Irish Bank Resolution Corporation Ltd v Camden Market Holdings Corp & Ors

The Irish Bank Resolution Corporation Limited (“IBRC”) is a bank incorporated in the Republic of Ireland, now in a special statutory liquidation. It appeals against the order of HHJ Raeside QC dated 8 May 2014 in the Chancery Division dismissing its application for summary judgment or alternatively the striking out of a claim brought against it by the respondents, the Camden Market Group, for breach of contract. The claim against IBRC was based on an alleged implied term in an agreement dated 5 November 2012, “the 2012 Supplemental Deed”, made in connection with a Facilities Agreement between members of the Camden Market Group and IBRC under which IBRC provided a loan of some £195 million to members of the Group to purchase and develop properties at Camden Market.

IBRC’s case is that the implied term pleaded and relied on by the Camden Market Group is inconsistent with the express terms of clause 26 of the Facilities Agreement, originally entered into in 2005, and restated by an amendment and restatement deed dated 26 November 2008 (“the Restated Facilities Agreement”). The Restated Facilities Agreement was incorporated into the 2012 Supplemental Deed. The first respondent is the guarantor under the Restated Facilities Agreement and the other seven respondents are companies and limited partnerships, the second to sixth of which are its subsidiaries and the borrowers under the agreement.

The dispute arose after IBRC was placed in special liquidation on 7 February 2013 by an order of the Irish Minister of Finance pursuant to the Irish Bank Resolution Corporation Act 2013. Two partners of KPMG were appointed as special liquidators. The Minister instructed them to sell off IBRC’s loan book, and they began marketing its loans, including those to the Camden Market Group, who were themselves marketing the properties they were developing.

On 14 October 2013, the Camden Market Group commenced proceedings against IBRC. The implied term of the Restated Facilities Agreement which was pleaded is set out at [13] below. It is that IBRC should not do anything to hinder the Group’s marketing of the properties they were developing to achieve the best price “by marketing the ‘sale’ of the loans under the … Facilities Agreement in competition …” with the Group. On 6 February 2014 IBRC applied for summary judgment or to strike out the claim. It maintained that the claim had no real prospects of success because clause 26 of the Restated Facilities Agreement expressly permitted it to market the loans for sale and to provide information about them to any potential buyer, and no implied term can be inconsistent with the express terms of the contract in question. Clause 26 is set out in the Appendix to this judgment.

The factual and contractual background:

The proposed development is of Stables Market, Camden, and land at Camden Lock Village located on the canal opposite Stables Market. The Camden Market Group entered into the 2005 Facilities Agreement with IBRC’s predecessor, the Anglo Irish Bank. The purpose of the agreement and the loans made under it was to finance the development of parts of Stables Market, the acquisition of the land at Camden Lock Village, and to assist with the costs of the process of obtaining planning permission. The second, third and fourth respondents were the borrowers under the Facilities Agreement, and the first respondent, incorporated in the British Virgin Islands and their parent company, was a guarantor. The maturity date of the agreement was originally 14 July 2010. The agreement was amended by other agreements between 2007 and 2009. The 2007 and 2008 agreements added the sixth, seventh and eighth respondents as borrowers and guarantors. The loans made available under the agreements were secured on the Camden Market Estate. The Restated Facilities Agreement dated 26 November 2008 amended and restated the Facilities Agreement and extended the period of the loan by providing for a final maturity date of 28 February 2013. The 2009 agreement added other companies in the Camden Market group as guarantors.

The Restated Facilities Agreement defines itself and a number of other specified documents, including any document so designated, as “Finance Documents”. Clause 26.1(a) expressly permits IBRC to “assign any of its rights … under any Finance Document to another bank or financial institution …”. By clause 26.2(a), before IBRC makes an assignment under clause 26.1 the consent of the first respondent (defined as the “parent”) must be obtained. Clause 26.8(a) empowers IBRC to disclose “any information about” the Camden Market Group and the Finance Documents as it considers appropriate, to any person to whom IBRC assigns or transfers or may potentially assign or transfer all or any of its rights under the Finance Documents but the person to whom the information is to be disclosed must enter a confidentiality undertaking.

