 2018 but the reason for its insolvency was rather the under-utilisation of overall shipyard facilities and a shortfall in orders. If so, then it would have made no commercial sense to get rid of the Contract when there was precious little prospect of securing a replacement order in the prevailing climate. Certainly there was no evidence that Nobiskrug was trying to renegotiate or cancel any of its other contracts and Mr Pataq denied that that was the case. Moreover, Mr Blundy accepted that on 8 April, Mr Safa said that he was standing behind the Contract and that his preference was to continue. Indeed, it was an important plank of Chugga Chugg’s case that Mr Blundy felt considerably reassured by this and that as at 8 April 2020, both parties were keen to continue. There is no reason to suppose that Nobiskrug’s position would have been any different two days earlier on 6 April. Indeed, Ms Noakes made the fair point that Chugga Chugg’s assertion that Nobiskrug wanted itself to get out of the Contract was wholly inconsistent with its case on affirmation and that if Nobiskrug really had wanted to cancel, it is incomprehensible that it then did nothing about it for a further two months.

[111]I am therefore satisfied that the impetus to terminate the Contract all came from Mr Blundy and Chugga Chugg and it is by no means implausible that Mr Beckett did indeed say on 6 April 2020 that “Mr Blundy wants out” or words to that effect.

[112]This unheralded approach came as a bolt from the blue to Nobiskrug. Mr Pataq was expecting the call to be about something entirely different and while Mr Safa would have known that it was something to do with Mr Blundy, I doubt that any of them had this in mind. After the call on 6 April 2020, they would therefore have been very exercised as to why it had been made and would have wanted time to consider the matter. Although I have found as a fact that Mr Blundy was not in fact in any financial difficulty so far as the Contract was concerned, this was not an unreasonable inference for Nobiskrug to draw in all the circumstances, particularly since Mr Beckett accepted not only that Nobiskrug wanted to know why Mr Blundy was enquiring about a cancellation but also that there was a discussion about the general state of the market and the impact of Covid and – possibly even initiated by himself – about Mr Blundy’s retail businesses having taken a hit. The effects of the pandemic were common knowledge and uppermost in people’s minds at the time and given that Chugga Chugg was an SPV, anything that impacted or potentially impacted Mr Blundy’s finances would have been a legitimate concern for Nobiskrug. The references by Privinvest’s witnesses in their written and oral evidence to having been told that Mr Blundy was experiencing difficulties in his personal life were an oddity. I do not believe for one moment that any of them would have made it up and the likelihood is therefore that they misinterpreted something that was said about Mr Blundy’s social life being affected in the sense that Covid had put paid to social cruises with friends and family.

[113]To the extent that any financial or scheduling problems at Nobiskrug’s end were mentioned at all, this was not the focus of the conversation.

[114]Critically, however, while Mr Blundy wanted to terminate the Contract, he was not prepared to do so unconditionally and at any price. His intention to cancel was accordingly always qualified in the sense that it depended on the costs involved. I accept that Mr Beckett made this clear and it is common ground that Nobiskrug was asked during the 6 April 2020 call to calculate these costs.

[115]There was no material dispute as to what was said during the call between Mr Blundy and Mr Safa on 8 April 2020. Mr Blundy said neither that he was definitely cancelling the Contract, nor that he was definitely carrying on with it. He expressed himself comforted by Mr Safa’s reassurances of performance, but his intention was still to cancel if the price was right and he was therefore content for Nobiskrug to continue to work on calculating the costs. The fact that he wanted Nobiskrug to carry on working out the figures is inconsistent with him having communicated any definite decision one way or the other. However, his intention to extricate himself if possible is supported by the fact that he raised Nobiskrug’s supposed difficulties as a reason why it might be in the yard’s interests to terminate the Contract. Had he told Mr Safa that he was carrying on with the project in any event, there would have been no reason to refer to this at all.

[116]In fact, when Nobiskrug produced its figures, they were higher than Mr Blundy had been expecting and he decided at that point that he would definitely carry on with the Contract. It is common ground that Mr Blundy and Mr Beckett thereafter repeatedly told Nobiskrug that Chugga Chugg wished to continue and provided evidence of Mr Blundy’s cash deposits in response to Mr Valentijn’s requests for reassurance.

