Marks and Spencer Plc v BNP Paribas Securities Service Trust Co (Jersey) Ltd
[2015] UKSC 72, [2016] AC 742
Supreme Court
Facts:
4 commercial leases had been negotiated and drafted between specialist solicitors. Rent was payable “yearly and proportionately for any part of a year by equal quarterly instalments in advance”.
Break clause required six months written notice to terminate lease, provided that there were no arrears and a break premium had been paid.
M&S served break notice and paid full quarter’s rent with the break premium.
M&S claiming for recovery of the rent that was paid in advance.
Legal Facts / Procedural History:
High Court (Chancery Division)
Court of Appeal
Legal Issues:
Whether the lease contained an implied term which entitled M&S to repayment of the advance rent after the period of the break clause.
Appellant (M&S) Arguments:
The lease was imperfect and did not provision for the foreseeable contingency of reimbursement of rent. It could be implied into the contract that the rent that was paid for the period after the break clause should be reimbursed.
An ‘officious bystander’ would understand that payment of rent should only be necessary during occupancy or during the period of the break clause, not after.
Respondent (BNP) Arguments:
A term should only be implied when it is necessary to give the contract business efficacy. There is a clear difference between construing the words of the contract and implying terms into a contract to find the agreement.
By implying a term into the contract, the court is focusing on what the contract ought to have been, not what was actually agreed upon.
A term cannot be implied if it would be inconsistent with an express term that already exists.
The lease is long and comprehensive, negotiated by solicitors between significant commercial parties. A ‘officious bystander’ would come to the conclusion that the contract entails all of the terms the parties agreed upon. Therefore, no terms can be implied.
The break clause would form a unilateral contract. The landlord benefits from the remaining rent and break premium, while the tenant benefits from terminating the contract. The tenant was in control of the situation.
Judgement (Lord Neuberger PSC, Lord Clarke JSC, Lord Sumption JSC, Lord Carnwath, JSC and Lord Hodge JSC):
Appeal dismissed.
Lord Neuberger PSC (Lord Sumption JSC and Lord Hodge JSC Agree):
The ‘officious bystander’ test helps determine the judgement but is not an “absolute necessity” in the decision. Construing a meaning and implying terms both require the meaning of the contract to be determined. Also applies ‘business efficacy’ test. Uses Simon LJ’s reasoning from BP… for when terms can be implied. Implication of terms is irrespective of the intention of the parties. Implying and interpretation are different things.
Lord Carnwath JSC:
Interpreting and implying terms are not the same thing, but they lead to the same outcome.
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