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Terms Implied in Fact Clarified in
Singapore
Goh Yihan
Faculty of Law, National University of Singapore
Contracts; Implied terms; Interpretation; Singapore
Introduction
The Singapore Court of Appeal (the Court of Appeal) has in Foo Jong Peng v
Phua Kiah Mail rejected.' Lord Hoffmann's statement (articulated in Attorney
General of Belize v Belize Telecom LtdL) that the implication of terms is to be
approached as an exercise in the interpretation (or construction) of the instrument
as a while. The Court of Appeal, however, accepted that the process of the
implication of terms does involve interpretation, albeit "a speczjic form or
conception of interpretation which is separate and distinctfrom the more general
process of interpretation (in particular, interpretation of the express terms of a
Its objection, then, was the adoption of what it regarded
particular d~cument)".~
as an amorphous test of "interpretation" in place of the more specific and traditional
tests of "business efficacy" and "officious bystander", tests that the Court of Appeal
regarded as "an integral as well as indispensable part of the law relating to implied
In doing so, the Court of Appeal pointed out that English
terms in Singap~re".~
case law subsequent to Belize still adopted the traditional tests when implying
terms in fact, seemingly contrary to the broad tenor of Lord HoEmann's statement
in Belize, even if h s Lordship did say that the traditional tests were merely different
ways of expressing the fact that implication is an exercise of interpretati~n.~
Two questions arise £rom this decision and form the scope of this comment.
First, is the Court of Appeal correct in saying that the English approach after Belize
is inconsistentwith the approachtaken in Belize? Secondly, and more substantively,
is the Court of Appeal correct to insist on the retention of the traditional tests to
govern the implication of terms in fact in such a way that they supersede the more
general test of interpretation, rather thanmerely being different ways of expressing
that more general test?
Facts and decision in Foo Jong Peng
Before dealing with these questions, it may be useful to first understand the
background of the decision at hand. Foo Jong Peng concerned the action brought
'
Foo Jong Peng v Phua Kiah Mai [2012]SGCA 55 (FooJong Peng). Andrew Phang J.A. delivered the judgment
for a unanimous court comprising also o f V.K. Rajah J.A. and Woo Bih Li J.
Z~tfoi-ney
General ofBelize v Belize Telecom Lfd [2009] 1 W.L.R. 1988 PC (Belize)(Belize).
Foo Jong Peng [2012] SGCA 55 at [36](emphasis in original).
Foo Jong Peng [2012] SGCA 55 at [36](emphasis omitted).
' ~ e l i z e[2009] 1 W.L.R. 1988 at [22].
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237
238 Journal of Business Law
by the respondents to declare null and void certain resolutions removing them
from their executive positions within the Singapore Hainan Hwee Kuan Association.
Those resolutions had been initiated and passed at a meeting called by the
appellants, who were all members of the Association. This was notwithstanding
the fact that there was no rule providing for the removal of a member from an
executive position before the end of the prescribed two-year term other than for
misconduct, none of which had been alleged in this case. The contractual issue
arose because the appellants argued that there was an implied term permitting such
removal apart from misconduct within the contract between the merpbers of the
association. The Singapore High Court had declined to imply such a term, opining
that members were not llkely to desire constant "election battles" that could stifle
the smooth running of the a~sociation.~
The appellants' appeal to the Court of Appeal was dismissed. The court refused
to imply a term that would allow the respondents to be dismissed hom their
executive positions in the absence of misconduct. Since there was no power
otherwise to remove th'e respondents, the appellants' purported removal in the
earlier meeting was declared null and void. In a detailed examination of the law
relating to terms implied in fact, the Court of Appeal, as already mentioned, rejected
Lord Hoffmann's use of a broad test of "interpretation" to govern the implication
of terms in fact. The seeds of this holding were laid in an earlier Court of Appeal
decision of MFMRestaurants Pte Ltd v Fish & Co Restaurants Pte Ltd: in which
the court had rejected Lord Hoffmann's "assumption of responsibility" test as
being the appropriate one to govern contractual remoteness. The present rejection
of a broad test of "interpretation" to govern the implication of terms in fact has
similar undertones: in particular, it points to the Court of Appeal's preference for
using specific tests as opposed to elevating conceptual justifications to the status
of otherwise impractical tests (insofar as their application is concerned). Indeed,
in MFM Restaurants, the Court of Appeal had stated in obiter dicta that Lord
Hoffmann's test of interpretation results "in a lack of concrete rules (and consequent
normative guidance) as well as uncertainty in the practical ~phere".~
It also pointed
out the lack of guidance "stems from the absence of a sufficiently specific set of
concrete rules and prin~iples".~Foo
Jong Peng, then, was to be the case in which
the Court of Appeal elaborated on the tentative views expressed in MFM
Restaurants. This it undertook in three principal steps.
