Key takeaway

In Pleon Limited v Leonis Yachting Limited “The Maltese Falcon” [2025] EWHC 3144 (Comm), the High Court had in front of it two rare issues: an appeal against an arbitral award made under section 69 of the Arbitration Act 1996, and the question of implying contractual terms into a commercial contract.

What were the facts in The Maltese Falcon dispute?

Pleon Limited (Pleon) were the owners of the 90 metre superyacht The Maltese Falcon. In 2022, by an Agreement For Sale, they agreed to sell the superyacht to Leonis Limited (Leonis). Under this agreement, Pleon were obliged to hand over the yacht in the condition that it was in when Leonis undertook short sea trials and found no defects.

After much delay, the yacht was transferred to Leonis on 20 April 2022. By a parallel agreement, Leonis agreed to grant Pleon access to the yacht for two further months until 20 June 2022. As part of this Agreement for Access, Leonis warranted that the yacht was in full working condition and would remain so for the period of access.

On 9 May 2022, the Maltese Falcon broke down as a result of a starboard generator failure.

What issue of contractual interpretation arose?

The question before the arbitral tribunal and later the High Court was whose responsibility it was for the yacht to be in working order. In essence, whether Leonis’s warranty in the Agreement for Access was conditional upon the yacht being delivered already compliant with the Agreement for Sale.

How did the arbitral tribunal interpret the contracts?

The question was first referred to an ad hoc arbitral tribunal consisting of three arbitrators. By a majority opinion, the tribunal found that the buyer Leonis could not be liable for the defect, as their warranty was conditional upon the state of the yacht at the point of delivery.

The reasoning for this focused on practical reality. Leonis only had four hours of sea trials, and it was not reasonable for them to discover this defect in that time. In any event, Leonis only had thirteen days from delivery under the Agreement for Sale until the yacht was returned to Pleon under the Agreement for Access. That time period was far too short for the defect to be remedied, which would have taken many weeks or months. Consequently, the majority observed that for the two agreements to make commercial sense together, they must be interpreted as though the two deliveries occurred simultaneously.

Sir Bernard Eder dissented, and found the opposite. He took the more orthodox view that the Agreement for Access should be read plainly, which expressly requires for the yacht to be delivered in full working order. Any implied term which qualifies this, would in reality contradict the express wording of the contract. In his view, this outcome was not palatable as it served to contradict what the parties had agreed.

Why was the arbitral award challenged under section 69?

Following this dissenting opinion, Pleon issued an application to the High Court under section 69 of the Arbitration Act to appeal against the tribunal’s award on a point of law. These types of applications are usually excluded in arbitration agreements, and success under section 69 is rare.

How did the High Court assess the section 69 appeal against the arbitral award?

On this occasion, Pleon were successful. Robin Knowles J considered that instead of viewing the dispute through the lens of practical reality, the legal agreements should instead be viewed as allocations and apportionments of risk.

From this perspective, prior to the Agreement for Sale, all risk (that the yacht is in reality unseaworthy) is entirely held by Leonis as buyer. Following the Agreement for Sale, this risk switches to Pleon as seller and accessor. After delivery under the Agreement for Access, the risk of unseaworthiness switches back to Leonis.

Consequently, through this analysis, the Court held that the two contracts are legally cohesive and no implied terms are required.

When will courts imply terms into commercial contracts?

This case acts as yet another reminder of the importance of careful drafting of contracts. The dispute stemmed entirely from a lack of clarity as to how the two agreements were meant to work together, and required costly legal analysis through both arbitration tribunals and formal Court proceedings. This dispute could have been avoided through either express qualification terms in the Agreement for Access, or distinct assignment of risk.

Furthermore, the case also displays a growing trend of Courts turning away from analyses through practical reality, and instead analysing disputes through a more academic, forensic methodology. Consequently, parties must be prepared to accept that not having time to remedy a defect or practical impossibility may no longer be a shield to these claims where contractual drafting apportions responsibility.

Legally speaking, the judgment also reiterates that Courts are slow to imply terms into contracts. The legal test has moved towards concepts of necessity – if the contract cannot be actioned at all, then the Court will imply a term. However, this case illustrates that where the contract can operate without an implied term, the Court will be very slow to imply a term into an agreement between two parties.

This tale therefore reinforces that Courts will hold parties to the risk allocation that they drafted in their contracts, even if that produces a harsh or unfair result.

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Please contact the Commercial Litigation team at Barnes Law for advice on contract disputes.

Authored by Barnes Law Managing Partner, Yulia Barnes.