[117]From this point on, I find that both sides were engaged in trying to leverage the position as far they could. Nobiskrug suspected (wrongly) that Mr Blundy was in financial difficulties and was calling its bluff. This was an entirely reasonable suspicion to entertain, at least initially. After all, the question of termination had been raised by Mr Blundy out of the blue very shortly after the onset of the pandemic with its ensuing commercial chaos and Nobiskrug was mistrustful of him now blowing hot and cold. The yard was facing significant contractual commitments of around €45 million in the near future and it is unsurprising that it wanted some reassurance that he had a genuine intention to continue. It was against that background that Mr Valentijn asked for a personal guarantee and the release of the escrow monies. Of course he knew that Mr Blundy was under no contractual obligation to agree, but it was a legitimate commercial request which was neither unrealistic nor unreasonable in circumstances where the payment of instalments under the Contract did not match the yard’s cashflow. Another buyer might well have agreed. As I find, he did not request release of the escrow monies because of Nobiskrug’s own financial position (since the yard would have been supported by Mr Safa in any event) but in order to be used for its intended purpose of constructing the yacht. Further, the provision of a personal guarantee did not require Mr Blundy to pay or commit any additional money, but would have been a tangible indication that he was prepared to back up what he now said his intention was and, as such, was no doubt regarded by Nobiskrug as a way of flushing out his true position.

[118]On the other hand, Mr Blundy knew that the yard was operating at a loss and he was certainly not going to make its life any easier. I am sure it entered into his calculations that if Mr Safa’s assurances were not borne out and Nobiskrug’s difficulties worsened over time, he might have the opportunity to get out of the Contract for nothing later on. He was also angry and affronted by Mr Valentijn’s approach. He therefore refused to do anything more than the bare contractual minimum, even though a personal guarantee would have cost him nothing. At the same time he made sure that Burgess kept Nobiskrug’s nose to the grindstone by insisting on strict contractual compliance and applying constant pressure for progress updates. (4). Repudiation: Conclusion on initial renunciation

[119]The critical question is whether, on the basis of these findings, Nobiskrug reasonably understood Chugga Chugg to have evinced a clear and unequivocal intention to renounce the Contract on 6-8 April 2020.

[120]In my judgment, Mr Blundy and Mr Beckett gave Nobiskrug reasonably to understand that Chugga Chugg wanted to cancel the Contract if it could be done at an acceptable price. However, this was not an unqualified intention since it always depended on whether agreement could be reached on the figures and, irrespective of any reasonable suspicion that he was looking for a way out because of the difficulties caused by Covid, Nobiskrug could not have reasonably understood it as an unqualified expression of an actual decision or determination to cancel. Indeed Mr Valentijn’s evidence in cross-examination reflects as much when he said of Mr Blundy “He definitely made sure that he wanted to get out of the contract and he was trying to figure out a way of how to get out of the contract financially.”

[121]The explanation of why Nobiskrug’s contemporaneous emails do not reflect the qualified nature of the proposition put to them (unlike the timeline) probably lies in the fact that, as Mr Valentijn suggested, they were all so stunned by the conversation on 6 April that they concentrated on what they saw as the headline point and the rest rather paled into insignificance. Thus if the word “intends” in Mr Valentijn’s email to Mr Safa and David Langford of 6 April 2020 (paragraph 68(b) above) is read as meaning “wants” rather than “has decided”, then it accurately records the gist of what Nobiskrug had understood from the call, namely that Mr Blundy “intends [in the sense of “wants”] to cancel the contract due to the change of business climate caused by the Coronavirus pandemic”. Likewise, the Nobiskrug timeline overstates the case if the word “decision” is taken to mean a definite decision. However, where none of the relevant participants was a native English speaker, it is easy to see how such misunderstandings might occur.

[122]In these circumstances, I am unable to find that there was any clear, absolute and unequivocal renunciation on the part of Chugga Chugg as a result of events over the period 6-8 April 2020. Privinvest’s case accordingly falls at the first hurdle since, as noted above, Ms Noakes accepted that subsequent events could not in themselves have amounted to a renunciation. (5). Renunciation: withdrawal or retraction

[123]If I am wrong about that, it is trite law that an unaccepted renunciation is a thing “writ in water” and may be overtaken by subsequent events, whether a change of heart by the renouncing party or supervening external events. Since Nobiskrug did not purport to accept the renunciation until 9 June 2020, the further question is therefore whether a clear and unequivocal intention on the part of Chugga Chugg not to perform the Contract still persisted at that date.

[124]By this time of course, Nobiskrug had been given multiple assurances by Chugga Chugg that it wanted to continue, together with a degree of assurance that Mr Blundy had funds at least to cover the third instalment of the price plus just under half of the fourth instalment. Mr Valentijn accepted that while this was not the same as a personal guarantee, it was nonetheless some indication of good faith.

