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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> ZAHID AGAINST DUTHUS GROUP INVESTMENTS LIMITED AND HIS ROYAL HIGHNESS PRINCE TURKI BIN MUGRIN AL SAUD [2018] ScotCS CSOH_59 (05 June 2018)
URL: http://www.bailii.org/scot/cases/ScotCS/2018/[2018]_CSOH_59.html
Cite as: [2018] ScotCS CSOH_59, [2018] CSOH 59
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OUTER HOUSE, COURT OF SESSION
[2018] CSOH 59
CA112/16
OPINION OF LORD DOHERTY
In the cause
MR KHALED HASSAN IBRAHIM ZAHID
against
DUTHUS GROUP INVESTMENTS LIMITED
Pursuer
Defender
and
HIS ROYAL HIGHNESS PRINCE TURKI BIN MUGRIN AL SAUD
Third Party
Pursuer: SP Walker QC, Frain-Bell; Young & Partners LLP
Defender: McBrearty QC, Paterson; Gilson Gray LLP
Third Party: Lord Davidson of Glen Clova QC; CMS Cameron McKenna Nabarro Olswang LLP
5 June 2018
Introduction
[1] The pursuer resides in the Kingdom of Saudi Arabia. The defender is a Scottish
limited company which was formerly incorporated under the name RMJM Group
Investments Limited (“RMJM GIL”). The third party is a member of the royal family of the
Kingdom of Saudi Arabia.
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2
[2] In this commercial action the pursuer sued the defender for repayment of two deposits
totalling US$1million paid to the defender in respect of a proposed transaction, and for
interest on those deposits. He also sought indemnification by the defender in respect of legal
costs incurred by him in relation to recovery of the deposits. The defender denied liability,
but maintained that if it was liable to repay the deposits to the pursuer it was entitled to relief
from the third party.
[3] The contract between the parties was contained in a Letter of Intent (“the Letter”)
written on behalf of the pursuer to the defender on 2 November 2014, the terms of which were
agreed and accepted in writing by the defender on 4 November 2014. The Letter superseded
an earlier Letter of Intent between the parties dated 16 September 2014. The Letter set out the
terms on which it was proposed that the pursuer would participate with the defender in the
ownership of a new architectural company (“Newco”) which was to acquire the existing
business of Robert Mathew & Johnson Marshall & Partners in the Middle East. In exchange
for the issuance or transfer of a 49% interest in Newco to the pursuer, the pursuer agreed to
pay a purchase price. In terms of Section 1(d)(i) of the Letter the parties agreed that the
pursuer had already paid US$250,000 of the purchase price as a refundable deposit (the “First
Deposit”). In terms of Section 1(d)(ii) the parties agreed that within three business days of the
Letter being signed the pursuer would pay the defender a further refundable deposit of
US$750,000 (the “Second Deposit”). Section 1(d) (iii) provided that the Deposits would be
refunded by the defender in the event that the pursuer decided not to proceed with the
transaction.
[4] The pursuer decided not to proceed with the purchase. He sought repayment of the
Deposits. The defender denied that the pursuer was entitled to repayment and it refused to
repay the Deposits. The pursuer took steps to enforce his right to repayment. He initiated
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3
criminal proceedings against the defender in Dubai. Thereafter he raised the present action.
A diet of proof before answer was set down to commence on 13 March 2018. At the outset of
the proof diet I was informed that, subject to one outstanding issue, the pursuer and the
defender had settled their differences. I was also told that the defender and third party had
reached agreement in principle to settle their dispute. Since the third party had no interest in
the outstanding issue between the pursuer and the defender, his senior counsel sought leave
to be excused further attendance at the proof. There was no opposition to that, and I granted
the request. Senior counsel for the pursuer moved to amend the second conclusion of the
summons. He also sought decree in terms of the first conclusion (which related to the
repayment of the Deposits, with interest) and immediate extract; recall of caution for
expenses; and the release of the pursuer’s mandatary. None of these motions were opposed,
and I granted them.