The process for obtaining planning permission was more complicated than the Camden Market Group anticipated and progress was delayed. In March 2012 planning permission for the Camden Lock Village development was refused, but the Group believed that, if they made the changes requested by the planning authority and undertook a community engagement plan, they would obtain planning permission. They had previously decided that they would repay the loan by selling the properties rather than by refinancing and had informed IBRC of this. Their advisers, Jones Lang LaSalle, provided them with a “red book” valuation which valued the properties at £370 million without planning permission and £395 million with permission, but they considered that the commercial price would be higher.

In view of the need to obtain planning permission, the Camden Market Group considered they would not have time to market and sell the properties before 28 February 2013, the final maturity date of the Restated Facilities Agreement. They therefore sought and obtained a twelve-month extension to the agreement. In clause 3.1 of the 2012 Supplemental Deed the parties agreed to vary the final maturity date to 28 February 2014, and clause 2 provided for a new loan facility of £10 million in two tranches. Mr Alper, the managing director of Stanley Sidings Ltd., a subsidiary of the first respondent, who was dealing with the marketing of the properties, stated that this was far in excess of the fees a bank would charge for an extension to a facility agreement and the fee charged for the three-year extension in 2008. On behalf of IBRC, Mr Zacaroli QC submitted that the £10 million was in effect IBRC’s fee for the extension. On behalf of the Camden Market Group, and in the light of Mr Alper’s evidence, Mr Gourgey QC submitted it was a payment reflecting an agreement that IBRC would get a share of the profit of the future proposed sale of the Camden Market Estate in the sense (see skeleton argument paragraph 81) that giving the Camden Market Group time to obtain planning permission would result in an increased profit from a subsequent sale.

As to the other material provisions of the 2012 Supplemental Deed, Clause 3.2 stated:

“[S]ave as amended by this deed, the Restated Facilities Agreement shall remain in full force and effect”, that “nothing contained in this deed shall discharge the liability of the Obligors or any other person party to a Finance Document to meet any of its obligations under the Restated Facilities Agreement or the other Finance Documents, which shall each remain in full force and effect”.

Clause 4, entitled “Exit Strategy”, required the Camden Market Group to submit the revised planning application on or before 31 December 2012. It also required them to ensure that the properties were marketed for immediate sale by an agent approved by IBRC’s English subsidiary, Anglo Irish Bank Corporation plc, within the earlier of six months from the receipt of unconditional planning permission or 30 September 2013. The Camden Market Group obtained planning permission on 31 January 2013, and began preparing to market the properties. Paragraph 7 of the Camden Market Group’s amended particulars of claim plead that, as part of this process, it met a number of prospective purchasers.

Following the special liquidation of IBRC on 7 February 2013, a further agreement, dated 11 July 2013, was made extending the final maturity date of the loan to 30 June 2014. Before then, as a result of uncertainty as to whether IBRC’s liquidators would try to sell the Restated Facilities Agreement, the Camden Market Group’s solicitor wrote reminding IBRC of the obligation in clause 26 not to transfer the loan without the Group’s consent. At some stage, IBRC acting on the instructions of the Irish Minister of Finance to sell off its loan book, began marketing all its loans, including the loan to the Camden Market Group.

Some of the loans made by IBRC were “distressed” debts but the loan to the Camden Market Group was not. The Group considered that marketing the Restated Facilities Agreement as part of a package which contained distressed debt gave rise to market uncertainty and rumour. A letter dated 8 August 2013 from Deloitte, who were advising them, to Mark Alper stated that there was a widespread view by parties with a potential interest in Camden Lock Village that its loan was distressed. The letter stated that some had referred to discussions with IBRC about the sale of the Camden loan “as part of their exit of their distressed loan portfolio”, and had challenged Deloitte’s statements that the loan was fully compliant with its terms and conditions. Mr Alper’s evidence is that some potential purchasers were telling the Camden Market Group that they would acquire the loan from IBRC instead of the property from them, with the implication that they would adopt a strategy used by “vulture funds” by contriving a basis to enforce the security and obtain the properties for less than their market value.

It was against this background that, on 14 October 2013, the Camden Market Group commenced these proceedings. They sought a declaration that any purported assignment by IRBC without their consent would be a breach of the Restated Facilities Agreement as amended and supplemented by the 2012 Supplemental Deed. In paragraph 12 of the Particulars of Claim served on 17 October 2013, the Group relied on clause 26 of the agreement and on an implied term that IBRC would not do anything to hinder the marketing of the properties by them to achieve the best price.

