Parties to construction contracts frequently seek to contend that the terms of the written instrument do not record the complete agreement between the parties and seek to imply terms governing their relationship. The recent banking decision of Irish Bank Resolution Corporation Ltd (in Special liquidation) v Camden Market Group  EWCA Civ 7 serves to remind us of the circumstances in which this will not be permissible.
The Appellant bank ("IBRC") and the Respondent developer ("CMG") entered into a Facility Agreement in 2005 in relation to the Stables Market in Camden and land on the opposite side of the canal.The loan was extended in 2008 and again in 2012 to allow CMG to obtain planning permission, which would add an estimated £25m to the value of the secured properties. The 2008 agreement included, at Clause 26, details of the circumstances in which IBRC could assign its loan.This included provisions for IBRC to provide information about the loan to potential assignees provided that the party receiving the information entered into an undertaking of confidentiality.
As part of its Special Liquidation process which commenced in February 2013 IBRC marketed all its loans, including one made to CMG.The book of loans marketed by IBRC included some which were "distressed", though the one to the CMG was not.
CMG, in marketing the properties, discovered that it was a widespread view among potential purchasers that the properties were subject to a distressed loan.Some suggested that they would purchase the loan from IBRC or its assignee and obtain the property by enforcing the security of the loan, rather than paying the market price.
CMG commenced proceedings and sought a declaration that it was an implied term of the agreement that IRBC would not do anything to hinder CMG marketing the properties to achieve the best price, by marketing the "sale" of the loans or otherwise. It alleged substantial losses arising from the breach of this implied term including the cost of refinancing the loan, the difference in market value of the properties, and wasted costs of marketing the properties. IBRC sought summary judgment or strike out the claim, on the basis that CMG's case on the implied term was not arguable.
The Court of Appeal held that CMG's case was bad in law and had no prospects of success, and entered judgment for IBRC. The pleaded implied term was difficult to reconcile with the express terms regarding assigning the loan and providing information. Further, the meaning of the pleaded implied term was ambiguous – would it prohibit any conduct which might have an adverse impact on CMG's marketing in fact, or just conduct which IBRC knows will have that effect? Market perception is clearly outside the control of the liquidators, but could trigger the pleaded implied term. The express terms give clear, and wide, powers to IRBC to deal with its asset, and an implied term cannot circumscribe them.
The express terms of a contract will always be considered before any implied terms, and any implied term can only be incorporated if it is not inconsistent with the express terms. The situation which emerged on the marketing of the loans was clearly not envisaged under the original contract, but CMG's proposed implied term was equally beyond the original intention of the parties.
Parties should ensure that their rights are protected by express terms from the outset of the contract, rather than relying on implied terms to fill in any gaps.