Implied terms: Supreme Court rejects M&S appeal

In our June 2014 article No Express Right to Refund upon Exercise of Break Clause, we reported upon the Court of Appeal's decision in the case of Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another [2014] EWCA Civ 603, in which the Court of Appeal held that in absence of an express term to the contrary, a tenant of a commercial property who had exercised a break clause was not entitled to a refund of rent, insurance rent and the car parking charge which related to the period after a break date.

In November 2014, M&S were granted permission to appeal to the Supreme Court with the appeal being heard on 7 October 2015. The Supreme Court's judgment was published today (2 December 2015) with M & S's appeal being unanimously dismissed.

By way of a brief reminder, the case concerned premises at The Point in Paddington, London which were let to M & S under a commercial lease and used as office space. On 7 July 2011, M&S served a break notice on BNP Paribasto determine the Lease on 24 January 2012.

As is not uncommon, the break date did not coincide with the expiry of a rent period, the break date being a month after a rent payment fell due on 25 December 2011. M&S paid the full quarter's rent in advance on 25 December 2011 together with a break premium, the payment of these monies being a condition of the break clause.

Having exercised the break, M&S requested an apportioned refund of rent, insurance rent, service charge and car parking charge for the period after the break date until the next rent payment date. The Lease made no provision for these monies to be repaid to M&S upon the exercise of the break clause and BNP Paribas declined to repay the monies.

Proceedings followed with M&S arguing that a term should be implied into the Lease which entitled them to an apportioned refund. Whilst the High Court held that M&S was entitled to a refund amounting to in the region of £1.1 million, the Court of Appeal disagreed and overturned that decision. 

The Court of Appeal held that if the parties had wanted monies which had been paid in relation to the period after the break date to be repayable to the Tenant, they could have expressly agreed to such a term. They did not, and it was not prepared to imply any term to the contrary.

Upholding the Court of Appeal's decision, the Supreme Court highlighted that when considering whether a term should be implied into a contract, the test is whether, without the term, the contract worked. There was no basis for any term being implied in this instance. The Supreme Court held that it would be wrong to impose upon BNP Paribasa term that M & S should be entitled to recover an apportioned part of monies previously paid by M&S in accordance with the express terms of the Lease.

Whilst the case has provided a greater degree of certainty in respect of monies paid by Tenants at the conclusion of a lease, the Supreme Court's judgment highlights how the Court will deal with implied terms generally and as such the case will have far reaching implications.

Posted on: 02/12/2015

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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