On 1 November 2013, IBRC’s solicitors stated that it was IBRC’s intention to dispose of the Camden Market Group’s loans by way of sub-participation only, and undertook not to transfer the Facilities Agreement by assignment or novation so that the relief sought in the claim was no longer required. On 20 November 2013, the Camden Market Group served draft amended particulars of claim claiming damages for breach of the implied term and, on 31 January 2014, a second version containing non-substantive amendments. On 6 February 2014, IBRC issued its application for summary judgment or the striking out of the claim. The Group’s Amended Particulars of Claim were served on 14 May 2014. The amended plea as to the implied term is:

“12.

Further, it was a term of the Facilities Agreement as so extended, to be implied by law and/or as necessary to give business efficacy thereto, that [IBRC] would not do anything to hinder the marketing of the said premises to achieve the best price in accordance with the said exit strategy, by marketing the “sale” of the loans under the assignment or transfer of the Facilities Agreement in competition therewith or otherwise.”

Paragraph 13 pleaded the facts and matters giving rise to and supporting the implied term. These included: the Group’s marketing of the Camden Market properties would be put at risk if IBRC called in the loan or alternatively marketed it to prospective purchasers; such prospective purchasers would be discouraged by this marketing of the loan from buying the estate from the Camden Market Group pursuant to the agreed exit strategy and would prefer either to purchase the loans themselves and enforce against the underlying asset or seek to purchase at a discount from another purchaser of the loan; and the agreed aim of the Facilities Agreement as extended was to market the estate without damaging the market for it by unilateral action that might distract or divert prospective purchasers in the hope that the first respondent would become a weakened seller. The pleaded losses included £19 million in respect of the costs of refinancing the loan, the difference between the market value of the properties on the date on which, but for the breach, they would have been sold under the agreed exit strategy, and wasted costs of £415,000 in attempting to market the properties through that strategy.

The Judgment:

On 8 May 2014, the judge delivered an ex tempore judgment and made his order. He informed the parties that he wished to develop the reasons for his decision in part 7 of the judgment, when it was reduced to writing. He later circulated a draft judgment to the parties which stated (at [1] and [34]) that it had been “corrected and as indicated added to by way of the discussion in part 8” “to provide a more reasoned judgment”. It is not suggested that part 8, or other revisions made to clarify the meaning of the judgment, affected the essential reasoning. The perfected judgment was handed down on 3 March 2015, ten months after the ex tempore judgment and order. Although assigned a neutral citation ([2014] EWHC 2319 (Ch)), it is not on the judgment template and does not appear to be on BAILLI, Westlaw, or Lawtel.

I first summarise the ex tempore part of the judgment. Section 4 deals with the pleaded implied term and the factual evidence relied on in support of it. This includes Mr Alper’s evidence about the extension of the final maturity date under the Restated Facilities Agreement, what was described in clause 2 of the 2012 Supplemental Deed as “a new loan facility” of £10 million in two tranches of £5 million, and the exit strategy provisions in clause 4 over which IBRC had influence. Section 5 of the judgment considers the agreement in the 2012 Supplemental Deed in some detail.

Section 6 of the judgment considers the law on implied terms, and includes lengthy extracts from a number of leading authorities, including Lord Hoffmann’s speech in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, and his opinion in Attorney General of Belize v Belize Telecom Ltd, [2009] UKPC 10, [2009] 1 WLR 1988, and the summary of the position by Sales J in Torre Asset Funding Ltd. v Royal Bank of Scotland plc [2013] EWHC 2670 (Ch) at [152]. Section 8 contains further discussion of this topic, including reference at [39] – [44] to cases dealing with the principle that a term will not be implied which contradicts the express terms of the contract. I deal with those cases which I consider it necessary to discuss at [22] ff. below, bearing in mind that, as Sir Anthony Clarke MR stated in Pratt v Aigaion Insurance Company SA[2008] EWCA Civ. 1314, [2009] 1 Lloyd's Rep 225at [9], in view of the wealth of the authority and the differences of formulation, care must be taken to avoid over-elaboration.

