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

An implied contractual term cannot cut across an express and unrestricted contractual power. The court should first construe the express agreement and then ask whether the proposed term is directly or substantively inconsistent with it. In a detailed commercial contract, omission of a term concerning subject matter already addressed by express provisions is a significant obstacle to implication. An express power to disclose information to potential assignees, transferees or sub-participants may be substantively inconsistent with a term restricting marketing activity that could affect the counterparty’s sale process. Where that conflict is clear, the claim may be summarily determined even if other aspects of the factual matrix would ordinarily require a trial.

IBRC had provided substantial loan facilities to the Camden Market Group for the development of Camden Market properties. Following IBRC’s entry into special liquidation, the Group alleged that the facilities agreement contained an implied term preventing IBRC from marketing the loans in competition with the Group’s marketing of the properties.

IBRC applied for summary judgment or strike-out, relying on clause 26 of the Restated Facilities Agreement, which permitted assignments, sub-participations and disclosure of information to potential counterparties. The High Court dismissed the application in [2014] EWHC 2319 (Ch). The central issue before the Court of Appeal was whether the pleaded term was inconsistent with clause 26 and whether the claim could properly be disposed of summarily.

The Court of Appeal allowed the appeal and entered summary judgment for IBRC. The judgment of Beatson LJ was agreed by Sales LJ and Longmore LJ.

1. On an appeal from refusal to strike out a claim or grant summary judgment, the court must be satisfied that the claim is bound to fail as a matter of law, that there is no live factual issue requiring oral evidence, and that the parties have had an adequate opportunity to address the point. Because implication of terms is often fact-sensitive, particular care is required: Hughes v Colin Richards & Co [2004] EWCA Civ. 266, ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ. 725 and Prometric Ltd v Cunliffe [2016] EWCA Civ. 191.
2. The majority reasoning in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72 confirmed that construing express terms and implying additional terms are distinct processes. The express terms should ordinarily be interpreted first. An implied term must not contradict an express term, which is a cardinal rule. In a lengthy and carefully drafted agreement, the court is especially reluctant to imply a term dealing with subject matter already addressed by express provisions.
3. There are two forms of inconsistency: direct linguistic inconsistency and substantive inconsistency. The pleaded term was not linguistically inconsistent with clause 26, since some marketing of the loans might not compete with the Group’s property marketing. It was nevertheless substantively inconsistent with clause 26.8, which gave IBRC an express power to disclose information to persons who might become assignees, transferees or sub-participants without obtaining the Group’s consent or informing it.
4. The implied term would significantly restrict IBRC’s contractual power and was difficult to construe coherently. It was also uncertain whether it applied to conduct which might adversely affect the Group or only conduct which IBRC knew or ought to know would have that effect. Reda v Flag Ltd [2002] UKPC 38 was strongly analogous: an express and unrestricted power cannot ordinarily be circumscribed by an implied qualification. Equitable Life Assurance Society v Hyman [2002] 1 AC 408 did not assist because the relevant discretion there was conferred for the benefit of policyholders.
5. Evidence concerning the commercial background and the alleged profit-sharing arrangement might otherwise have required a trial. It could not overcome the legal inconsistency between the pleaded term and clause 26. The claim was therefore bad in law and had no real prospect of success.

• Court of Appeal (Civil Division): allowed IBRC’s appeal and entered summary judgment in its favour.
• High Court of Justice, Chancery Division: dismissed IBRC’s application for summary judgment or strike-out in [2014] EWHC 2319 (Ch).