An on demand loan really is repayable 'on demand'

Original news

Swallowfalls v Monaco Yachting & Technologies SAM [2014] EWCA Civ 186

What were therelevant facts in thecase?

The case related to loans which were made in connection with theplanned construction of a luxury motor yacht for Nat Rothschild.

Swallowfalls (the Claimant) commissioned theyacht from Monaco Yachting & Technologies (the Defendant) in 2006 pursuant to a construction agreement containing a London arbitration clause. It was understood that theactual construction work would be carried out by a sub-contractor of theDefendant.

The price of theyacht was just over €35m which was to be paid by 11 instalments, each due when theDefendant had achieved certain milestones in respect of theyacht's construction. The final 10% of thepurchase price was due on delivery of theyacht (the 11th milestone). Title to theyacht was to be transferred to theClaimant on payment of the5th milestone.

Progress with construction of theyacht was slow. It became clear to theClaimant that they would have to provide interim finance to theDefendant in advance of payment becoming due under the3rd and 4th milestones. In a series of amendments to theoriginal construction contract, theClaimants agreed to provide funds to theDefendant. The amendments were as follows:

• the first amendment in October 2007—the Claimant agreed to provide a loan facility of €3,372,000 to theDefendant and theDefendant agreed to repay that sum:

1. from thepayments due to it when it achieved the4th milestone, or
2. if that milestone had not been reached by 30 April 2008, by some other means on that day

The Defendant did not repay theloan by 30 April or at all.

• the