The judge’s decision is in section 7 of the judgment. The judge stated (at [33(iii)]) that, to give meaning to the agreement extending the final maturity date of the Restated Facilities Agreement to 28 February 2014, it was necessary to take into account the relevant factual matrix, which included the two payments of £5 million by the respondents and the exit strategy. He also stated that it was the Camden Market Group’s case that “what the parties intended by the word fees was that [the £10 million] was a payment to IBRC by Camden Market by which they agreed that IBRC would get a share of the profit of the future proposed sale of Camden Market” and “not just the usual arrangement fee for an extension of the loan period”. He stated (at [33(iv)]) that this was a matter he had to have regard to as part of the relevant factual matrix in the context of IBRC’s application for summary judgment and/or the striking out of the claim.

The judge held (at [33(v)]) that it was arguable: (a) that clauses 2 and 4 reflected an agreement by the Camden Market Group to pay IBRC a share of the profit of the future sale of the properties rather than an arrangement fee for an extension of the loan period; (b) that the parties had “jointly entered into a common venture to share the profit of the future sale”, and (c) that “it [was] arguably not surprising that the two of them would wish that this would proceed in [the] way that the maximisation of a profit would be of benefit to both of them”. If so, it was also arguable (see [33(vi)]) that there was an implied term that IBRC “would not hinder or prevent the achieving of that purpose, namely the planning application with which they had involvement, the market application with which they had direct involvement, and then … the sale [by the Camden Market Group] over a limited period of time” which would achieve the purpose of maximising profit. These matters, he stated (at [33(vi)], needed to be decided at a trial.

The judge also held (at [33(vii)]) that it was arguable that the pleaded implied term did not contradict clause 26 of the Restated Facilities Agreement and is not inconsistent with it. He stated that clause 26.8 is a general term which does not necessarily contradict the implied term: “it forms part of the Agreement by reference to its express incorporation”. It is a general right which has to be contrasted with the specific agreement limited to a specific period of time in the exit strategy. It was, he stated, “arguable that … IBRC would not hinder or prevent the achieving” of that strategy within the limited period of time stated in the agreement. He also stated (at [33(viii)]) that the implied term as pleaded was sufficiently certain and precise to go to trial.

As to section 8, which contains the judge’s development of his reasons, he considered (at [34(i)]) the relationship between an implied term of necessity and a term implied in law and stated that, in construction cases, the court has for many years implied a term as a matter of law imposing on a financier an obligation not to hinder or prevent the performance of its agreement. He considered that the facts of this case when properly construed may be analogous to such a situation. The two key points in this section, however, are that the judge stated (at [34(i)]) that it was the alleged agreement to profit- share for the parties’ mutual benefit which enabled him to conclude that the pleaded implied term had a real prospect of success at trial, and (at [34(iii)]) that this case, in which the parties had agreed “a somewhat unusual approach to their further loan extension” was not a case in which the implied term was flatly contrary to the express terms agreed.

The Grounds of Appeal:

There are five grounds of appeal against the judge’s decision. Underlying them in substance is the contention that the judge erred in finding that it was arguable that the alleged implied term was neither directly inconsistent with the express provisions in clause 26 of the Restated Facilities Agreement nor otherwise incompatible with it. IBRC submitted that the judge erred in the following ways:

In substance, as Mr Gourgey accepted, there was no disagreement between the parties as to the principles governing the implication of contractual terms. The dispute is as to their application to the facts of this case. The result was that the parties’ primary submissions focussed on different aspects of the principles, and perhaps reflect a difference of emphasis as to the effect of the decision of the Supreme Court in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd[2015] UKSC 72, [2016] AC 742, handed down on 2 December 2015, nineteen months after the judge’s decision in this case. In that case, which concerned a commercial lease, a majority of the Supreme Court restated the principles governing the implication of contractual terms and commented on the important contribution of Lord Hoffmann in Attorney General of Belize v Belize Telecom Ltd, [2009] UKPC 10, [2009] 1 WLR 1988 and on the relationship between the approach to construction and the approach to the implication of a term.

