• In the case of Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd [2015] UKSC 72, the Supreme Court judged a commercial contract case regarding the recovery of certain costs paid under a lease.
  • This case concerned leases, implied terms, commercial common sense and contract construction.

Facts of the Case

  • C was given 4 sub-leases by D and required to pay rent as well as a car park licence fee. C was granted a written notice to determine the lease on 24th of January 2012.
  • C claimed for some apportioned basic rent and argued an implied term of the lease agreement should have been a small amount of refund money of the basic rent.
  • BNP’s appeal was allowed in the lower court on the basis that C was not entitled to refund money from the car park licence fee, the insurance rent and the service charge.

Issues

  • What are the implied terms?
  • Does the implied term concern apportionment?

Held by House of Lords

  • Appeal dismissed – C’s suggested implied terms are not enforceable and the portion of the rent cannot be recovered.

Lord Neuberger

Implied terms

  • Implied terms should be fair. Implied terms should be terms the parties would have otherwise consented to had it been suggested to both contracting parties at the time of contract formation.

Contract terms tests

  • Two tests used during commercial context of a contract are the business efficacy test from The Moorcock [1889] 14 PD 64 and officous bystander test from Shirlaw v Southern Foundries [1939] 2 KB 206.
  • “First, the notion that a term will be implied if a reasonable reader of the contract, knowing all its provisions and the surrounding circumstances, would understand it to be implied is quite acceptable, provided that (i) the reasonable reader is treated as reading the contract at the time it was made and (ii) he would consider the term to be so obvious as to go without saying or to be necessary for business efficacy. (The difference between what the reasonable reader would understand and what the parties, acting reasonably, would agree, appears to me to be a notional distinction without a practical difference.)” [23]

Issue of construction

  • “Of course, it is fair to say that the factors to be taken into account on an issue of construction, namely the words used in the contract, the surrounding circumstances known to both parties at the time of the contract, commercial common sense, and the reasonable reader or reasonable parties, are also taken into account on an issue of implication. However, that does not mean that the exercise of implication should be properly classified as part of the exercise of interpretation, let alone that it should be carried out at the same time as interpretation.” [27]

Forfeiture

  • The judge referred to the key case Ellis v Rowbotham [1900] 1 QB 740 where it was held Apportionment Act 1870 applies to rent in arrear and not rent payable in advance.

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