[125]Importantly, however, this hypothesis assumes that Chugga Chugg had previously renounced the Contract by communicating a decision to terminate if the price was right. The subsequent assurances that it would continue cannot therefore be viewed in isolation. Rather it is necessary to consider whether against the backdrop of the prior renunciation they are sufficient positively to expunge it or at least render it equivocal.

[126]In this context, the following are relevant considerations from Nobiskrug’s point of view:(a) Mr Blundy was blowing hot and cold;

(b) The deposits were not specifically linked to the yacht and Nobiskrug only had Mr Blundy’s word that they were earmarked for the project. As he accepted, he could have used them for other purposes;

(c) In any event, deposits of €29 million were not sufficient even to cover the entirety of the fourth instalment, let alone the balance of the purchase price;

(d) Mr Blundy was refusing to provide a personal guarantee to back up his professed intention to continue, even though this would not cost him anything;

(e) He was also refusing to allow the escrow monies to be used for the next stages of the project, even though the construction of the yacht was precisely what the funds were supposed to be for;

(f) The fact that Mr Blundy had entered into a contract to purchase a tender was not necessarily an indication of unequivocal commitment to this particular contract, since the tender could have been used with other vessels. Even the design work for the yacht itself could have been taken to another yard, albeit this would not have been entirely straightforward.

[127]Nonetheless, even accepting that Nobiskrug had reasonable (though unfounded) continuing concerns about Mr Blundy’s ability and willingness to continue, I find it impossible to say that there was still any clear and unequivocal manifestation of an intention to renounce the Contract as at 9 June 2020. Mr Blundy had repeatedly said that he wanted to continue and had provided evidence of an ability to satisfy at least his immediate financial obligations. In my judgment that inevitably raises a degree of equivocation about the continuation of any prior renunciation and I so find. While a refusal to provide a satisfactory assurance of contractual performance may be relevant to an assessment of a party’s willingness or ability to perform (see Carter’s Breach of Contract (3rd ed.) §7-32), to my mind a refusal to comply with a non-contractual request (however commercially reasonable) in circumstances where that would involve relinquishing part of a carefully negotiated security package cannot be regarded as indicative of an intention not to perform. On the contrary, if anything, it demonstrates an intention to stick very much to the letter of the contract.

[128]Privinvest nonetheless submitted that Chugga Chugg was simply acting for form’s sake while it put together its own case for terminating the Contract. However, as Ms Noakes accepted, the subjective intentions of Mr Blundy and Chugga Chugg are irrelevant. The question is how their conduct would reasonably have appeared to Nobiskrug. It is therefore unnecessary for me to decide whether Mr Blundy’s expressions of intention to continue were genuine. I merely note that all of Chugga Chugg’s conduct was consistent with an intention to proceed rather than the contrary. In fact, my impression was that Mr Blundy did genuinely intend to continue albeit – in line with his initial approach to Nobiskrug – he would have taken the opportunity to exit the Contract at an acceptable price had one subsequently presented itself. Indeed, this is precisely what happened. (6). Affirmation

[129]Even if, contrary to my findings above, there was a continuing renunciatory breach which persisted after 8 April 2020, the Contract was in my judgment in any event affirmed by Nobiskrug prior to its purported termination.

[130]It is common ground that Nobiskrug’s project team continued to perform the Contract up to 9 June 2020 – unsurprisingly since Mr Valentijn quite candidly accepted that he had not divulged to the rest of the Nobiskrug team any of the discussions which had been going on with Burgess and Mr Blundy at management level. As a result, the project team carried on as usual, responding to requests for information, agreeing change orders and carrying out steel cutting. Mr Valentijn accepted when it was put to him that it was reasonable for Chugga Chugg to have supposed from all of this that Nobiskrug was continuing with the Contract.

[131]By contrast, Ms Noakes submitted that none of this conduct could amount to an affirmation because Nobiskrug as the putative innocent party was allowed a reasonable time to decide whether to accept the renunciation and meanwhile was entitled, if not obliged, to continue performance of the Contract. This raised an interesting point.

[132]So far as the principles of law relating to affirmation are concerned, the following propositions were not disputed:(a) Where a party becomes entitled to terminate a contract on grounds of repudiatory or renunciatory breach, it must elect whether to exercise that right or not.

(b) In order to make such an election, it must have knowledge both of the facts giving rise to the right and of the right itself.

(c) If, with the requisite knowledge, it acts in a manner consistent only with one or other of two inconsistent courses, it will be held to have elected accordingly.

(d) Election may be made by any words or conduct communicating an intention to choose one or other course of action but it must be conveyed in clear and unequivocal terms.