Mr Zacaroli’s focus was on the authorities that state that an implied term must not contradict any express term of the contract. He referred in particular to Reda v Flag Ltd. [2002] UKPC 38, [2002] IRLR 747 at [45] per Lord Millett, Johnson v Unisys Ltd., [2003] 1 AC 518 at [37] per Lord Hoffmann, Autoclenz Ltd. v Belcher [2011] UKSC 41, [2011] I.C.R. 1157 at [20], per Lord Clarke, and the decision in the Marks & Spencercase. Mr Gourgey accepted that an implied term must not contradict any express term of the contract but maintained that the pleaded implied term did not do so in this case. This, he submitted, was because the implied term did not prevent IBRC from marketing the loans, it only prevented marketing in competition with the Camden Market Group’s marketing. He argued that IBRC could have provided information about the loans to potential assignees, transferees, sub-participants, and others without interfering with the Camden Market Group’s efforts. From Mr Gourgey’s oral submissions, it appeared that the main reason the Camden Market Group regarded the marketing by IBRC’s liquidator as in competition with the Group’s was because IBRC was marketing its debt as part of a package which contained distressed debt which the Group maintained gave rise to the mistaken perception that its debt was distressed.

Mr Gourgey submitted that, given the approach of “vulture” funds and similar entities, it would have been obvious to both parties that parallel marketing of the Restated Facilities Agreement could disrupt the Camden Market Group’s marketing and could thus undermine the objective of achieving the best sale price. It followed that the pleaded implied term was the natural corollary of the fact that the clear business purpose of the “exit strategy” provision in the agreement dated 5 November 2012, the 2012 Supplemental Deed, was to enable the Camden Market Group to maximise their equity by achieving the best price with the benefit of planning permission. That was why the maturity date of the loan under the Restated Facilities Agreement was extended and the £10 million was paid to IBRC. His focus was on the opinion of Lord Hoffmann in the Belize Telecom caseand the speech of Lord Steyn in Equitable Life Assurance Society v Hyman [2002] 1 AC 408 to which Lord Hoffmann referred. He relied on Lord Hoffmann’s statement (at [21]) of the Belize Telecom case that “the question for the court iswhether [the alleged implied term] would spell out in express words what the [contract], read against the relevant background, would reasonably be understood to mean” and (at [22]) that the question is whether the alleged implied term is necessary to give business efficacy to the contract taking into account “the practical consequences of deciding that it means one thing or another”. The touchstone for this, he submitted, is what a reasonable person would understand the contract to mean, and he thus focussed on the business purpose of the extension of the period of the loan under the Restated Facilities Agreement.

In the Equitable Life case, the issue was the relationship between Equitable Life’s policies which provided for a guaranteed annuity rate and article 65 of Equitable Life’s articles of association which made the amount of any bonus a matter within the absolute discretion of its directors. Lord Steyn, whose speech was agreed with by the other members of the Appellate Committee, considered that although there was no express restriction in article 65 precluding the directors from calculating the final bonus in a way which was inconsistent with the terms of the guaranteed annuity rate, a restriction to this effect had to be implied so that the directors could not use their discretion to deprive policy holders of their expectations under the policy. Mr Gourgey submitted that in this case, although the Restated Facilities Agreement did not expressly restrict IBRC’s ability to market its loans, or make provision for it not to hinder the marketing of the properties by the Camden Market Group, without the pleaded implied term the apparent business purpose of the parties in the 2012 Supplemental Deed would be frustrated.

My starting point is the Marks & Spencer case. The majority judgment of the Supreme Court was given by Lord Neubergerwith whom Lord Sumption and Lord Hodge agreed. The majority refused to imply a term into the lease that the tenant should be entitled to recover an apportioned part of rent payable and paid in advance after that tenant exercised a break clause and paid the break premium of one year’s rent. Lord Neuberger stated that Lord Hoffmann’s opinion in the Belize Telecom case and his statements (at [19]) that “the implication of a term is an exercise in the construction of the [contract] as a whole” and at [21], whichI quoted at [25], above did not change the law and should not be interpreted as relaxing the approach to implying terms. The traditional tests which ask whether the term is necessary for the business efficacy of the contract and whether the parties would say “of course” to an officious bystander who asks whether the term was meant to be included were reaffirmed.

