(Belize) A company had been formed to manage telecommunications in Belize. The parties disputed the interpretation of its articles. Shares had been sold, but the company was structured so as to leave a degree of control with the government. It was argued that a term was to be implied requiring resignation of a director when the class of shareholdings he represented ceased to exist.
Held: The implication of a term is an exercise in the construction of the contract as a whole. The background facts should have been admitted as evidence to interpret the articles in this particular situation: ‘The implication as to the composition of the board was not based upon extrinsic evidence of which only a limited number of people would have known but upon the scheme of the articles themselves and, to a very limited extent, such background as was apparent from the memorandum of association and everyone in Belize would have known, namely that telecommunications had been a state monopoly and that the company was part of a scheme of privatisation.’
Lord Hoffmann said that the court ‘cannot introduce terms to make [a contract, statute or articles of association] fairer or more reasonable. It is concerned only to discover what the instrument means.’ and . .
‘It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean. It will be noticed from Lord Pearson’s speech that this question can be reformulated in various ways which a court may find helpful in providing an answer – the implied term must ‘go without saying’, it must be ‘necessary to give business efficacy to the contract’ and so on – but these are not in the Board’s opinion to be treated as different or additional tests. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?’ and . .
‘An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, though tacit, formed part of the contract which the parties made for themselves.’
Judges:
Lord Hoffmann, Lord Rodger of Earlsferry, Baroness Hale of Richmond, Lord Carswell, Lord Brown of Eaton-under-Heywood
Citations:
[2009] UKPC 10, [2009] 1 WLR 1988, 26 BHRC 578, [2009] 2 BCLC 148, [2009] 2 All ER (Comm) 1, [2009] BCC 433, [2009] Bus LR 1316, [2009] 2 All ER 1127
Links:
Jurisdiction:
Commonwealth
Citing:
Cited – Investors Compensation Scheme Ltd v West Bromwich Building Society HL 19-Jun-1997
Account taken of circumstances wihout ambiguity
The respondent gave advice on home income plans. The individual claimants had assigned their initial claims to the scheme, but later sought also to have their mortgages in favour of the respondent set aside.
Held: Investors having once . .
Cited – Equitable Life Assurance Society v Hyman HL 20-Jul-2000
The directors of the Society had calculated the final bonuses to be allocated to policyholders in a manner which was found to be contrary to the terms of the policy. The language of the article conferring the power to declare such bonuses contained . .
Cited – The Moorcock CA 1889
Unless restricted by something else, an employer ought to find work to enable a workman to perform his part of the bargain, namely, to do his work. A term will be implied into a contract only to the extent required to give the contract efficacy: ‘if . .
Cited – Bratton Seymour Service Co Ltd v Oxborough CA 1992
The company was set up to acquire and manage a property divided into flats which also included ‘amenity areas’ (tennis courts, swimming pool, gardens). It was argued that there should be implied into the articles of association an obligation on the . .
Cited – BP Refinery (Westernport) Pty Ltd v The Shire of Hastings PC 1977
(Victoria) The Board set out the necessary conditions for a clause to be implied into a contract.
Held: Lord Simon of Glaisdale said: ‘Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a . .
Cited – Shirlaw v Southern Foundries (1926) Ltd CA 1939
The court warned against the over-ready application of any principle to justify the implication of terms into a contract. McKinnon LJ set out his ‘officious bystander’ test: ‘If I may quote from an essay which I wrote some years ago, I then said: . .
Cited – Trollope and Colls Limited v North West Metropolitan Regional Hospital Board HL 1973
The court was requested to imply a term into a building contract.
Held: The term could not be implied, since at least four alternatives might also be implied.
Lord Pearson said: ‘[T]he court does not make a contract for the parties. The . .
Cited – Holmes v Keyes CA 1959
Where provisions were ambiguous a construction which produced reasonable business efficacy was preferred over one which produced an unreasonable result. Jenkins LJ said: ‘I think that the articles of association of the company should be regarded as . .
Cited by:
Cited – Strydom v Vendside Ltd QBD 18-Aug-2009
The claimant sought recovery of a sum paid to the defendant as a commission by his union during his claim for personal injuries at work, relying on a term he sought to have implied into his contract, that the costs position should not be . .
Cited – Grisbrook v MGN Ltd and Others ChD 16-Oct-2009
The claimant sought an order committing officers of the defendant company for having failed to obey a court order requiring the defendant to cease infrigement of his copyright in photographs. He operated as a photographer of celebrities selling . .
Cited – Sectorguard Plc v Dienne Plc ChD 3-Nov-2009
The claimant alleged misuse of confidential information in the form of its customer list, and its charges to them. The defendant company was run by former employees of the claimant. A later allegation was made of accessing the defendant’s private . .
Cited – Hughes v Borodex Ltd CA 27-Apr-2010
The court considered the determination of a new rent on the conversion of a long tenancy protected under Part I of the 1954 Act to an assured periodic tenancy under the 1988 Act. The tenant had carried out improvements which she now wanted to be . .
Adopted – Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc (‘The Reborn’) CA 10-Jun-2009
The court confirmed that the necessity to give business efficacy to a contract was still required for the implication of a term into a contract. . .
