PT-2021-000393 - [2025] EWHC 2749 (Ch)

Fecha: 23-Oct-2025

Implication of terms

Implication of terms

46.

The Claimants’ alternative case is that if I consider that the express terms are not to be read in the manner they suggest, a term is to be implied to like effect. Again, the legal principles were not in dispute, such that it easiest to start there. Mr Cowen referred me to Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd [2015] UKSC 72. I was not taken to specific paragraphs of Marks & Spencer, but it is again worth highlighting what I consider to be the key elements of that decision.

47.

At paragraph [18], Lord Neuberger (with whom Lords Hodge and Sumption agreed) set out the observation of Lord Simon in BP Refinery (Westenport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 52 AJLR 20 at 26:

[F]or a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express terms of the contract.

48.

Lord Neuberger then referred to two decisions of Sir Thomas Bingham, first as Bingham LJ (The APJ Pritti [1987] 2 Lloyd’s Rep 37 at 42) and later as Bingham MR (Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472 at 481-482). What Bingham MR said in that latter case at 482 is particularly significant here:

The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting but wrong. …[I]t is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred…

49.

At paragraph [21] Lord Neuberger described these statements as “a clear, consistent and principled approach.” While recognising the danger of reformulation, he went on to add six points of his own:

First, in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459, Lord Steyn rightly observed that the implication of a term was “not critically dependent on proof of an actual intention of the parties” when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term. However, and thirdly, it is questionable whether Lord Simon’s first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable. Fourthly, as Lord Hoffmann I think suggested in Attorney General of Belize v BelizeTelecom Ltd [2009] 1 WLR 1988, para 27, although Lord Simon’s requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied. Fifthly, if one approaches the issue by reference to the officious bystander, it is “vital to formulate the question to be posed by [him] with the utmost care”, to quote from Lewison, The Interpretation of Contracts 5th ed (2011), para 6.09. Sixthly, necessity for businessefficacy involves a value judgment. It is rightly common ground on this appeal thatthe test is not one of “absolute necessity”, not least because the necessity is judgedby reference to business efficacy. It may well be that a more helpful way of puttingLord Simon’s second requirement is, as suggested by Lord Sumption in argument,that a term can only be implied if, without the term, the contract would lackcommercial or practical coherence.

50.

Finally, I note the point made by Lord Neuberger at paragraph [51] that while the result of refusing the proposed implied term might be capricious or anomalous, that would not of itself show that the contract without the proposed term was unworkable.

51.

The implied term contended for is set out at paragraph 10 of the Defence to Counterclaim:

It was an implied term of the Facility Letter (by reason of it being necessary for the purposes of business efficacy and/or so obvious that it went without saying) that:

10.1

[LCL] would accept [CEK] and or the Claimants’ offer(s) to redeem the loan.

10.2

[LCL] would not obstruct, prevent or otherwise interfere with [CEK] and/or the Claimants’ ability to redeem the Loan.

10.3

[LCL] would facilitate and/or not obstruct, prevent or otherwise interfere with the Claimants’ exit strategy (which was known to it) of refinancing the [Downhills Way Properties].

52.

Mr Cowen submitted that in the absence of such terms, LCL could prevent the Claimants from repaying the Loan and exiting the facility, an absurd result. The Facility Letter, he submitted, only entitled LCL to those sums actually due to it; if an offer to pay those sums was made, LCL should be bound to accept it. To limit that obligation to an actual tender of moneys, rather than offers of repayment, would represent such an imbalance in the parties’ rights and obligations, and undermine the express obligations in such a way that it would offend business efficacy and common sense.

53.

Finally, Mr Cowen contended that the proposed terms were not inconsistent with the express terms of the Facility Letter. Certainly, he accepted, they expanded on those terms, but that was inevitably the case with implied terms; what mattered is that they did so in a way that was complementary.

54.

Mr Wheeler drew my attention to the Court of Appeal’s decision in Yoo Design Services Ltd v Iliv Realty PTE Ltd [2021] EWCA Civ 560, where the principles were summarised at paragraph [51]. There, the Court of Appeal also approved the trial judge’s use of the test from Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at page 227:

Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course!’

55.

Mr Wheeler submitted that the proposed implied term in no way satisfied the legal test for implication. He submitted that, on the contrary, in requiring LCL to accept offers of payment that in some way fell short of tender or actual payment it was inconsistent with the express terms of the Facility Letter. He further submitted that there was no need for the implied term because the borrower has all the protection it needs from the rules on tender and an action for redemption of the mortgaged property. The strict test of necessity was therefore not met. He also noted that the situation confronting CEK in this case is far from unusual and must have happened frequently in the past; that being the case, one would expect to find cases in which a similar term had been implied. In fact, one sees the opposite: where such a term had been proposed it was rejected. He drew my attention to St Vincent European General Partner Ltd v Robinson [2018] EWHC 1230 (Comm) and Swallowfalls Ltd v Monaco Yachting & Technologies SAM [2014] EWCA Civ 186. Finally, he submitted, a similar provision had been proposed by CEK in negotiating the Facility Letter and it had been rejected. Far from the parties responding to the officious bystander’s proposal, “Oh, of course!”, LCL had responded, “Of course not!”