Lord Neuberger (at [31]) described Lord Hoffmann’s opinion in the Belize Telecom case as “a characteristically inspired discussion rather than authoritative guidance on the law of implied terms”. He also stated (at [26]) that, while construing the words the parties have used in the contract and implying terms into it involved determining the scope and meaning of the contract, Lord Hoffmann’s analysis “could obscure the fact that construing the words used and implying additional words are different processes governed by different rules”. At [29], Lord Neuberger approved what he described as Sir Thomas Bingham MR’s trenchant explanation in Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, 481 that “the implication of contract terms involves a different and altogether more ambitious undertaking” than the interpretation of express terms because it deals with matters for which the parties have themselves made no provision and that “because the implication of terms is so potentially intrusive that the law imposes strict constraints on the exercise of this extraordinary power”. Lord Neuberger also stated (at [28]) that in most, possibly all, disputes about whether a term should be implied it is necessary first to interpret the express terms and described the requirement that an implied term must not contradict any express term of the contractas “a cardinal rule”.Lord Neuberger, however, also recognised that it may be appropriate to reconsider the interpretation of an express term once it has been decided whether to imply a term.

Six months before its decision in the Marks & Spencer case, the Supreme Court had handed down its decision in Arnold v Britton[2015] UKSC 36, [2015] AC 169. That case did not concern the implication of terms but the interpretation of express terms. The Supreme Court revisited the principles distilled from the authorities by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 and refined by him in later decisions including the Belize Telecom case. The issue was the construction of provisions in the leases of a number of chalets in a caravan park concerning service charge contributions. For present purposes it suffices to observe that the court emphasised (at [17] – [19]) that commercial common sense and surrounding circumstances should not be invoked to undervalue the importance of the language of the provision which is to be construed, and that the clearer the natural meaning of the words used, the more difficult it is to justify departing from that meaning.

With this background, I turn to the submissions. I do so bearing in mind that where the appeal is against a refusal to strike out the claim or enter summary judgment the court must be certain that the claim is bound to fail as a matter of law, that it raises no live issue of fact which can only be properly determined by hearing oral evidence, and that the parties have had an adequate opportunity to address the point in argument: see e.g. Hughes v Colin Richards & Co [2004] EWCA Civ. 266 and ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ. 725. Where, as in the present case, the issue is whether there is an implied term, the same principles apply, although as that issue is one that is often fact sensitive, particular care is needed. In Prometric Ltd v Cunliffe [2016] EWCA Civ. 191, [2016] I.R.L.R. 776 the question was whether there was an implied term in an employment contract to provide the same pension benefits under a different scheme. This court allowed the employer’s appeal against a decision refusing to strike out the employee’s claim. Sir Stanley Burnton, with whom Jackson and Floyd LJJ agreed, held (see [19]) that it was not possible to imply the term into the employee’s contract of employment as there was no objective intention to provide the same benefits.

In the present case, the question is therefore whether the court can be certain that Camden Market Group’s claim is bound to fail as a matter of law and that there is no live issue of fact which can only be properly determined by hearing oral evidence. The consequence of this is that, for the reasons I give at [32] – [34] below, in my judgment this appeal turns on grounds 1 and 4. They overlap but both contend that the pleaded implied term is inconsistent with the express terms of the Restated Facilities Agreement which was incorporated into the 5 November 2012 Supplemental Deed, because clause 26 of the Restated Facilities Agreement permitted IBRC to sell the loans with the consent of the Camden Market Group, to offer sub-participations in the loans without the Group’s consent, and to provide information relating to the loans to prospective purchasers or sub-participants.

There is force in Mr Zacaroli’s submission that it is a non sequitur to say that because the purpose of the 2012 Supplemental Deed was to give the Group more time to get planning permission to sell at a better price it impliedly affected IBRC’s ability to deal with its asset in the way expressly provided for in clause 26 of the Restated Facilities Agreement. The submission by the Camden Market Group that the 2012 Supplemental Deed had this effect sits very uncomfortably with the degree of control that IBRC reserved to itself over the Group in relation to the exit strategy and the fact that the Restated Facilities Agreement, an agreement described by the judge as “detailed and substantive”, was incorporated into the 2012 Supplemental Deed, with no modification to clause 26. I add, in relation to ground 2, that it does appear that the judge characterised the case put by the Camden Market Group (see [33(iii) and (v)] summarised at [18] – [19] above) as a submission that the Supplemental Deed and the word “fees” in relation to the £10 million in it reflected an agreement that IBRC would get a share of the profit of the future proposed sale of Camden Market and was not the usual arrangement fee for an extension of a loan period, and that he accepted that this was arguable. Mr Gourgey accepted (skeleton argument paragraph 81) that the Group’s case was not that the Supplemental Deed changed the relationship into that of a classic joint venture for the sharing of profit and that, if that was what the judge had described, he fell into error.

