Perenco UK Ltd & Anor v Bond

A term may be implied into a detailed commercial agreement only where it is necessary to give the agreement commercial or practical coherence, or where it is so obvious that it goes without saying. The term must be capable of clear expression and must not contradict an express provision. Fairness, presumed intention, or the fact that reasonable parties might have agreed a term are insufficient.

Where an agreement incorporates statutory provisions giving a pipeline owner discretion as to whether, and when, to serve a counter-notice, an inconsistent obligation to serve or be deemed to have served such a notice will not ordinarily be implied. The surrounding contractual arrangements and a double-compensation clause do not establish such an obligation without clearer contractual language.

The appellants, successors to British Gas and BP respectively, appealed under section 69 of the Arbitration Act 1996 from an arbitrator’s award concerning compensation for minerals sterilised by two parallel pipelines.

The relevant agreements incorporated the statutory mining provisions and contained provisions addressing compensation and avoidance of double recovery. The respondent argued that a term should be implied into the British Gas deed requiring the pipeline owner to serve, or be deemed to have served, a counter-notice when the other pipeline owner elected to pay compensation rather than divert its pipeline.

The central issue was whether that term satisfied the principles governing implication of terms into a commercial contract.

1. Appeal allowed. The arbitrator’s award on issue 5 was set aside. The proposed implied term was not incorporated into the deed.
2. The principles restated in Marks and Spencer v BNP Paribas [2015] UKSC 72 applied. A term must be reasonable and equitable, necessary to give business efficacy or obvious in the relevant sense, capable of clear expression, and consistent with the express terms. Business efficacy and obviousness may operate as alternatives, but neither is satisfied merely because the term appears fair or would probably have been accepted if suggested.
3. The deed expressly incorporated the Mining Code. Under the incorporated provisions, the pipeline owner had discretion whether to serve a counter-notice and could do so at any time. The proposed term would impose an obligation in circumstances where the express statutory scheme imposed none and would contradict the express provision permitting service at any time.
4. The related lease and the double-compensation provisions did not require a different conclusion. They did not provide that compensation under one agreement necessarily triggered compensation under the other, nor that the parties had agreed to share compensation in every relevant mining-development case. The provisions dealing with surface building works pointed against any general assumption that the parties would share the compensation burden.
5. The statutory background also weighed against implication. The deed placed British Gas in a less advantageous position than a statutory acquisition would have done, yet the parties had expressly amended the statutory scheme in relation to arbitration. If a further compulsory obligation had been intended, it could have been stated.
6. The complexity and successive reformulations of the proposed term, together with the professional drafting of the deed, provided further support for the conclusion that it did not go without saying. Directions were given for written submissions on the form of order, costs and any application for permission to appeal.

• Arbitration: The arbitrator adopted the Legal Adviser’s conclusion that the proposed term should be implied into the British Gas deed.
• High Court (Technology and Construction Court): On an appeal under section 69 of the Arbitration Act 1996, the court allowed the appeal on issue 5 and set aside the relevant conclusion in the award.