56.

Again, I see considerable force in Mr Wheeler’s submissions:

In my view, and for the reasons given above in respect of the express terms, the terms proposed would be inconsistent with the requirements of the Facility Letter concerning the need for funds to be immediately available. The Court of Appeal Judgment, rightly, emphasised the importance of repayment on the due date. I see no basis whatsoever for implying a term that would defeat that express right of LCL under the Facility Letter.

ii)

The proposed terms are remarkably broad in their scope. As Mr Wheeler observed, it is not a strain on the language to say that a facilitation obligation could go so far as to require LCL to assist in identifying and securing refinancing. That goes well beyond what is necessary for business efficacy or is so obvious as to go without saying; in my view, it is not even reasonable to impose such a broad obligation on a lender in the absence of an express term to that effect.

iii)

The terms are said to be implied as a matter of fact, but the only facts apparently relied on were that the Loan was to be refinanced and the parties were aware of this. A great many loans fit that description, including bridging finance of the type in question here, which almost by definition is a short-term expedient from one debt package to another, and many, if not most, residential mortgages. Yet as Mr Wheeler pointed out, if that were the case one would expect there to be other instances where similar issues have arisen and similar terms been implied. None were identified.

iv)

On the contrary, I accept Mr Wheeler’s point that earlier attempts to imply a term have failed in cases such as St Vincent and Swallowfalls. Mr Cowen is, of course, correct to submit that where, as here, implication is alleged as a matter of fact the court’s refusal to imply a term in one contract does not mean that it will not be implied in another. I do not see this as a freestanding point, however, but as buttressing the previous point: no court has implied such a term, and it is not a case that the question simply has not arisen.

I also return to the point about what would happen if an offer of payment, unsupported by even a binding offer of funds, let alone immediately available funds, were made on the Repayment Date. As I understand the Claimants’ case, that would still be an offer for the reasons I have addressed above, but, again as I have addressed above, that means that such an offer prevents a default from occurring even though the lender does not receive funds on the Repayment Date. What I am effectively being asked to conclude is that it is necessary, to give business efficacy to a loan, that the borrower have a unilateral option to extend the time for repayment by an indefinite period, interest free. I do not regard that as being necessary. Likewise, as to obviousness, if the officious bystander had suggested some express term to that effect I very much doubt that any lender in LCL’s position would have responded, testily or otherwise, “Oh, of course!” It seems to me much more likely that the officious bystander would have been lectured, testily, on the basic economic principles of profitable lending.

57.

I should note for completeness that I do not accept Mr Wheeler’s final point, that a similar term was considered and rejected by the parties. It seems to me that this would focus too heavily on the intentions of the actual parties to the agreement, which as Lord Neuberger made clear at paragraph [21] of Marks & Spencer, is impermissible.

58.

There may have been scope for implying a more limited term. Specifically, there are certain logistical steps that need to be followed that are impossible without the involvement of LCL, most critically the provision of relevant account details and the release of security on full repayment of the Loan. This arises from clause 9 of the Facility Letter, which provides, so far as is relevant: “All payment of principal and interest and any other amounts due from [CEK] to [LCL] under this Facility Letter shall be made in Sterling and in immediately available funds to such account as the Lender specifies to the Borrower.” That provision renders the (in any event implausible) scenario of repayment in specie impossible. The only way to repay is into an account, the details of which are known only by LCL. If the officious bystander had put it to the parties that LCL could refuse to provide those account details and so defeat repayment I think both would have agreed that was not the case.

59.

I recognise that Males J, as he then was, observed in St Vincent at paragraph [59] that the situation is addressed by the rules on tender and the ability of the debtor to pay sums into court and make an application for redemption of the mortgaged property. However, he also referred without apparent disapproval to the decision of Neuberger J, as he then was, in Equatorial Corporation plc v Shah (18 October 1996, unreported) that a debtor may be entitled to require from the creditor a redemption statement. Implication of a limited duty to provide such details would also be consistent with what is said in Swallowfalls at paragraph [33] regarding the implication of an obligation to cooperate into a loan agreement in certain circumstances.

60.

Ultimately, the matter does not fall for determination on the facts of this case: a term requiring the provision of account details and release of security, even had it been contended for, does not go far enough for Mr Cowen because the only time those things were requested, in May 2021, they were arranged. Assuming such a term were to be implied, it would not have been breached.