(e) The test is objective and looks at the impact of the innocent party’s conduct on a reasonable person in the position of the defaulting party who has a general understanding of the possibility of the innocent party making a choice. See, for example, The Kanchenjunga, [1990] 1 Lloyd’s Rep. 391, 398; Chitty on Contracts (op.cit.) §28-056.

[133]The first three of these requirements were not in issue in this case. Battle was joined on whether Nobiskrug’s conduct in the face of Chugga Chugg’s supposed renunciation was clear and unequivocal and consistent only with an intention to proceed.

[134]As to this, it was common ground that an innocent party faced with a repudiatory or renunciatory breach has a reasonable time to make up its mind whether to accept it or not: Stocznia Gdanska SA v Latvian Shipping Co.,

[2002] EWCA Civ 889

; [2002] 2 Lloyd’s Rep. 436 at [87]; Chitty on Contracts (op.cit.) §28-055. What is reasonable depends on the facts, including any degree of urgency or prejudice to the defaulting party: Havila Krystruten AS v Abarca Companhia de Seguros SA,

[2022] EWHC 3196 (Comm)

at [283].

[135]It follows that Nobiskrug’s conduct must be assessed in this light. At times the submissions before me seemed to proceed on the basis that a bright line was to be drawn between conduct before a reasonable time has expired and conduct after. In my judgment that is not the correct approach. The innocent party’s conduct must be looked at as a whole and cannot be artificially carved up into separate components. Thus it does not necessarily have carte blanche to do whatever it likes for a reasonable period on the basis that no conduct during that time can be regarded as affirmatory. Rather it seems to me that the correct approach is to assess whether conduct is affirmatory bearing in mind that it may be taking place at a time when the innocent party cannot reasonably be expected to have reached a decision. This it seems to me, is what Lord Justice Rix had in mind when he commented in Stocznia (supra) at [87] that “If he does nothing for too long, there may come a time when the law will treat him as having affirmed.”

[136]Such approach is consistent with the reluctance of the courts to find that an innocent party which is still making up its mind within the reasonable period allowed has (absent an estoppel) affirmed merely by continuing to comply with its contractual obligations or calling upon the defaulting party to change its mind: Yukong Line Ltd v Rendsburg Investments Corporation, [1996] 2 Lloyd’s Rep. 604, 608, Chitty on Contracts (op.cit.) §28-056. Likewise, the presence or absence of a reservation of rights may be more or less significant depending on the circumstances. Ultimately, of course, it is a fact-dependent enquiry and it is dangerous to attempt to analogise from other cases, however superficially similar.

[137]In this case, the allegedly affirmatory conduct relied upon consisted of the following:(a) Inviting Burgess to review various designs, plans and schematics and agreeing two minor amendments to the specification;

(b) Reliance on the potential applicability of the force majeure clause as a reason for not confirming that #1 dock would definitely be available for outfitting;

(c) Seeking Burgess’s approval of the Builder’s Risk insurance that Nobiskrug planned to take out and confirming that it would pay for the Innocent Owner’s component of such cover;

(d) Reopening the yard on 4 May 2020 and performing a steel-cutting ceremony on 13 May 2020 and obtaining a corresponding certificate of the start of construction from the Classification Society – specifically (as Mr Valentijn accepted) in order to forestall any complaint that the yard had fallen behind schedule;

(e) Sending a Progress Report on 17 May 2020 which summarised the current state of the project and the yard’s plans for the future;

(f) Setting dates for a series of meetings to take place in May.

[138]Notably there was no reservation of rights by Nobiskrug until 25 May 2020.

[139]Ms Noakes submitted that none of this involved any expenditure or advanced the actual construction of the yacht one iota. She pointed out that it was in any event in Nobiskrug’s own interests to progress the work because it retained title to the yacht and was entitled to sell it for its own account in the event that the Contract was terminated for breach by Chugga Chugg. As to the specific conduct relied upon:(a) The steel-cutting was purely ceremonial and did not even trigger a payment milestone. As Mr Edmund Beckett said, it had little contractual significance and was just a nice event; the first meaningful event in construction was the keel-laying.

(b) The Progress Report merely set out the current state of play and what was then planned for the future. It was not an unequivocal confirmation that these plans would actually be put into action. In fact, Nobiskrug was studiously avoiding responding to requests for the provision of updates and information.

(d) The changes to the specification and approvals of other plans and schematics were just minor steps in the journey to keel-laying, as accepted by Mr Edmund Beckett.