Divorced from the question of the consistency of the pleaded implied term with clause 26, however, the resolution of the matters in the last paragraph would require consideration of the detailed background and the discussions between the parties when negotiating the Supplemental Deed. In the particular circumstances of the present case, there was, as Mr Zacaroli submitted, nothing in Mr Alper’s evidence to suggest that the parties contemplated changing the nature of their relationship into a joint profit-sharing venture and this was not Camden Market Group’s case. It was, however, the Group’s case that his evidence arguably lays a legitimate basis for the pleaded implied term as part of the relevant factual matrix to the Supplemental Deed. In the light of that, I do not consider these matters suitable for determination on an application for summary judgment or striking out: see for example AL Challis Ltd v British Gas Trading Ltd [2015] EWHC 141 (Comm) per Popplewell J at [24] – [25]. In substance, Mr Zacaroli’s oral submissions in effect recognised this by treating material relevant to ground 2 as an aspect of the inconsistency arguments in support of ground 1.

I do not consider that the judge started from the premise that it was arguable that there was a different relationship between the parties to that in the express agreement. His starting point was the 5 November 2012 Supplemental Deed. In section 5 of his judgment, at [29] – [30], he recognised the significance of the extent of control that IBRC reserved to itself over the Camden Market Group in the Supplemental Deed and the fact it incorporated the Restated Facilities Agreement into it. There is, however, a degree of force in what underlies IBRC’s ground 3 because at [30] the judge also stated that the Restated Facilities Agreement did not contain a clause in it which, “as sometimes appears in these … agreements, could attempt to limit the implication of terms or representations … which might be binding or give factual matrix and meaning to other agreements made under [it]”. In referring to what the Restated Facilities Agreement did not contain he may have given insufficient weight to the need to interpret its express terms before considering whether to imply a term in the way (see [28] above) Lord Neuberger stated is required.

I therefore turn to the inconsistency grounds. There can be two sorts of inconsistency; direct linguistic inconsistency and substantive inconsistency. The second type of inconsistency may be difficult to distinguish from the position where the parties have entered into express obligations with respect to a particular subject-matter, and it is argued that a further term should be implied in relation to the same subject-matter. It is well established that, particularly where the contract is lengthy and carefully drafted, the courts will be very reluctant to imply a further term even if it does not actually conflict with the express terms.

In Broome v Pardess Co-operative Society of Orange Growers (Est 1900) Ltd. [1940] 1 All ER 603, one of the cases cited by Lewison, The Interpretation of Contracts 6^th ed. 2015 at [338], MacKinnon LJ stated (at 612) that “it is, and must be, extremely difficult for either of [the parties] to say in regard to that subject-matter, as to which there is an express provision, that there is also an implied provision ….”. In Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, 481-482 Sir Thomas Bingham MR stated that: “where parties have entered into a lengthy and carefully drafted contract but have omitted to make provision for the matter in issue, it is difficult to infer with confidence what the parties must have intended – the parties may have chosen to leave the matter uncovered in their contract in the hope that the relevant eventuality will not occur”.

Mr Gourgey accepted that the Restated Facilities Agreement works without the implied term, but argued, primarily on the basis of the test in the Belize Telecom case, that is not the test. Although not conclusive, the fact that the agreement works without the implied term is, particularly in view of what the judge described as the “detailed and substantive” nature of the Restated Facilities Agreement, a significant impediment to implying a term dealing with subject-matter expressly dealt with in that contract. But in itself it does not mean that Camden Market Group’s claim is bound to fail as a matter of law. As was recognised in Autoclenz Ltd v Belcher [2009] EWCA Civ. 1046, [2010] IRLR 70 at [88], [2011] UKSC 41, [2011] I.C.R. 1157 at [20], by Aikens LJ and Lord Clarke MR the question is whether the implied term is inconsistent with clause 26 and whether the court is able to determine this at the summary judgment or strike out stage of these proceedings.

I accept Mr Gourgey’s submission that the implied term pleaded in this case is not linguistically inconsistent with clause 26 and, in particular, clause 26.8. This is because I accept that there could be situations in which marketing of the loans by IBRC is not in competition with the marketing of the properties by the Camden Market Group and that disclosure of information under clause 26.8 could be made in a manner which does not in fact hinder the Group achieving the best price in accordance with the exit strategy.

