The Court of Appeal has today handed down judgment in the case of Bou Simon v BGC Brokers LLP  EWCA 1525 (Civ). The question for the Court was whether the trial judge had been correct to imply a term into a loan agreement requiring the appellant broker to repay a loan made by his employer in circumstances where he left the firm before the completion of the ‘initial period’ defined in his employment contract. The trial judge had found that such a term should be implied, applying the test in Marks & Spencer v BNP Paribas Securities  AC 742. The Court of Appeal disagreed. It held that the judge had succumbed to the temptation warned against by Bingham MR in Philips Electronique  EMLR 472 of implying a term to give effect to the merits of the situation as they appeared to the judge, rather than to the obvious intentions of the parties at the time of contracting.
The decision of the Court of Appeal is interesting for its discussion about the circumstances in which deleted words in draft agreements are admissible in determining whether a term should be implied into a contract. This question arose because, in a draft of the loan agreement, the employer had specifically put forward an express term similar to that which the judge implied, but the employee indicated that he did not agree to the inclusion of the term, which was subsequently deleted from the draft. In the event, the Court of Appeal rejected the implied term without reference to deleted term, and so did not need to decide whether or not the deletions could be taken into account, but nevertheless expressed some obiter views on the question.
According to Asplin LJ, deleted words from a draft agreement should only be admitted for the purpose of implication if they were part of the admissible background for the purposes of construing the express terms (para 30). She held that even if the parties had deleted a term which was identical to that which was sought to be implied, this fact could not be relied upon in order to rebut the proposed implication unless it was part of the relevant surrounding circumstances and not merely part of the course of negotiations.
Singh LJ, however, suggested that a wider approach may be justified. He indicated that he saw force in the suggestion in Lewison, The Interpretation of Contracts, that “the consideration of deleted words may negative the implication of a term in the form of deleted words.” (para 33). He also pointed out that, in circumstances where (post Marks & Spencer) it was now clear that the process of implying a term was different from that of construing express terms, the fact that the deletions may not have been admissible for the purpose of construction may not be determinative (para 34).