[140]In short, Ms Noakes submitted that Nobiskrug was doing the bare minimum to avoid breaching the Contract while it made up its mind whether to terminate or not. She also submitted that Chugga Chugg clearly did not think that Nobiskrug had affirmed the Contract since the day after signing the contract for the Pascoe tender, it was discussing internally how it could exit from that commitment if the worst came to the worst with Nobiskrug. However, it seemed to me that the first of these submissions shot wide of the mark on one side, while the second shot wide on the other. The relevant question is what the impact of Nobiskrug’s conduct would have been on a reasonable person in Chugga Chugg’s position and, as Mr Valentijn accepted, it would have been reasonable for a buyer to assume that Nobiskrug was continuing with the Contract. Conversely, Chugga Chugg’s subjective views are irrelevant if Nobiskrug’s conduct was objectively affirmatory.

[141]Nevertheless, Ms Noakes was on considerably stronger ground when she said that it must have been clear to Chugga Chugg that Nobiskrug was refusing to complete the Contract without a personal guarantee and release of the escrow monies, or at least without some further assurance of Chugga Chugg’s commitment to continuing. Nobiskrug’s conduct must be viewed as a whole and it is wrong just to focus on what was going on in the actual shipyard.

[142]This, it seemed to me, was a powerful point. If the alleged affirmatory conduct relates to peripheral and inconsequential matters (as by and large it does) and if it takes place against a backdrop of insistence on a personal guarantee and release of escrow monies as the price of continuing, can it really be said to amount to an unequivocal affirmation? I can see a strong argument that in all the circumstances, such conduct was not unequivocal.

[143]I am satisfied that Nobiskrug did not do anything during April which amounted to a clear affirmation. During this time it was calculating the costs of termination and advancing its demands for a personal guarantee and release of the escrow monies. However, from 1 May 2020, it was clear that those demands would not be met and Mr Blundy clearly thought he had put that particular matter to bed. Thereafter there was complete silence from Mr Valentijn until 25 May 2020 despite Nobiskrug not having put in place any reservation of rights. Mr Valentijn said that he was hoping Mr Blundy might change his mind. But an uncommunicated hope that Mr Blundy might reverse his clearly stated refusal and agree to a non-contractual demand is not the most promising basis for countering a suggestion of affirmation, particularly when the performance of the Contract is continuing on the ground.

[144]Given my primary finding that there was no renunciation by Chugga Chugg in the first place, it is not necessary for me to reach a decision on this point. Had it been unavoidable, I would have been inclined on balance to conclude that even though the conduct relied upon did not amount to significant performance in itself, nonetheless when coupled with(i) Nobiskrug’s complete silence at management level following the 1 May conversation between Mr Blundy and Mr Valentijn and

(ii) the absence of any reservation of rights, it did nonetheless constitute a sufficiently clear and unequivocal affirmation.

[145]On that basis, the reservation of rights when it finally came on 25 May 2020 was too late and the Contract had already been affirmed with irrevocable effect.

[146]For this reason too, I am satisfied that there was no legitimate basis for Nobiskrug to terminate the Contract on 9 June 2020.

[147]As both parties accept, that is the end of the case but since a considerable amount of time and effort was devoted to argument on the nature of the guarantee I set out my views briefly on the remaining issues. G: Construction Issues (1). Primary or secondary liability

[148]Chugga Chugg submitted that the instrument in question was a demand guarantee. Mr Akkouh emphasised the obligation in clause 2 to pay “on demand” which he submitted has been treated by the courts as a strong indication of a demand guarantee equivalent to a performance bond, rather than a true surety guarantee. In those circumstances, he argued that it made no commercial sense to require Chugga Chugg to satisfy the requirements of clause 2 and also to prove Nobiskrug’s underlying liability, particularly when it was not possible to join Privinvest into any proceedings against Nobiskrug because of the arbitration clause in the Contract.

[149]For her part, Ms Noakes submitted that this was a surety guarantee which depended on the actual underlying liability of the debtor. Privinvest’s liability under the guarantee was accordingly contingent on such liability being established.

[150]The question is one of construction and although both sides appealed to the summary of principles set out by Lord Justice Popplewell in Shanghai Shipyard Co Ltd v Reignwood International Investment (Group) Co Ltd,

[2021] EWCA Civ 1147

;

[2021] 1 WLR 5408

, each guarantee depends on its particular wording and circumstances as he expressly emphasised. Accordingly, decisions on other instruments in other contexts cannot be treated as prescriptive and are of limited assistance unless the circumstances are materially identical.

[151]In this case:(a) There is no wording which makes Privinvest’s liability “absolute and unconditional”. On the contrary, clause 1 expressly provides that the guarantee is given as security for “the payment and performance of [Nobiskrug’s] obligations under the Contract … or arising by reason or in consequence of any breach or termination of the Contract…” and guarantees the due and punctual performance of all such obligations.