[5] The remaining contentious issues concerned the proper construction of a contractual
indemnity contained within Section 1(d) of the Letter, and whether in terms thereof the
defender is obliged to indemnify the pursuer in respect of certain costs and expenses which
the pursuer avers he incurred in relation to the recovery of the Deposits. The pursuer avers
(in article 7 of condescendence) that he incurred legal expenses of 218,259 Emirati Dirhams
(US$59,431.95) to Dubai lawyers who instigated the criminal proceedings against the defender
in Dubai and who sought an opinion from Scottish counsel as to the enforceability of the
contract in Scotland. He further avers that he has incurred counsel’s fees of £322,924.03
(US$410,856.24), legal costs to his Scottish solicitors of £196,644.19 (US$250,190.40), and legal
costs to a Saudi Arabian firm of US$2,000. The total sum in respect of which indemnity is
claimed is US$722,478.59 (conclusion 2).
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[6] Neither party led any evidence. I heard (relatively brief) submissions from senior
counsel for the pursuer and senior counsel the defender as to the proper construction of the
indemnity.
The indemnity and other terms of the Letter
[7] The Letter states:
“...
1 – Prices and terms. I understand that the principal terms of the proposed transaction
would be substantially as follows:
...
(d) Payment. The parties agree and acknowledge as follows in relation to the
Purchase Price and the proposed transaction generally:
...
(v) RMJM GIL (for itself and as agent for each of its affiliates) hereby fully
indemnifies me in respect of all costs and expenses (including but not limited to
legal costs and expenses) which I may incur in any jurisdiction in relation to the
recovery of the Deposits ... in the event that the Deposits are not repaid ... as
provided for in this Letter of Intent.
...
4. Miscellaneous. ... This Letter of Intent constitutes the entire understanding and
agreement between the parties hereto and their affiliates with respect to its subject
matter and supersedes all prior or contemporaneous agreements, representations,
warranties and understandings of such parties (whether oral or written)... No promise,
inducement, representation or agreement, other than as expressly set forth herein, has
been made to or by the parties hereto. This Letter of Intent may be amended only by
written agreement, signed by the parties to be bound by the amendment. Evidence
shall be inadmissible to show agreement by and between such parties to any term or
conditions contrary to or in addition to the terms and conditions contained in the
Letter of Intent. This Letter of Intent shall be construed according to its fair meaning
and not strictly for or against either party.
...
7- Non-Binding. Except for Section 1(d) and Sections 2 through 6 of this Letter of
Intent (which are legally binding upon full execution of this Letter of Intent), this
Letter of Intent is a statement of mutual intention; it is not intended to be legally
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binding, and does not constitute, create or give rise to any binding contractual
commitment with respect to the transaction...
...”
Senior counsel for the pursuer’s submissions
[8] Mr Walker submitted that on a proper construction of Section 1(d) the pursuer was
entitled to recover from the defender all costs and expenses which he had incurred in relation
to the recovery of the Deposits. That was the ordinary and natural meaning of the words
which had been used. It was very plain that the indemnity granted had been in the widest of
terms. The defender had agreed to “fully” indemnify the pursuer in respect of “all” costs and
expenses. The costs and expenses recoverable were not merely reasonable expenses. There
was no express qualification to that effect, and such a qualification ought not to be implied.
All relevant costs and expenses were recoverable. While the pursuer’s position was that all
costs and expenses claimed had in fact been reasonably incurred, their recoverability did not
depend on their having been reasonably incurred. If that represented an agreement which the
defender had been imprudent to enter into (which was not conceded), that had been its look
out. It was not a good reason for giving the provision something other than its ordinary and
natural meaning. It was not necessary to imply any term in order to give the contract business
efficacy. The pursuer’s construction did not produce a commercially absurd result. The
objectively ascertainable intention of the parties was that the pursuer should not be left out of
pocket in respect of any costs and expenditure which it did in fact incur in relation to the
recovery of the Deposits. Reference was made to Bank of Scotland v Dunedin Property
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BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742, per Lord Neuberger at
paras 18 and 28.
Senior counsel for the defender’s submissions
[9] Mr McBrearty submitted that it was clear that there had to be some limit upon the
costs and expenses which were recoverable under Section 1(d). Mr Walker had recognised
that expenses which were “beyond the pale” or which “would produce a commercially
absurd result” should not be recoverable. While it would indeed be absurd to give the
indemnity clause the construction which Mr Walker contended, it was not necessary for the
defender to go as far as that. It was enough for it to show that the pursuer’s construction was
not a commercially sensible one.
[10] Reasonable persons in the positions of the contracting parties at the time of contracting
could not have intended that the pursuer should be able to recover expenditure which was
unreasonably incurred because, eg, it was disproportionate or extravagant or exorbitant or
unnecessary. The defender had very real concerns in relation to some of the expenditure
which the pursuer sought to recoup.
