Meridian International Services Ltd v Richardson & Ors

A term may be implied into an oral agreement only through objective construction against the relevant background. The term must be strictly necessary to make the agreement workable, or so obvious as to go without saying; the court implies no more than is necessary. In a multi-party agreement, obviousness and reasonable expectations must be assessed from the standpoint of all parties, not solely the party seeking the term. A copyright term cannot be treated as necessary where the argument assumes that the claimant, rather than the person initially entitled to the copyright, owns it. Separate factors cannot acquire cumulative force when each has no individual force. The appeal was dismissed because no alleged ground established strict necessity or obviousness.

The appellant claimed that an agreement made in January 2006 with Richardson, Aldersley and IP Enterprises Ltd contained implied terms requiring delivery of software materials, protection of related confidential rights, and assignment of copyright. The terms were said to be necessary for business efficacy or so obvious as to go without saying.

The High Court, Chancery Division, rejected both the alleged express term and the claim for implied terms. On appeal, the appellant abandoned its challenge concerning the express term. The central issue was whether the remaining terms were properly implied into the January Agreement.

The Court of Appeal dismissed the appeal. The Chancellor gave the leading judgment, and Rix LJ and Rimer LJ agreed.

1. Applicable principles. The implication of terms is a question of objective construction, including an assessment of the agreement in its relevant background. A term may be implied only where strict necessity is established, and only to the extent necessary. Alternatively, the term must be so obvious as to go without saying. Subjective intentions and subsequent events or discussions are immaterial. These principles were accurately stated by the deputy judge by reference to Robin Ray v Classic FM [1998] EWHC Patents 333.
2. All parties’ interests. The judge was entitled to reject an argument based exclusively on the appellant’s commercial interests. In an ordinary two-sided contract, an obvious term must be one which both parties would have accepted as obvious. The same reasoning applies with particular force to a multi-party agreement. The relevant question concerns the reasonable expectations of the parties generally. The passage relied on from Equitable Life Assurance Society v Hyman [2002] 1 AC 408 supported that approach and did not establish a unilateral test of necessity.
3. Application. The agreement between the appellant and CHUK was still being negotiated at the January meeting. The evidence did not establish an earlier concluded contract or acceptance by conduct. The proposed copyright implication therefore could not be justified by assuming that the appellant, rather than Aldersley as the initial copyright owner, was beneficially entitled to the copyright.
4. The alleged resale strategy was not established as a fact. The remaining grounds, including the alleged loss-leader context and confidential information, did not establish necessity or obviousness. If each individual factor had no value or force, its cumulative effect could not supply the missing necessity.

The deputy judge’s rejection of the implied terms was therefore unimpeachable.

1. High Court, Chancery Division: Mr Robert Ham QC, sitting as a Deputy High Court Judge, tried the claim in July 2007 and gave judgment on 18 October 2007, rejecting the claims based on express and implied terms.
2. Court of Appeal (Civil Division): Permission to appeal was granted. The appellant abandoned its appeal concerning the alleged express terms. The remaining appeal concerning implied terms was dismissed.