(b) There are no words imposing liability on Privinvest as primary obligor rather than surety. In any event, as Lord Justice Popplewell points out, such words may on their true construction be used simply to make clear that the default of the debtor gives rise to an independent liability on the part of the guarantor who becomes liable by the very fact of the debtor’s default. In this case, the only reference to “primary obligor” is in clause 4(a) which has nothing to do with the circumstances triggering liability under the guarantee but is concerned only with the procedural position. Thus it confirms that if Nobiskrug defaults, Chugga Chugg has an independent claim against Privinvest which it can assert directly without having to sue Nobiskrug first. However, the inclusion of this express provision suggests that Chugga Chugg otherwise would have had to sue Nobiskrug. In other words, it presupposes that there must be a default and liability on the part of the debtor.

(c) The obligation under clause 2 is to procure performance or pay “as required” which can only mean as required under clause 1, i.e., in circumstances of breach or default.

(d) I accept that clause 2 contemplated the guarantee being triggered by a demand – and only a demand where the alleged breach/termination was uncontested. I accept further that it is possible to have a “conditional demand bond”. However, I do not find this determinative. The mere fact that clause 2 required a demand in order to trigger Privinvest’s liability as guarantor is not inimical to this being a surety guarantee of the “see to it” variety. It is simply a variation of the standard arrangement (see Shanghai Shipyard (supra) at [23]) and, as Ms Noakes said, it is difficult to see how in practical terms the guarantor would know that its liability was being called upon other than by service of a demand.

(e) The absence of any specific short timescale for payment takes the matter no further one way or the other.

(f) In relation to a contested breach, the liability of the guarantor does not arise as soon as an award is rendered. The award must be final and unappealable which suggests that the guarantee is not responding simply to the existence of the award as a document, but rather to the award as reflecting an established liability.

(g) There is no express provision that the liability of the guarantor is to be unaffected by the existence of a dispute with the debtor. Conversely, clause 4(b) expressly preserves Chugga Chugg’s rights in circumstances where the guarantor would otherwise be discharged. Whilst not conclusive, both considerations point away from this being a demand guarantee.

(h) Clause 5 confirms that the guarantee lapses on delivery of the yacht or lawful termination by Nobiskrug.

[152]In my judgment, everything points to this being in principle a classic “see to it” guarantee which was only triggered in the event that Nobiskrug was in default or breach of contract or where the Contract was terminated otherwise than lawfully by Nobiskrug. Thus, the clause 2 pre-conditions in practical terms required a breach by Nobiskrug to be established, either because it was not contested or because it was established by final unappealable award. This is the very antithesis of the guarantor’s liability being triggered by an event independent of breach. To say that this was nonetheless a demand bond would in my view be a triumph of form over substance. It is true, as Mr Akkouh pointed out, that even a demand guarantee can hardly avoid referring to the obligation the performance of which is being secured. It is also true that in Shanghai Shipyard the obligation to pay against an award was construed as an obligation to pay against a document rather than the underlying liability. However, in this case, the award is to be rendered in circumstances where there is a contested breach and must therefore, by definition, specifically address the question of liability.

[153]Mr Akkouh also prayed in aid the familiar mantra that cash flow is the lifeblood of commerce and that one of the purposes of a demand guarantee is to protect that cash flow. However, that ignores the fact that it is the yard, not the owner, which needs cash flow protection which no doubt explains why purchasers are often required to give demand guarantees to secure payment of the purchase price instalments (as was the case in Shanghai Shipyard). This, by contrast, was a refund guarantee securing Nobiskrug’s obligation to repay money which had been validly paid to it. That could only be appropriate on breach or if it failed to comply with its obligations in some other way. It is therefore unsurprising that the beneficiary would need to establish a breach or failure to comply with an obligation to repay before calling on the guarantee.

[154]In my judgment, therefore, the whole premise of the instrument in this case is a breach or failure to perform or unlawful termination by Nobiskrug. This is entirely consistent with clause 5 which makes liability contingent on what happens under the Contract and provides for the guarantee to lapse in circumstances where it comes to an end without fault on the part of Nobiskrug.