[11] The commercially sensible construction of the provision was that it meant “all
reasonable costs and expenses ... which I may reasonably incur ...”. That conclusion could be
arrived at in either of two ways. First, by construing the words of the Section as bearing that
meaning. Second, and alternatively, by implying the reasonableness qualifications. The
requirements for implication of such terms were satisfied. In particular, the suggested terms
were necessary to give business efficacy to the contract. In addition, they were so obvious that
they went without saying. Reference was made to Marks and Spencer plc v BNP Paribas
Securities Services Trust Co (Jersey) Ltd, supra, per Lord Neuberger at paras 18, 19, 20, 21 and 26.
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Decision and reasons
[12] The sums claimed for counsel’s fees and solicitors’ fees do seem remarkable.
However, on the basis of the material before me I am not in a position to assess whether those
fees represent reasonable remuneration for work done by counsel and the solicitors, or
whether they are costs and expenses which were reasonably incurred by the pursuer.
[13] It is perhaps helpful to clarify two matters at the outset. First, senior counsel for the
defender did not argue that the indemnity clause ought to be construed contra proferentem the
pursuer. Such an argument would have been difficult. The application of that canon of
construction is generally a matter of last resort: the court’s first task is to construe the contract
properly on ordinary principles (Lewison, The Interpretation of Contracts (6th ed), para 7.08).
Here there would also have been the added difficulty of the final sentence of Section 4 of the
Letter. Second, senior counsel for the pursuer did not suggest that the entire agreement clause
within Section 4 precluded the suggested implied terms. That position was adopted, I
presume, because it is well established that if an entire agreement clause is to exclude the
implication of a term in a contract the language of the clause must make that clear (see eg J N
and 36; Barden v Commodities Research Unit International (Holdings) Ltd & Others [2013] EWHC
[2018] BLR 111, per Lord Clark at paras 55-57; Lewison, The Interpretation of Contracts, supra,
para 3.16 (p 156)).
[14] In my opinion it is appropriate to consider first the proper interpretation of the words
used in Section 1(d)(v). The exercise of interpretation of the words used in a contract is
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different from, and usually ought to precede, any consideration of whether a term falls to be
implied into the contract (Marks and Spencer plc v BNP Paribas Securities Services Trust Co
(Jersey) Ltd, supra, per Lord Neuberger at paras 22-31; Trump International Golf Club Scotland
Barrington Support Services Ltd (formerly Lawyers at Work Ltd) 2017 AC 73, per Lord Hodge at
para 31: cf Lord Carnwath JSC (at para 57-74) and Lord Clarke of Stone-cum-Ebony JSC (at
paras 75-77) in Marks and Spencer, and Lord Mance JSC in Trump International (at paras 41-44)).
[15] In Arnold v Britton, supra, Lord Neuberger (with whom Lord Sumption, Lord Hughes
and Lord Hodge JJSC agreed) observed:
“15 When interpreting a written contract, the court is concerned to identify the
intention of the parties by reference to ‘what a reasonable person having all the
background knowledge which would have been available to the parties would have
understood them to be using the language in the contract to mean’, to quote Lord
does so by focussing on the meaning of the relevant words, in this case clause 3(2) of
each of the 25 leases, in their documentary, factual and commercial context. That
meaning has to be assessed in the light of (i) the natural and ordinary meaning of the
clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the
clause and the lease, (iv) the facts and circumstances known or assumed by the parties
at the time that the document was executed, and (v) commercial common sense, but
(vi) disregarding subjective evidence of any party's intentions...
16 For present purposes, I think it is important to emphasise seven factors.”
Only the first five need be repeated here. Read short, they were, first (para 17), that
“the reliance placed in some cases on commercial common sense and surrounding
circumstances...should not be invoked to undervalue the importance of the language
of the provision which is to be construed. The exercise of interpreting a provision
involves identifying what the parties meant through the eyes of a reasonable reader,
and, save perhaps in a very unusual case, that meaning is most obviously to be
gleaned from the language of the provision.”
Second (para 18), that the less clear the centrally relevant words are, or the worse their
drafting, the more ready the court can properly be to depart from their natural meaning.
