• In the case of Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, the courts ruled on whether the shareholders ceased to hold their requisite shares based on the implication of terms in the contract.
  • This case concerned implied terms, shareholders and contract construction.
  • This case involved company law as well as contract law.

Facts of the Case

  • After telecommunications was privatized in the nation, D purchased shares from the government and a loan.
  • The government changed its pledges and policies thus leading to the question of where the special share lies as well as whether the shares could have been taken away from the government.
  • D contended the directors of the company should not be dismissed from their positions while C claimed in this appeal that the implied terms showed appointed directors in these circumstances are obliged to vacate office.

Issues

  • What did the parties intend during contract formation?
  • What were the implied terms?

Held by Privy Council

  • Appeal allowed – based on all the background information, it’s clear the implied term does not need to be straightforward and apparent to everyone concerned.

Lord Hoffmann

Construction

  • The interpretation of terms in the contract and the implication of terms based on what the contracting parties agreed to can be very different.
  • “The court has no power to improve upon the instrument which it is called upon to construe, whether it be a contract, a statute or articles of association. It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means. However, that meaning is not necessarily or always what the authors or parties to the document would have intended.”
  • Courts must decipher what is the background knowledge reasonably available to the contracting parties as per the objective test of Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896.

Implied Terms

  • “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?” [21]