[155]However, that does not conclude the matter since I have also reached the clear conclusion that even if this is in principle an instrument of secondary liability, clause 2 effectively embodies a contractual agreement between the parties as to how Nobiskrug’s underlying liability is to be established for the purposes of a claim under the guarantee. A similar approach can be seen in the line of reinsurance cases reflected in Hill v Mercantile & General Reinsurance Co plc,

[1996] 1 WLR 1239

. It also makes sense of the proviso in clause 4(a) that proceedings directly against the guarantor are always subject to compliance with the pre-conditions of clause 2. This ensures that a breach by Nobiskrug can always be established for the purposes of the guarantee even if Chugga Chugg has not sued it directly.

[156]On that basis, satisfaction of the clause 2 requirements sufficiently establishes Nobiskrug’s liability for the purposes of clause 1 with the practical effect that the guarantee, whilst technically an instrument of secondary liability, becomes almost indistinguishable from a conditional demand bond. (2). Contested and uncontested

[157]The main issue which divided the parties under this head was whether the concepts of “contested” and “uncontested” covered all the ground between them or whether they left open some middle ground where an alleged breach might be neither contested nor uncontested.

[158]Ms Noakes argued that contestation in the context of this guarantee required active participation by or on behalf of Nobiskrug throughout the entire arbitration process culminating in a final unappealable award on the merits. In her submission, an award – even a final unappealable award – was not delivered in circumstances of contestation where, for example:(a) Nobiskrug withdrew from the arbitration prior to the issue of any award - a fortiori where it withdrew before a final hearing or before having served any evidence or documents;

(b) The award was obtained by default;

[159]In these instances, she argued, the alleged breach could not be uncontested, but neither was it contested and in these circumstances the liability of Nobiskrug would have to be proved de novo as neither of the scenarios posited in clause 2 would apply. She pointed to clause 4 as providing the mechanism by which such liability could be established.

[160]Drawing heavily on the classical erudition of his junior, Mr Akkouh argued that “un” was a privative prefix denoting the absence or negation of the root word. Use of such antonyms created a purely binary distinction where, in accordance with the third cardinal rule of logic, one or other proposition must be true and there is no middle ground. Appealing to Aristotle, he submitted that it is impossible for the same thing both to be and not to be.

[161]Quantum physicists might beg to differ with the latter proposition, but in the less rarified context of a commercial guarantee, I agree. I have no doubt that in opposing the words “contested” and “uncontested”, the parties objectively intended to cover the whole field. Having gone to the trouble of making specific provision for cases where the alleged breach was contested and where it was uncontested, they cannot sensibly have contemplated leaving an undefined and potentially contentious middle ground for which no provision was made at all.

[162]The question then is the meaning to be ascribed to these terms as a matter of construction. Rather like the proverbial elephant, this is easier to recognise than to define. The extremes are straightforward: a breach is contested if it positively denied. It is uncontested if it is positively admitted. More problematic are mere non-admission or inactivity. However, in my judgment the key lies in the fact that (as I have held) this is a “see to it” guarantee, because it means that the terms must be construed in a way which can sensibly be regarded as conducive to establishing the underlying liability.

[163]Thus once arbitration proceedings have been commenced, it seems to me that the question of contestation must be approached through the prism of the arbitration process. Commencement of arbitration proceedings gives rise to a tri-partite relationship between the parties and the tribunal. See for example Cie Européene de Ceréales SA v Tradax Export SA, [1986] 2 Lloyd’s Rep. 301, 306 ;The Jordan Nicolov, [1990] 2 Lloyd’s Rep. 11, 16. This means that once a claim has been contested on the pleadings, the tribunal is bound to deal with it, whether the defendant supports it with evidence or not, unless the defence is withdrawn. Even if the claim is “not admitted” in the arbitration, it does not seem to me that the position is substantively any different, since in those circumstances the arbitral process still requires the claimant to prove its case. In either case, it is not necessary for the purposes of the arbitration that the defendant should have participated in the proceedings throughout. I fail to see how mere subsequent non-participation unaccompanied by withdrawal of the defence can somehow mean that the claim ceases to be contested when it is not uncontested on the face of the pleadings. Such an approach is unnecessarily complicated and would be productive of much confusion and uncertainty. I agree with Mr Akkouh that it would also open the door to abuse by tactical withdrawal.

[164]I therefore reject Privinvest’s case that there was necessarily no contestation in the three scenarios identified above. In my judgment, unless a claim in arbitration is positively admitted the tribunal is obliged to deal with it in an award, and it must be regarded as being “contested” for the purposes of the guarantee. There is no basis – and certainly no textual, contextual or commercial reason – for distinguishing in this respect between a default award and an award on the merits provided only that the award is final and unappealable. It is therefore unnecessary to consider further the reasons why the Insolvency Administrator withdrew from the arbitration and whether or not he was effectively obliged to do so under German insolvency law. In declining to descend into the weeds of this particular debate, I intend no discourtesy to Dr Scholz and Dr Liening, whose evidence I found most helpful and interesting.