The question therefore is whether the pleaded implied term is in substance inconsistent with IBRC’s rights under clause 26.8. It prohibits IBRC from doing anything “to hinder the marketing of the said premises to achieve the best price in accordance with the said exit strategy, by marketing the ‘sale’ of the loans under the Facilities Agreement in competition therewith or otherwise”. Conduct by IBRC which explores an assignment, a transfer or a sub-participation with a potential counterparty would fall within the term “marketing”. Clause 26.8 confers an express power on IBRC to disclose information to those whom it “assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under the Finance Documents” and with whom it “enters into (or may potentially enter into) any sub-participation in relation to … the Finance Documents” (emphasis added). There is no requirement for IBRC to inform, let alone obtain the consent of, the Camden Market Group before providing information to those who may “potentially” enter such transactions with it.

IBRC was not given an unrestricted power to market the Camden Market Group’s loan, but the express power to disclose information to potential counter-parties without a requirement to obtain the Group’s consent or even to inform the Group is, in my judgment, substantively inconsistent with the pleaded implied term. It is difficult to construe clause 26.8 and the pleaded implied term in a coherent way. The implied term is a significant restriction of IBRC’s power under the Restated Facilities Agreement to deal with its assets. It would cut across IBRC’s entitlement to provide information and would do so in a way which is redolent of uncertainty. It is not clear from the pleaded term whether what is prohibited is any conduct which in fact might have an adverse impact on the Camden Market Group’s marketing, or only conduct which IBRC knows or ought to know will have such an effect. On either view, market perception which is outside the liquidators’ control could trigger the operation of the implied term. The Supplemental Deed was made by commercial entities against a background of a detailed Restated Facilities Agreement which gave IBRC power to disclose information. The Restated Facilities Agreement was incorporated into the 2012 Supplemental Deed but without any qualification to the provisions in it which would be affected by the pleaded implied term.

I turn to the fact that the judge characterised clause 26 as “general” but the terms of the Supplemental Deed as a specific agreement regarding the exit strategy and limited to a specific period of time and concluding that this meant there was no inconsistency between the implied term and clause 26. I do not consider Mr Zacaroli’s submission that the pleaded implied term is in one sense more general than clause 26 because it deals with all “marketing” “in competition”, whereas clause 26 only deals with IBRC’s ability to deal with its own asset goes anywhere. I do, however, consider the judge erred in not reflecting the principle stated in Reda v Flag Ltd [2002] UKPC 38, [2002] IRLR 747 in which Lord Millett at [45] said that “an express and unrestricted power cannot in the ordinary way be circumscribed by an implied qualification”.

In Reda’s case, the issue before the Judicial Committee of the Privy Council was whether an employer’s duty not without reasonable and proper cause to destroy the relationship of trust and confidence which should exist between employer and employee was circumscribed by an express term empowering dismissal without cause. It was held that it was not. Mr Gourgey correctly pointed to the fact that Reda’s case did not concern whether a term should be implied into a contract but whether an implied term which undoubtedly existed circumscribed an express term. But I do not consider that this means that the approach in it is not relevant in the circumstances of the present case. In the light of the requirement that an implied term must not contradict any express term of the contract, described by Lord Neuberger in the Marks & Spencer case, see [28] above, as “a cardinal rule”, in assessing whether there can be an implied term in fact such as the pleaded implied term in this case the Reda case has strong analogical relevance and that case cannot therefore be discounted for the reason given by Mr Gourgey. In my judgment, IBRC’s express and unrestricted power to market the sale of loans by disclosing information to potential counter-parties cannot, as a matter of law, be circumscribed by an implied qualification.

Finally, I do not consider that Mr Gourgey is assisted by the Equitable Life case. Lord Steyn’s statements in that case are important, but the case was concerned with the interpretation of two express terms which were inconsistent. The link between the policy document and the articles of association was important because (see 459E-F) the bonuses were not bounty but part of the consideration for the premiums paid and the directors’ discretions were conferred for the benefit of the policyholders. In the present case it cannot be said that the provision empowering IBRC to disclose information to the potential counterparties was conferred for the benefit of the Camden Market Group.

For these reasons, I have concluded that the Camden Market Group’s case is bad in law, and the Group has no real prospects of succeeding on it. Accordingly, I would allow the appeal and enter summary judgment for IBRC.

I agree.

I also agree.