In the recent case of Thomas Crema v Cenkos Securities1, whilst allowing an appeal on the facts, the Court of Appeal upheld the earlier finding of the High Court2 that market practice was admissible as part of the factual matrix which may be considered in interpreting a contractual term. The case also contains an interesting exploration by Lord Justice Aikens of how and when a court will imply terms into a contract.


To imply a term into a contract on the basis of a particular trade’s usage or custom, the English courts have set a high bar. Chitty on Contracts3 states that a term can be implied where the practice is “notorious, certain, reasonable” and not “contrary to law”. Nor can there be inconsistency between the usage and the express terms of the contract which will otherwise prevail.

In interpreting contracts the court will examine the intentions of the contracting parties, viewed objectively. This involves considering the ordinary meaning of the words used to determine what a reasonable person, with knowledge of the full background factual matrix available to the parties, would have understood the words to mean.


Cenkos is a stockbroker and corporate finance adviser based in the City of London. In 2007-2008 it engaged Mr Crema, who had worked as an investment banker in the City for 20 years, to act as a ‘sub-broker’ to find investors to finance a project for a venture capital company - Green Park Ventures (GPV).

There were two contracts concerning commission. The first was a contract between Cenkos and GPV. The second was a contract between Cenkos and Mr Crema. It was not disputed that Mr Crema’s fee would be 70% of Cenkos’ final commission payable by GPV, which was 7% of the total of £18m raised for GPV. Mr Crema’s fee would be payable after GPV had received the total funds from investors. However, it was the responsibility of Cenkos, not GPV, to pay Mr Crema’s fee.

The only dispute was whether Mr Crema became entitled to be paid his commission only upon GPV’s fee being paid to Cenkos or whether he was entitled to payment of his commission even if Cenkos itself had not received payment. The problem arose because GPV refused to pay Cenkos any commission, even though it received all of the £18m raised through Mr Crema. It then collapsed into insolvent administration in 2009.

Mr Crema claimed a fee of £882k with interest.

High Court decision

At first instance the judge heard expert evidence from two witnesses on when a sub-broker would be paid commission by the broker on raising finance for a client of the broker. Neither suggested there was sufficient trade custom, in the sense described above, to imply a term into the contract. However, the judge accepted that “there is a general market practice or understanding in the City that a sub-broker is not paid until the broker receives payment from the client.” The judge found that payment in advance would be “regarded as an indulgence”. The judge therefore held that a market practice existed. He also had to consider whether or not that fact was admissible.

In deciding that it was, he said that when construing a contract:

“[…] the Court is seeking to place itself in the position of the parties, and to do that it needs to have available to it all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.”

The judge also held that it was unnecessary, contrary to the decision in Galaxy Energy International4, for there to be accord between experts as to the market practice. Therefore “… it cannot be a pre-requisite of admitting this evidence that both experts are agreed. It is for the Court to decide whether a general market practice has been established. […] the evidence of one of them may be incredible or obviously wrong.”

Despite coming to this conclusion, the judge felt able to ignore it for the purposes of his judgment. In his assessment, Mr Crema and Cenkos “were in it together”. He stated that “[…] any other arrangement would be rather uncommercial, placing the whole risk of nonpayment by GPV on Cenkos.” He found that the contract between Mr Crema and Cenkos entitled him only to receive 70% of the brokerage actually received from GPV. Although he said he ignored market practice, the judge said it “strongly supported” his conclusion.

Court of appeal decision

Lord Justice Aikens gave the leading judgment. Aikens LJ first considered the judge’s finding that there was a term in the contract between Cenkos and Mr Crema that the latter would take a 70% share of the 7% brokerage received from GPV and that Mr Crema had no independent right to payment of brokerage. Aikens LJ held that if such a term did exist it must be an implied term.

Aikens LJ considered the circumstances in which a term would be implied and referred to the principles in the Belize case5 :

  • A court cannot improve the instrument it has to construe to make it fairer or reasonable.
  • The meaning is that which the instrument would convey to the “reasonable addressee”. That person will have all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed.  
  • The question of implication only arises when the instrument does not expressly provide for what is to happen when some particular event occurs.  
  • The default position is that nothing is to be implied in the instrument.  
  • If the “reasonable addressee” would understand the instrument to mean something more, “ie that something is to happen” in relation to that particular event, it is said the court implies a term.  
  • The process does not add another term to the instrument, however; it only spells out what the instrument means and is an exercise in the construction of the instrument as a whole.  

Aikens LJ went further than the Belize case, however, in concluding that the principles must apply to any contract, whether in writing or oral.  

Aikens LJ again referred to the Belize case as confirmation that “market practice” was admissible in the construction of a contract. “Only in that way can a court be put in the position of being what Lord Hoffmann calls the ‘reasonable addressee’”.  

When giving their evidence, both experts accepted they had never encountered a case where a broker had not been paid and so had to hypothesise on what would happen in that event. Their analysis had relied on the normal sequence of payments when things went according to plan. Aikens LJ found the first instance judge’s finding on City practice to be “tentative and general”, and that “the expert evidence did not drive the judge to the conclusion that the parties to this contract” must have intended to operate the contract in line with the condition described above.

Aikens LJ asked: “is the only meaning of the contract, […] consistent with its other provisions and taken against the relevant background, […] that Mr Crema is only entitled to his sub-commission if Cenkos has been paid its commission […]?”. Aikens LJ concluded that this was not the meaning of the contract for the following reasons:  

  • The default position is that there is no implication and there has to be some good reason why the contract must mean something more than what has been expressly stated.”  
  • The contracts between GPV and Cenkos and between Cenkos and Mr Crema are “on the face of it, entirely independent”.  
  • There was nothing in the agreement between Cenkos and Mr Crema to give him any control over the arrangements between GPV and Cenkos. Further, “at no stage did Mr Crema have a direct contract with GPV”. In those circumstances “it is right that the risk of non-payment by GPV should be placed upon Cenkos unless otherwise specifically agreed.”  
  • If there is to be an implied term, as found by the first instance judge, “there have to be other implied terms in the contract. At a minimum, (and as the judge found) these would impose duties on Cenkos to take reasonable steps to recover fees due from GPV and also not to do anything that would prevent payment of fees by GPV to Cenkos with the consequence that Mr Crema was deprived of his sub-commission.” With many terms having to be implied to give the contract the meaning sought by Cenkos, it left Aikens LJ asking: “is that what the parties must have meant by the contract?”.

He concluded not and the appeal was allowed. The Chancellor of the High Court agreed with the conclusion, but on “slightly different grounds”. Whilst he agreed that regard can be had to market practice falling short of trade usage or custom in interpreting a contract, he found that he did not have to consider the Belize case and when a court implies terms into a contract. Rather, on the documents correctly interpreted he did not consider that they warranted the “gloss”, that is to say the implied terms, “put on them by the judge”.


This judgment extends the bounds of the admissible factual matrix and provides a fresh avenue for parties to explore as an aid to contractual interpretation. It also serves as an interesting reminder of how and when a court will imply terms to a contract, although it should be noted that there was some disagreement amongst the judges as to whether that question was relevant to this case.

Crucially it serves as a reminder that when drafting commercial contracts parties must ensure that they are conscious of the environment in which they operate. If they intend to depart from common market practice – even practice that falls short of being “notorious, certain and reasonable” – they must do so explicitly. If they do not, and it later falls to the court to construe the parties’ agreement, they may find themselves held to a contract they did not intend.