Bou-Simon v BGC Brokers LP

A contractual term may be implied only by reference to the agreement’s express terms, the surrounding circumstances known at the time of contracting, and commercial common sense. The term must be so obvious that it goes without saying or must be necessary to give the agreement commercial or practical coherence. Fairness, hindsight, or the fact that the parties might have agreed a term if asked is insufficient.

The court must construe the express agreement before considering implication. It should not rewrite an agreement to regulate circumstances outside its scope or to cure a supposed unfairness. A loan agreement drafted on the basis that the borrower would become a partner did not therefore acquire an implied repayment term merely because the borrower left employment without becoming a partner.

Mr Bou-Simon appealed against the High Court’s judgment for BGC Brokers LP in the sum of £401,361.19. The claim concerned £336,000 paid under a loan agreement executed in connection with Mr Bou-Simon’s proposed return to employment and partnership at BGC.

The High Court dismissed BGC’s claim based on an express term but implied a term requiring repayment if Mr Bou-Simon failed to serve the four-year Initial Period. Mr Bou-Simon left employment before becoming a partner. The central issue was whether that repayment term satisfied the modern test for implication into a detailed commercial contract.

1. Appeal allowed. The order of HHJ Curran QC was quashed, judgment was entered for Mr Bou-Simon, and BGC’s claim was dismissed.
2. Asplin LJ held that the judge had applied the implication test incorrectly. The question had to be assessed from the standpoint of a reasonable reader of the Agreement, with knowledge of its provisions and the surrounding circumstances, at the date it was made. The court could not use hindsight to fashion a term which appeared fair or which the parties might have accepted if the issue had been raised. Those considerations were necessary but not sufficient.
3. The express terms had to be construed before implication was considered. The Agreement was drafted as a loan to be made when Mr Bou-Simon became a partner. Repayment was to be made from partnership distributions, and any balance was to be written off only if the four-year Initial Period was served. The Agreement was expressly independent of other agreements. It therefore had the hallmarks of a limited-recourse loan directed to partnership status.
4. The proposed term was neither obvious nor necessary for business efficacy. Without it, the Agreement did not lack commercial or practical coherence. The circumstances which occurred—employment without partnership—were outside the scope of the Agreement, rather than a lacuna which the court could fill. To impose repayment would require substantial redrafting of the Agreement. The opening words of clause 2 did not provide a gateway to implying a term dealing with those different circumstances.
5. The court did not need to decide the effect of deletions from an earlier draft. Asplin LJ nevertheless observed that such deletions would ordinarily be unlikely to assist in implication unless they formed part of the relevant surrounding circumstances or had affected interpretation. Singh LJ agreed in the result but regarded the admissibility question as open, observing that deletion of the very words sought to be implied might bear on the strict-necessity question and that ambiguity might not be a threshold requirement in the distinct exercise of implication.

• Court of Appeal (Civil Division): appeal allowed. The order of HHJ Curran QC dated 26 May 2017 was quashed, judgment was entered for the appellant, and BGC’s claim was dismissed.
• High Court of Justice, Queen’s Bench Division: HHJ Curran QC implied a repayment term and entered judgment for BGC in the sum of £401,361.19. The claim based on an express term was dismissed.