Applied – Crema v Cenkos Securities Plc CA 16-Dec-2010
C sought payment of broker fees after assisting in raising funds for a venture capital company. The parties disputed the terms as to when payment was to be made.
Held: The appeal was allowed. The evidence did not allow the inference of the . .
Cited – Garratt v Mirror Group Newspapers Ltd CA 13-Apr-2011
The claimant had been employed by the defendant. They made him redundant. He claimed and enhanced payment saying that his emloyment was covered by a collective agreement, but when he refused to sign a compromise agreement, the company paid him only . .
Cited – Mulcaire v News Group Newspapers Ltd ChD 21-Dec-2011
The claimant, a private investigator had contracted with the News of the World owned by the defendant but since closed. He had committed criminal offences in providing information for the paper, had been convicted and had served his sentence. He . .
Cited – Unique Pub Properties Ltd v Broard Green Tavern Ltd and Another ChD 26-Jul-2012
The claimant freeholder sought to install in the tenant’s pub, equipment to monitor sales. It claimed a right for this in the lease. The tenant refused access, saying that the proposed system was inaccurate. The claimant now sought summary relief. . .
Considered – Unique Pub Properties v Onifas Limited ChD 2011
Enterprise owned the reversion on the lease of a public house, The Bedford, in Balham, having taken as assignment of that reversion from Unique. Onifas Ltd was the tenant. Unique had installed a ‘DMS’ flow measurement system at The Bedford in 2006. . .
Cited – Graiseley Properties Ltd and Others v Barclays Bank Plc ComC 29-Oct-2012
The claimant sought damages alleging that the wrongful manipulation of the LIBOR interest rate by the defendants had caused them losses. Loan facilities which they had taken out had been subject to interest rates set by reference to LIBOR. The . .
Cited – Gladman Commercial Properties v Fisher Hargreaves Proctor and Others CA 14-Nov-2013
The claimant appealed against the striking out of his claims for fraudulent or negligent misrepresentation as to the suitability for deveopment of two former fire service properties. The court had said that a settlement with co-tortfeasors operated . .
Cited – Marks and Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and Another CA 14-May-2014
The court considered the operation of a break clause within a lease, and in particular ‘ Can the court imply a term which enables the lessee to get back that part of the advance payment of rent which relates to a period (‘the broken period’) after . .
Cited – Mr H TV Ltd v ITV2 Ltd ComC 8-Oct-2015
The claimant had contracted with the defendant for the production of a series of reality TV shows featuring celebrities. After severe personal clashes between the people involved on the claimants side, the contract was terminated. The claim was that . .
Cited – Regency Villas Title Ltd and Others v Diamond Resorts (Europe) Ltd and Another ChD 7-Dec-2015
Claim by time share owners for easements over neighbouring land. The easements were for various sporting rights and facilities.
Held: The Claimants were entitled to appropriate declaratory relief confirming that they have the rights they claim . .
Cited – Trump International Golf Club Scotland Ltd and Another v The Scottish Ministers (Scotland) SC 16-Dec-2015
The appellant challenged the grant of permission to the erection of wind turbines within sight of its golf course.
Held: The appeal failed. The challenge under section 36 was supported neither by the language or structure of the 1989 Act, and . .
Cited – Trump International Golf Club Scotland Ltd and Another v The Scottish Ministers (Scotland) SC 16-Dec-2015
The appellant challenged the grant of permission to the erection of wind turbines within sight of its golf course.
Held: The appeal failed. The challenge under section 36 was supported neither by the language or structure of the 1989 Act, and . .
Rephrased – Marks and Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and Another SC 2-Dec-2015
The Court considered whether, on exercising a break clause in a lease, the tenant was entitled to recover rent paid in advance.
Held: The appeal failed. The Court of Appeal had imposed what was established law. The test for whether a clause . .
Rephrased – Foo Jong Peng and others v Phua Kiah Mai and another 8-Oct-2012
Supreme Court of Singapore – Court of Appeal) The court refused to follow the reasoning in Belize at least in so far as ‘it suggest[ed] that the traditional ‘business efficacy’ and ‘officious bystander’ tests are not central to the implication of . .
Cited – BNY Mellon Corporate Trustee Services Ltd v LBG Capital No 1 Plc and Another SC 16-Jun-2016
The Court was asked whether Lloyds Banking Group was entitled to redeem 3.3 billion pounds of loan notes which would otherwise carry a relatively high rate of interest, namely over 10% per annum. The loan notes are contingent convertible securities . .
Cited – London Borough of Lambeth v Secretary of State for Housing, Communities and Local Government and Others SC 3-Jul-2019
The second respondent sought a certificate from the Council determining that the lawful use of its store extended to sales of unlimited categories of goods including food. A certificate to that effect was refused by the Council, but granted by a . .
Cited – London Borough of Lambeth v Secretary of State for Housing, Communities and Local Government and Others SC 3-Jul-2019
The second respondent sought a certificate from the Council determining that the lawful use of its store extended to sales of unlimited categories of goods including food. A certificate to that effect was refused by the Council, but granted by a . .
Lists of cited by and citing cases may be incomplete.
Company, Contract
Leading Case
Updated: 16 April 2022; Ref: scu.322751