Third (para 19), that commercial common sense is not to be invoked retrospectively: it is only
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9
relevant to the extent of how matters would or could have been perceived by reasonable
people in the position of the parties as at the date that the contract was made. Fourth
(para 20), that a court should be very slow to reject the natural meaning of a provision as
correct simply because it appears to be a very imprudent term for one of the parties to have
agreed, even ignoring the benefit of wisdom of hindsight. Fifth (para 21), that when
interpreting a contractual provision only facts or circumstances which existed at the time that
the contract was made and which were known or reasonably available to both parties may be
taken into account.
interpretation of an indemnity clause in a sale and purchase agreement) Lord Hodge (with
whose judgement all the other Justices agreed) observed:
“10 The court’s task is to ascertain the objective meaning of the language which the
parties have chosen to express their agreement. It has long been accepted that this is
not a literalist exercise focused solely on a parsing of the wording of the particular
clause but that the court must consider the contract as a whole and, depending on the
nature, formality and quality of drafting of the contract, give more or less weight to
elements of the wider context in reaching its view as to that objective meaning...
11 Lord Clarke of Stone-cum-Ebony JSC elegantly summarised the approach to
Lord Neuberger of Abbotsbury PSC, paras 13-14; Lord Hodge JSC, para 76 and Lord
Carnwath JSC, para 108. Interpretation is, as Lord Clarke JSC stated in the Rainy Sky
case (para 21), a unitary exercise; where there are rival meanings, the court can give
weight to the implications of rival constructions by reaching a view as to which
construction is more consistent with business common sense. But, in striking a balance
between the indications given by the language and the implications of the competing
constructions the court must consider the quality of drafting of the clause (the Rainy
Sky case, para 26, citing Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd
(No 2) [2001] 2 All ER (Comm) 299, paras 13, 16); and it must also be alive to the
possibility that one side may have agreed to something which with hindsight did not
serve his interest: the Arnold case, paras 20, 77. Similarly, the court must not lose sight
of the possibility that a provision may be a negotiated compromise or that the
negotiators were not able to agree more precise terms.
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12 This unitary exercise involves an iterative process by which each suggested
interpretation is checked against the provisions of the contract and its commercial
consequences are investigated: the Arnold case, para 77 citing In re Sigma Finance Corpn
[2010] 1 All ER 571, para 12, per Lord Mance JSC. To my mind once one has read the
language in dispute and the relevant parts of the contract that provide its context, it
does not matter whether the more detailed analysis commences with the factual
background and the implications of rival constructions or a close examination of the
relevant language in the contract, so long as the court balances the indications given by
each.
13 Textualism and contextualism are not conflicting paradigms in a battle for exclusive
occupation of the field of contractual interpretation. Rather, the lawyer and the judge,
when interpreting any contract, can use them as tools to ascertain the objective
meaning of the language which the parties have chosen to express their agreement.
The extent to which each tool will assist the court in its task will vary according to the
circumstances of the particular agreement or agreements. Some agreements may be
successfully interpreted principally by textual analysis, for example because of their
sophistication and complexity and because they have been negotiated and prepared
with the assistance of skilled professionals. The correct interpretation of other contracts
may be achieved by a greater emphasis on the factual matrix, for example because of
their informality, brevity or the absence of skilled professional assistance. But
negotiators of complex formal contracts may often not achieve a logical and coherent
text because of, for example, the conflicting aims of the parties, failures of
communication, differing drafting practices, or deadlines which require the parties to
compromise in order to reach agreement. There may often therefore be provisions in a
detailed professionally drawn contract which lack clarity and the lawyer or judge in
interpreting such provisions may be particularly helped by considering the factual
matrix and the purpose of similar provisions in contracts of the same type. The
iterative process, of which Lord Mance JSC spoke in Sigma Finance Corpn [2010] 1 All
ER 571, para 12, assists the lawyer or judge to ascertain the objective meaning of
disputed provisions.
14 On the approach to contractual interpretation, the Rainy Sky and Arnold cases were
saying the same thing.
15 The recent history of the common law of contractual interpretation is one of
continuity rather than change. One of the attractions of English law as a legal system of
choice in commercial matters is its stability and continuity, particularly in contractual
interpretation.”
