![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
England and Wales Court of Appeal (Civil Division) Decisions |
||
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Eastleigh Borough Council v Town Quay Developments Ltd [2009] EWCA Civ 1391 (26 October 2009) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2009/1391.html Cite as: [2010] 2 P & CR 2, [2009] EWCA Civ 1391 |
[New search] [Printable RTF version] [Help]
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE ETHERTON)
Strand, London, WC2A 2LL |
||
B e f o r e :
LADY JUSTICE ARDEN
and
LORD JUSTICE THOMAS
____________________
EASTLEIGH BOROUGH COUNCIL |
Appellant/ Defendant |
|
- and - |
||
TOWN QUAY DEVELOPMENTS LTD |
Respondent/Claimant |
____________________
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Jonathan Gaunt QC (instructed by CMS Cameron McKenna) appeared on behalf of the Respondent.
____________________
Crown Copyright ©
Lady Justice Arden:
"Exceptions and reservations
The right within the period of eighty years from the date hereof which shall be the perpetuity period applicable hereto ('the perpetuity period') to enter on the transfer land for the purpose of laying pipes cables sewers drains and other conducting media and the right thereafter to take water electricity and the appropriate services and to the passage of water and soil through the said pipes cables sewers drains and other conducting media and the right within or without vehicles at all times over the road or roads so constructed PROVIDED THAT the exercise of such rights shall be in accordance with the provisions contained in the Wildern Area Development Brief which was adopted by the Council on 24th July 1986 and shall be subject to the consent of the Director of Planning and Development of the Council ('the Director of Planning') and PROVIDED FURTHER THAT the person or persons exercising such rights shall make good any damage caused thereby."
"If the construction […] suggested by counsel on behalf of the defendants were correct [namely that it was an absolute power to refuse approval], this would mean that the covenantees could have been in a position, by the arbitrary and capricious withholding of consent of approval of building plans, wholly to have prevented a development of the estate by the covenantors. This cannot, in my judgment, have represented the intentions of the parties to the 1955 transfer."
"21. 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?
22. There are dangers in treating these alternative formulations of the question as if they had a life of their own. Take, for example, the question of whether the implied term is "necessary to give business efficacy" to the contract. That formulation serves to underline two important points. The first, conveyed by the use of the word "business", is that in considering what the instrument would have meant to a reasonable person who had knowledge of the relevant background, one assumes the notional reader will take into account the practical consequences of deciding that it means one thing or the other. In the case of an instrument such as a commercial contract, he will consider whether a different construction would frustrate the apparent business purpose of the parties. That was the basis upon which Equitable Life Assurance Society v Hyman [2002] 1 AC 408 was decided. The second, conveyed by the use of the word "necessary", is that it is not enough for a court to consider that the implied term expresses what it would have been reasonable for the parties to agree to. It must be satisfied that it is what the contract actually means.
23. The danger lies, however, in detaching the phrase "necessary to give business efficacy" from the basic process of construction of the instrument. It is frequently the case that a contract may work perfectly well in the sense that both parties can perform their express obligations, but the consequences would contradict what a reasonable person would understand the contract to mean. Lord Steyn made this point in the Equitable Life case (at p. 459) when he said that in that case an implication was necessary "to give effect to the reasonable expectations of the parties."
24. The same point had been made many years earlier by Bowen LJ in his well known formulation in The Moorcock (1889) 14 PD 64, 68:
'In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men'
25. Likewise, the requirement that the implied term must "go without saying" is no more than another way of saying that, although the instrument does not expressly say so, that is what a reasonable person would understand it to mean. Any attempt to make more of this requirement runs the risk of diverting attention from the objectivity which informs the whole process of construction into speculation about what the actual parties to the contract or authors (or supposed authors) of the instrument would have thought about the proposed implication. The imaginary conversation with an officious bystander in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, 227 is celebrated throughout the common law world. Like the phrase "necessary to give business efficacy", it vividly emphasises the need for the court to be satisfied that the proposed implication spells out what the contact would reasonably be understood to mean. But it carries the danger of barren argument over how the actual parties would have reacted to the proposed amendment. That, in the Board's opinion, is irrelevant. Likewise, it is not necessary that the need for the implied term should be obvious in the sense of being immediately apparent, even upon a superficial consideration of the terms of the contract and the relevant background. The need for an implied term not infrequently arises when the draftsman of a complicated instrument has omitted to make express provision for some event because he has not fully thought through the contingencies which might arise, even though it is obvious after a careful consideration of the express terms and the background that only one answer would be consistent with the rest of the instrument. In such circumstances, the fact that the actual parties might have said to the officious bystander "Could you please explain that again?" does not matter.
26. In BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 282-283 Lord Simon of Glaisdale, giving the advice of the majority of the Board, said that it was "not … necessary to review exhaustively the authorities on the implication of a term in a contract" but that the following conditions ("which may overlap") must be satisfied:
'(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying' (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract'."
Lord Justice Waller:
Lord Justice Thomas:
Order: Appeal dismissed