[165]That leaves the position where no arbitration proceedings have been commenced. In reality, there are really only three possibilities. Either the claim is admitted, in which case it is clearly uncontested, or it is “not admitted” or there is simply no response to the allegation. Whether liability is uncontested in any of these situations seems to me to depend on the facts of each case. For example, in my view a settlement without admission of liability as posited by Mr Akkouh would almost always fall to be regarded as an uncontested breach for the purposes of clause 2. In other circumstances, it might not be so easy to regard a non-admission or absence of response as an indication that the claim was uncontested. The solution in any case of doubt, of course, is to commence arbitration and establish liability in that way.

[166]As to whether an alleged breach which is initially contested can become uncontested, the answer to this must be that it can in principle, but again it will depend on the circumstances. For example, as stated above, a claim once contested in arbitration proceedings remains contested unless and until there is either a subsequent admission or acceptance of liability by the defendant or it has been determined by the tribunal.

[167]Finally, there was the question of whether the admission of Chugga Chugg’s claim in Nobiskrug’s insolvency prior to the issue of the Second Award affected the position on contestation.

[168]Ms Noakes argued that the admission of the claim could be ignored because it did not reflect a determination of the claim “on the merits”. The evidence of the experts was that an Insolvency Administrator’s decision to admit or reject a claim in insolvency proceedings will be made on both legal and economic/pragmatic grounds and in theory may not necessarily reflect an actual liability. However, it can hardly be sensible for liability under an English law guarantee to depend on the fortuity of whether a foreign insolvency practitioner happens to make a decision on one basis rather than another. This would open up a potentially difficult and complex enquiry into foreign insolvency law where there may or may not be sufficient evidence to determine the question. In my view, this would be wholly inimical to the commercial purpose of a guarantee whether it is an instrument of primary or secondary liability. In this regard, I agree with Mr Akkouh that once the claim was admitted by Mr Gittermann, it should not in principle matter why he decided to accept it. His decision binds both Nobiskrug and Chugga Chugg as a matter of German insolvency law and prevents them from respectively prosecuting or defending the claim further in any other forum, either because they are legally prohibited from doing so or because it would be pointless to do so.

[169]Nevertheless, what happens outside the arbitration proceedings is in my judgment irrelevant unless it amounts to an admission or acceptance of liability which binds not only the parties to the arbitration but also the tribunal. Both experts accepted that the Insolvency Administrator’s admission of a claim in the insolvency was only binding on Nobiskrug and Chugga Chugg for the purposes of the insolvency and did not affect the arbitration proceedings. The claim therefore remained contested in the arbitration until the Second Award was delivered and in my judgment the mere fact that the Insolvency Administrator did not object to an award being made did not mean that it became “uncontested” within the meaning of the Guarantee.

[170]If there had been no arbitration proceedings, then the position would have been different. In those circumstances, it would not have been necessary to consider the position of the tribunal and even if Nobiskrug had initially denied liability in correspondence, the subsequent admission of the claim in the insolvency by Nobiskrug’s Insolvency Administrator would have bound both Nobiskrug and Chugga Chugg. In those circumstances, it is difficult to see why the claim would not have become “uncontested” by virtue of the admission. However, that is not this case.

[171]On that basis, it is irrelevant whether Mr Gittermann’s decision to admit the claim was made on the merits or not, or whether he could or should have accepted Privinvest’s offer to fund the arbitration at no cost to himself or the insolvency estate. For the record, however, I should make clear that there is not the slightest reason to doubt that Mr Gittermann as an experienced and respected insolvency practitioner properly and fully complied with his obligations to consider the merits of Chugga Chugg’s claim as part of his assessment.

[172]In short, to the extent that it is relevant, I conclude that this was a contested breach within the meaning of clause 2 of the Guarantee and that both a final unappealable award and a demand were required in order to trigger Privinvest’s liability thereunder. Since there is no longer any dispute that both conditions were fulfilled, it follows that Nobiskrug’s liability is sufficiently established for the purposes of the Guarantee and Privinvest’s defence fails for this reason as well.

[173]The claim accordingly succeeds. I was not addressed on the question of interest which I leave for further submission.

[174]I would like to record my thanks to counsel for the quality of their written and oral submissions. I was also particularly pleased to be addressed, however briefly, by junior counsel. Opportunities for junior counsel to gain trial experience are few and far between in the modern world of commercial advocacy but they are tomorrow’s generation of silks and it is important that they are positively encouraged to do so as much as possible.