Marks & Spencer Plc v BNP Paribas Securities Services – Case Summary

Marks & Spencer Plc v BNP Paribas Securities Services

Supreme Court

Citations: [2015] UKSC 72; [2016] AC 742; [2015] 3 WLR 1843; [2016] 4 All ER 441; [2016] 1 P & CR 13; [2016] L & TR 8; [2016] CILL 3779; [2016] CLY 1377.

Facts

The parties entered into four commercial leases, drafted by specialist solicitors. The rent under these leases was payable ‘yearly and proportionately for any part of a year by equal quarterly instalments in advance’. The leases also contained a break clause. This allowed the tenant to end the lease on a particular day by giving six months’ notice.

The tenant gave notice under the break clause. They later paid a quarter of the upcoming year’s rent and the break premium. After the lease terminated, the tenant attempted to claim back the rent paid in advance for the quarter after the lease terminated. They argued that a term requiring this repayment should be implied into the lease.

Issue(s)
  1. Did the contract contain the implied term proposed by the tenant?
Decision

The Supreme Court declined to imply the suggested clause. Given the professional and well-drafted nature of the lease, there would need to be clear evidence of intention to include such a term or of a business necessity for that term. The proposed clause would make the contract more efficacious. It would mean that the tenant did not have to pay rent for a period in which the lease was terminated. However, it was not necessary to make the contract work or avoid absurdity. As such, there was no basis to imply the term.

This Case is Authority For…

A clause will only be implied into a contract in fact if it is:

  • Necessary to imply the term to give business efficacy to the contract; or
  • So obvious that the parties intended to include the term that it went without saying.

Both are assessed from an objective standpoint. The test of necessity is one of absolute necessity, not merely ‘reasonable’ necessity. Absolute necessity means that it must be the case that the contract does not work at all, or only works in an absurd fashion. It is not enough that the contract does not work as the parties reasonably must have intended.

It is necessary that any implied term is fair, but this is not a sufficient condition. The relevance of fairness is that an unfair term is unlikely to be necessary to make a contract work, nor are reasonable people likely to obviously agree to an unfair term.

Other

Lord Hoffman in Attorney-General of Belize vĀ Belize TelecomĀ Ltd [2009] UKPC 10 suggested that implying and construing terms are part of the same process: understanding what the parties objectively intended the contract to mean.

Lord Neuberger (with whom Lords Sumption and Hodge agreed) disagreed in this case. He argued that implying terms and construing express terms are analytically processes governed by different rules, despite having similar purposes and taking into account similar factors. Normally, it is only possible to discuss implication after the contract’s express terms have been construed. Lord Neuberger was concerned that Lord Hoffman’s approach might dilute the strict requirements for implying terms.

Lord Neuberger also commented that s.2 of the Apportionment Act 1870 does not apply to rent payable in advance. Similarly, the common law will not apportion rent paid in advance on a time basis.