Lloyd's Maritime and Commercial Law Quarterly

Professor Francis D Rose

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UNNECESSARY COMPLICATIONS

Anthony Kennedy*

Marks & Spencer v BNP Paribas

In Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd,1 the Supreme Court again considered the principles governing the implication of terms into commercial contracts. It has now rejected the controversial or merely controversially expressed (depending on one’s point of view) guidance offered by Lord Hoffmann on behalf of the Privy Council in Attorney-General of Belize v Belize Telecom Ltd.2 Speaking for the majority in the Supreme Court, Lord Neuberger3 reaffirmed that terms will be implied only where it is “necessary” (not merely reasonable) to do so. That clarification of principle is welcome; the terms in which it is expressed, less so. Unhelpfully, the judgments in Marks & Spencer contain several versions of the appropriate question a court must ask and answer when dealing with implied terms, as well as discussion of several perspectives from which a court might arrive at an answer. Doubtless others will comment on the rejection of the Belize construction-based approach to the implication of terms. Yet, without clear guidance on the appropriate test, comparing the approaches of the Supreme Court and the Privy Council is a much harder task.

Factual background

The defendant landlords (the “Respondents”) and the claimant tenants (the “Appellants”) entered into a lease, commencing on 25 January 2006 and ending on 2 February 2018 (the “Lease”). The Lease demised the third floor of a building to the Appellants. It also granted them the use of two car parking spaces. In return, the Appellants promised to pay annually “Basic Rent plus VAT” and a “Car Park Licence Fee”.4 The former was to be paid “yearly and proportionately for any part of a year by equal instalments in advance on the [usual] quarter days”; the latter “by equal quarterly instalments in advance on the [usual] quarter days”.5

The Lease contained the break clause (cl.8) by which the Appellants could determine prior to the anticipated end date. Clause 8.1 provided that, to determine on 24 January 2012 (the First Break Date), the Appellants should provide the Respondents with six months’ written notice.6 This right to determine was, however, circumscribed: the Appellants had to ensure that “on the break date there [were] no arrears of Basic Rent or VAT on basic rent” (cl.8.3) and that “on or prior to the break date the [Appellants paid] to the Landlord the sum of £919,800 plus VAT” (cl.8.4).

1. [2015] UKSC 72; [2015] 3 WLR 1843.

2. [2009] UKPC 10; [2009] 1 WLR 1988 (PC, Belize).

3. With whose judgment Lords Sumption and Hodge agreed. Lord Clarke provided a short concurring judgment. The fifth judge, Lord Carnwath, agreed (at [57]) “that the appeal should be dismissed for the reasons given by Lord Neuberger so far as addressed to the issues between the parties” but was much less receptive to Lord Neuberger’s wider criticisms of Belize.

4. At [3], where Lord Neuberger recorded that the Basic Rent was originally £919,800 plus VAT. By 25 December 2011, it had risen to £1,236,689. The Car Park Licence Fee was £6,000.

5. A version of the Lease is annexed to the first-instance judgment of Morgan J [2013] EWHC 1279 (Ch). The referred to clauses appear at (3)(a) and (3)(b) thereof.