[17] The Letter did not form part of a particularly detailed agreement. It was intended to
be the precursor of a fuller formal agreement for the sale and purchase of an interest in
Newco. It appears to be a matter of admission by the defender that the pursuer had had the
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benefit of legal advice in relation to it from Tim Watkins of Hadef & Partners, Dubai (article 2
of condescendence and answer 2). There is no equivalent averment or admission indicating
whether the defender had legal assistance when the contract was being concluded. In terms
of the Letter, Deposits paid by the pursuer to the defender were to be repaid in the event of
the transaction not proceeding. Clause 1(d) made provision as to what was to happen if the
pursuer had to incur expenditure in order to obtain the return of the Deposits.
[18] On an ordinary and natural reading of Section 1(d) I do not think that its express terms
are capable of bearing the construction which the defender suggests. Nor in my opinion is
there anything in the remainder of the Letter, or in any relevant surrounding circumstance
which was known or ought reasonably to have been known by the parties at the time of
contracting, which suggests that the defender’s interpretation of the express terms is an
available one.
[19] It follows that the defender can only succeed if a term falls to be implied in
Section 1(d). I turn then to consider the criteria discussed in Marks and Spencer v BP Paribas
Securities Services Trust Co (Jersey) Ltd, supra. Lord Neuberger (with whom Lord Sumption and
Lord Hodge JJSC agreed) opined:
“18 In the Privy Council case BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977)
180 CLR 266 , 283, Lord Simon of Glaisdale (speaking for the majority, which included
Viscount Dilhorne and Lord Keith of Kinkel) said that:
‘for a term to be implied, the following conditions (which may overlap) must
be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to
give business efficacy to the contract, so that no term will be implied if the
contract is effective without it; (3) it must be so obvious that ‘it goes without
saying’; (4) it must be capable of clear expression; (5) it must not contradict any
express term of the contract.’
19 In Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR
472, 481, Bingham MR set out Lord Simon's formulation, and described it as a
summary which ‘distil[led] the essence of much learning on implied terms’ but whose
‘simplicity could be almost misleading.’ Bingham MR then explained, at pp 481–482,
that it was ‘difficult to infer with confidence what the parties must have intended
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when they have entered into a lengthy and carefully-drafted contract but have omitted
to make provision for the matter in issue’, because ‘it may well be doubtful whether
the omission was the result of the parties' oversight or of their deliberate decision’, or
indeed the parties might suspect that ‘they are unlikely to agree on what is to happen
in a certain … eventuality’ and ‘may well choose to leave the matter uncovered in their
contract in the hope that the eventuality will not occur.’ Bingham MR went on to say,
at p 482:
‘The question of whether a term should be implied, and if so what, almost
inevitably arises after a crisis has been reached in the performance of the
contract. So the court comes to the task of implication with the benefit of
hindsight, and it is tempting for the court then to fashion a term which will
reflect the merits of the situation as they then appear. Tempting, but wrong.
[He then quoted the observations of Scrutton LJ in the Reigate case, and
continued] it is not enough to show that had the parties foreseen the
eventuality which in fact occurred they would have wished to make provision
for it, unless it can also be shown either that there was only one contractual
solution or that one of several possible solutions would without doubt have
been preferred …’
20 Bingham MR's approach in the Philips case was consistent with his reasoning, as
Bingham LJ in the earlier case Atkins International HA v Islamic Republic of Iran Shipping
Lines (The APJ Priti) [1987] 2 Lloyd's Rep 37, 42, where he rejected the argument that a
warranty, to the effect that the port declared was prospectively safe, could be implied
into a voyage charterparty. His reasons for rejecting the implication were ‘because the
omission of an express warranty may well have been deliberate, because such an
implied term is not necessary for the business efficacy of the charter and because such
an implied term would at best lie uneasily beside the express terms of the charter.’
