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

On 14 March 2024, the Commercial Court handed down judgment in the case of Chugga Chugg Pty Ltd v Privinvest Holding SAL [2025] EWHC 585 (Comm) in which Rani Noakes and Jacob Haddad of 4 Pump Court were instructed by Preston Turnbull LLP on behalf of the Defendant.

Chugga Chugg (an SPV) claimed €9.955m under a parent company guarantee. The guarantee secured performance of Privinvest’s subsidiary, Nobiskrug GmbH, under a contract with Chugga Chugg for the design and build of a luxury superyacht.

Nobiskrug entered insolvency in Germany in 2021, part-way through an LMAA arbitration concerning Chugga Chugg’s and Nobiskrug’s rival terminations of the shipbuilding contract in 2020. Chugga Chugg obtained two awards in its favour, the first dismissing Nobiskrug’s claim in default of payment of security for costs by Nobiskrug and the second awarding Chugga Chugg its counterclaim.

The judgment addresses a number of important issues for commercial practitioners, including:

1. The circumstances in which renunciation of a contract will be established. The issue on the facts was whether during telephone discussions between Chugga Chugg’s and Nobiskrug’s representatives on 6 & 8 April 2020, Chugga Chugg communicated to Nobiskrug a settled intention to terminate the shipbuilding contract or was merely seeking to explore the possibility of a mutually beneficial termination. The judge found that the shipbuilding contract was not renounced by Chugga Chugg during the 6-8 April calls because, while Chugga Chugg gave Nobiskrug reasonably to understand that Chugga Chugg wanted to cancel the contract, it was not an unqualified intention to cancel in circumstances where it depended on whether agreement could be reached on the exit costs [119]-[122].
2. When a renunciation is withdrawn or cured by subsequent words and / or conduct. In this case (on the hypothesis that Chugga Chugg had renounced the contract on 6-8 April) the question was whether Chugga Chugg continued to evince an unequivocal intention not to perform up to the date of purported termination by Nobiskrug. The judge found that, on an objective assessment, any renunciation was withdrawn prior to Nobiskrug’s purported termination in light of Chugga Chugg’s beneficial owner repeatedly telling Nobiskrug that he wanted to continue with the contract and providing bank statements showing available funds to satisfy at least its immediate financial obligations under the contract [123]-[128].
3. The relevance of the putative contract breaker’s response to requests by the innocent party for comfort of its ability to perform. In this case Nobiskrug contended that it was material that Chugga Chugg’s beneficial owner refused to provide a personal guarantee to secure Chugga Chugg’s payment of all future instalments under the shipbuilding contract in circumstances where it had intimated an inability and / or unwillingness to perform. This, Privinvest contended, was the minimum required for Chugga Chugg to withdraw any renunciation. The judge held that whilst refusal to provide a satisfactory assurance of contractual performance might be relevant to an assessment of a party’s willingness or ability to perform, a refusal to comply with non-contractual requests (however commercially reasonable) could not be regarded as indicative of a failure to perform, particularly where it would involve the party relinquishing part of a carefully negotiate security package [127].
4. The proper approach to deciding whether an innocent party has affirmed the contract following a renunciation, in particular when there are ongoing discussions between the parties about the defaulting party’s willingness and/or ability to perform. On the facts, Chugga Chugg alleged that if there had been a renunciation which persisted until Nobiskrug’s purported termination, Nobiskrug affirmed the contract by continuing to perform it, including during a period when Nobiskrug had not reserved its rights. In this respect, the judge found that even though the conduct by Nobiskrug relied upon by Chugga Chugg did not amount to significant performance under the contract (agreeing with Privinvest), when coupled with (i) Nobiskrug’s silence at management level; and (ii) the absence of any reservation of rights by Nobiskrug, meant that (if it had been necessary to reach a decision on the point) this conduct would have amounted to a sufficiently clear and unequivocal affirmation [144]-[146].
5. The approach to the proper construction of the guarantee instrument. The parties disputed whether the parent company guarantee was an instrument of primary liability (a so-called “demand” guarantee) or secondary liability (a so-called “surety” guarantee). Relatedly, the parties also disputed the proper construction of the conditions for the making of a valid demand. In this case, those conditions were (under clause 2) that Chugga Chugg’s demand be made either in circumstances where Nobiskrug’s liability under the shipbuilding contract was “uncontested” or in circumstances where its liability was “contested” and Chugga Chugg had obtained a “final unappealable” arbitration award in its favour.

The judge concluded that the guarantee was an instrument of secondary liability (agreeing with Privinvest), with clause 2 embodying a contractual agreement as to how Nobiskrug’s liability under the shipbuilding contract is to be established for the purposes of a claim under the guarantee (in line with Hill v Mercantile & General Reinsurance Co plc, [1996] 1 WLR 1239) [152]-[156].

As for the meaning of the requirements in clause 2, the Court found that Nobiskrug’s liability was “contested” for the purpose of clause 2 where an arbitration was commenced concerning Nobiskrug’s liability and there was no positive admission or acceptance of liability by Nobiskrug thereafter (such that the tribunal was obliged to deal with the claim in an award) [163]-[166]. Nobiskrug’s liability was “uncontested” for the purpose of clause 2 when there was such an admission or acceptance which binds both the parties and the tribunal (in circumstances where an arbitration has commenced) [163]-[166]. A “final unappealable” award was found to include both a default award and an award on the merits (so long as it is final and unappealable) [164].

Rani Noakes and Jacob Haddad of 4 Pump Court, instructed by Preston Turnbull LLP, acted for Privinvest. Tim Akkouh KC and Sebastian Mellab of Essex Court Chambers, instructed by Slaughter and May LLP, acted for Chugga Chugg.

You can read the full judgment here.

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Rani Noakes

Call 2010

Jacob Haddad

Call 2021

Related practice areas

Commercial Litigation
Shipping