Kwik Lets Ltd & Ors v Khaira & Ors

A Braganza duty is not implied merely because a contractual party forms an opinion about an alleged breach and then elects to exercise a contractual remedy. The duty is directed to a contractually agreed primary decision-maker who must make a decision affecting both parties, typically involving an assessment or choice between options. It does not ordinarily govern a unilateral right to terminate, suspend payment or pursue another remedy in the exercising party’s own interests. Where the contract reserves final determination to the court and provides machinery for challenging the alleged breach, that machinery supplies the relevant control. A binary choice to give notice and suspend payment, or to continue paying, therefore does not engage the public-law standard of review recognised in Braganza.

The appellants appealed against the Senior Master’s refusal, in part, of their application to strike out or obtain summary judgment on claims arising from a settlement agreement. The respondents alleged that terms should be implied requiring reasonable grounds and sufficient evidence before notice could be served alleging breach and suspending instalment payments.

The Senior Master held that the first implied term had a real prospect of success but struck out the second. The appellants challenged the first conclusion. The respondents filed an out-of-time cross-appeal concerning the second implied term. The central issue was whether clause 6.5.1 engaged a Braganza duty.

1. Appeal allowed. The court held that the Senior Master was wrong to conclude that the first alleged implied term had a real prospect of success. The claim against the appellants was struck out.
2. The relevant question was whether the Land Companies were contractually appointed as primary decision-makers making a decision affecting both parties. Under clause 6.5, they could notify the Plot Owners of an alleged breach and then suspend payments, but the Plot Owners could dispute the notice and bring proceedings. The parties had agreed to abide by the final and binding decision of a competent court.
3. Clause 6.5.1 created a binary choice: the Land Companies could treat an act or omission as a breach, serve notice and suspend payments, or overlook the breach and continue paying. It did not confer a discretion involving a range of options or an evaluative decision to be made for both parties’ interests.
4. The Land Companies’ right was unilateral and could be exercised in their own interests. It was not subject to procedural or substantive fairness obligations analogous to public-law duties. The court, rather than the Land Companies, was the ultimate decision-maker on the validity of the alleged breach and entitlement to suspend payments. The reasoning in Shurbanova v Forex Capital Markets Limited was distinguishable because the company there was the contractual primary decision-maker and was expressly required to act fairly.
5. Since there was no relevant conflict of interest, there was no basis for the alleged imbalance of power. The second implied term depended on the first and therefore also had no real prospect of success. The respondents’ out-of-time revised respondents’ notice and cross-appeal were not admitted; alternatively, permission to appeal on the cross-appeal was refused.

• High Court (Queen’s Bench Division): appeal from the Senior Master’s order dated 26 April 2019 allowed. The claim against the appellants was struck out.
• Senior Master Fontaine: application under CPR Part 24 dismissed in relation to the first implied term, but the second implied term and related pleading were struck out.