21 In my judgment, the judicial observations so far considered represent a clear,
consistent and principled approach. It could be dangerous to reformulate the
principles, but I would add six comments on the summary given by Lord Simon in the
[1995] EMLR 472 and exemplified in The APJ Priti [1987] 2 Lloyd's Rep 37. First, in Equitable
Life Assurance Society v Hyman [2002] 1 AC 408, 459, Lord Steyn rightly observed that
the implication of a term was ‘not critically dependent on proof of an actual intention
of the parties’ when negotiating the contract. If one approaches the question by
reference to what the parties would have agreed, one is not strictly concerned with the
hypothetical answer of the actual parties, but with that of notional reasonable people
in the position of the parties at the time at which they were contracting. Secondly, a
term should not be implied into a detailed commercial contract merely because it
appears fair or merely because one considers that the parties would have agreed it if it
had been suggested to them. Those are necessary but not sufficient grounds for
including a term. However, and thirdly, it is questionable whether Lord Simon's first
requirement, reasonableness and equitableness, will usually, if ever, add anything: if a
term satisfies the other requirements, it is hard to think that it would not be reasonable
and equitable. Fourthly, as Lord Hoffmann I think suggested in Attorney General of
Belize v Belize Telecom Ltd [2009] 1 WLR 1988, para 27, although Lord Simon's
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requirements are otherwise cumulative, I would accept that business necessity and
obviousness, his second and third requirements, can be alternatives in the sense that
only one of them needs to be satisfied, although I suspect that in practice it would be a
rare case where only one of those two requirements would be satisfied. Fifthly, if one
approaches the issue by reference to the officious bystander, it is ‘vital to formulate the
question to be posed by [him] with the utmost care’, to quote from Lewison, The
Interpretation of Contracts 5th ed (2011), p 300, para 6.09. Sixthly, necessity for business
efficacy involves a value judgment. It is rightly common ground on this appeal that the
test is not one of ‘absolute necessity’, not least because the necessity is judged by
reference to business efficacy. It may well be that a more helpful way of putting Lord
Simon's second requirement is, as suggested by Lord Sumption JSC in argument, that a
term can only be implied if, without the term, the contract would lack commercial or
practical coherence.”
[20] In the present case the terms which the defender says fall to be implied are not said to
be a legal incident of a particular kind of contractual relationship. Rather, the implied terms
are said to be based on the intention imputed to the parties from their actual circumstances.
[21] In my opinion the real issue here is whether a term should be implied that the costs
and expenses which Section 1(d) indemnifies are those which the pursuer may reasonably incur
in relation to the recovery of the Deposits. If such a term were to be implied there would in
my view be no arguable basis for also implying a further term that the costs and expenses
indemnified are only reasonable costs and expenses. Such a further term would not be
necessary to give the contract business efficacy, nor would it be so obvious as to go without
saying. However, if costs and expenses are unreasonable in extent or amount it may be
harder to demonstrate that they have been reasonably incurred: but it may not necessarily
follow from the mere fact that costs or expenses are not reasonable in extent or amount that
they were not reasonably incurred. Whether costs and expenses were reasonably incurred is
likely to be a matter that requires to be assessed broadly, not using too fine a scale.
[22] On the pursuer’s construction of Section 1(d) he would be entitled to be indemnified
for costs or expenses even if they were unreasonably incurred. I do not accept that a
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reasonable reader of the contract at the time it was made would have understood it to have
that effect. On the contrary, in my opinion such a reader would have considered the term that
the indemnity was of costs and expenses which the pursuer might reasonably incur to have
been so obvious as to go without saying.
[23] Moreover, in my view the implication of that term is necessary in order to give the
contract business efficacy. Implication of a term does not succeed only where without it the
contract would be completely inoperable. As Lord Neuberger reminds us at para 21 of Marks
and Spencer v BP Paribas Securities Services Trust Co (Jersey) Ltd, supra, “the test is not one of
‘absolute necessity’, not least because the necessity is judged by reference to business
efficacy.” A contract lacking business efficacy must, if possible, be supplemented to cure the
defect. The exercise involves implication from the presumed intention of the parties. The
object is to give the transaction the efficacy which the parties are taken to have intended. I am
satisfied that without implication of the term that indemnity was of costs and expenses which
the pursuer might reasonably incur the contract would lack commercial and practical
coherence. In my view it would fail to give effect to the presumed intention of the parties.
[24] While it may suffice that one or other of the obviousness or business efficacy
requirements is satisfied, I think that each of them is met in the present case. That both are
fulfilled is unsurprising. As Lord Neuberger observed in Marks and Spencer plc v BNP Paribas
Securities Services Trust Co (Jersey) Ltd, supra, at para 21, while business necessity and
obviousness can be alternatives, in practice it would be a rare case where only one of them
was satisfied.
[25] In my opinion the remaining requirements discussed by Lord Simon of Glaisdale in BP
Refinery (Westernport) Pty Ltd v Shire of Hastings are also satisfied. The term is reasonable and
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15
equitable. It is capable of clear expression. It does not contradict any express term of the
contract.
Disposal
[26] I shall put the case out by order to discuss (i) an appropriate interlocutor to give effect
to my decision; (ii) further procedure.