TG Can Ltd v Crown Packaging UK Plc

Permission to amend pleadings depends on whether the proposed case has some prospect of success. Terms are implied into a commercial contract only where the established requirements are met, including necessity for business efficacy, obviousness, clear expression and consistency with the express terms. The court will not rewrite a contract to improve a party’s commercial position.

An implied restraint on the exercise of a contractual discretion requires an actual discretion, and the Paragon formulation is a single composite term. It does not permit caprice or arbitrariness alone to establish breach. Where contractual wording is clear and unambiguous, the factual matrix cannot be used to alter its meaning.

TG Can Limited claimed damages from Crown Packaging UK PLC for alleged breach of a three-year supply contract for consumable tooling. TG Can contended that Crown was obliged to maintain approximately 70 per cent of its tooling orders, subject to specified contractual conditions, and relied on various express and implied obligations.

At trial, TG Can sought substantial amendments to its Particulars of Claim. Crown opposed the amendments, sought to strike out parts of the pleading, and applied for summary judgment on the principal contractual claim. The issues were whether the amendments were arguable, whether the pleaded implied terms and dishonesty allegations should be struck out, and what the supply contract meant.

1. Amendments and strike-out. The court considered whether the proposed amendments had some prospect of success. Lateness was not, by itself, a sufficient reason to refuse permission. The proposed implied terms concerning allocation of business, good faith and fair treatment were nevertheless unsustainable and were struck out.
2. Implied terms. The requirements for implication include reasonableness and equity, necessity to give business efficacy, obviousness, clear expression and consistency with the express contract. The terms pleaded would rewrite the agreement in TG Can’s favour. The contract remained effective without them and did not require Crown to treat TG Can and Sandvik even-handedly.
3. Contractual discretion. Paragon Finance PLC v Nash [2002] 1 WLR 685 did not assist. That case concerned an unfettered discretion to vary interest rates and a single composite restraint against dishonest, improper, capricious or arbitrary exercise. The present contract conferred no discretion over order volumes. In any event, capriciousness or arbitrariness alone would not establish breach of such a term.
4. Dishonesty and motive. Allegations concerning Crown’s reasons for, and concealment of, its decision to terminate did not address the substance of the decision to reduce orders. Motive is not generally relevant where a party is entitled to act as it wishes provided that it does not breach the contract.
5. Construction. The preamble entitled Crown in the second and third years to reduce the volume of orders to 50 or 30 per cent, or retain it at 70 per cent, subject to the contractual conditions. The agreement treated TG Can and Sandvik as one supplier and did not allocate a specific share between them. The wording was clear and unambiguous, so the factual matrix was immaterial.
6. Disposition. The principal contractual claim had no real prospect of success and was dismissed. The relevant amendments were disallowed and the corresponding pleading was struck out.