First, the Court of Appeal in Foo Jong Peng pointed out that the fundamental
difficulty with the Belize approach was that the process of implication is "just one
specific conception of the broader concept of 'interpretation"'.1° It stated that the
process of implication "necessarily involves a situationwhere it is precisely because
the express term(s) are missing that the court is compelled to ascertain the presumed
intention of the parties"."
Secondly, the Court of Appeal held that there had been conflation of the tests
governing implication and interpretation following Belize. This conflation had
6 ~ o JongPeng
o
v Phua Kiah Mai [2012] SGHC 14 at [5].
WM Restaurants Pte Ltd v Fish & Co Restaurants Pte Ltd [2011] 1 S.L.R. 150 (MFMRestaurants), noted in
Goh Yihan, "Explaining ContractualRemoteness in Singapore" [2011] J.B.L. 282.
MF~Restatrrants[2011] 1 S.L.R. 150 at [98].
9 ~ ~ ~ ~ e s t a u [2011]
r a n t 1s S.L.R. 150 at [98].
l o Foo Jong Peng [2012] SGCA 55 at [3 11.
l1 Foo Jong Peng [2012] SGCA 55 at [36](emphasis in original).
'
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Terms Implied in Fact Clarified in Singapore 239
occurred after Belize because, in the Court of Appeal's view, the test of
interpretation is premised on the concept of the reasonable man.'' The court pointed
out that Lord Hoffmann mooted the concept of the reasonable man in the context
of implied terms in his extrajudicial writings more than a decade ago.13
Thirdly, the Court of Appeal held that it was incorrect to conflate the tests and
techniques that accompany interpretation and implication respectively, even if it
acknowledged that the "(general) concept of 'interpretation' has much in common
with the implication of terms inasmuch as both entail an objective appr~ach".'~
This was the crux of the Court of Appeal's reasoning against the Belize approach.
According to the Court of Appeal, while such a concept would work in certain
areas of law, such as hstration (because it is a doctrine that applies by operation
of law and does not concern the search for the parties' presumed intention), it
would not work in the sphere of implication (because this involves a search for
the parties' presumed intention)." The conflation of the respective tests for
implication and interpretation was thus to be avoided. Furthermore, in the Court
of Appeal's view, the adoption of the reasonable man (and, with it, the objective
approach) does not "in and of itself, tell us how a particular term ought-r
ought
not-to be implied".16 In contrast, the Court regarded the traditional "business
efficacy" and "officious bystander" tests to "constitute . . . specific as well as
concrete guidance for the courts in a situation where the contracting parties have
not, ex hypothesi, made express provision for the situation concerned in the first
place"." Moreover, in the court's view, those tests encompass the stricter criterion
of "necessity", which may not be present if implication were governed by the test
that dictates interpretation. This criterion was deemed necessary because, as the
court pointed out, the court concerned cannot substitute its own view of what the
contracting parties would have intended had the gap in their contract been brought
to their attention for further consideration." Rather, using the strict criterion of
necessity, the court concerned would try "its level best to ascertain the presumed
intention of the contracting parties in order to ascertain whether or not it will imply
the term concerned".19
All in all, the Court of Appeal in Foo Jong Peng saw the Belize approach as
only helpful "in reminding us of the importance of the general concept of
interpretation (and its accompanyingemphasis on the need for objective evidence)"
but should otherwise be rejected in Singapore in so far as it suggests that the
traditional tests are not central to the implication of terms in fact.20In this regard,
the Court of Appeal declined the opportunity to comment on a Singapore High
Court decision that had interpreted the Belize approachnarrowly, since that decision
l2 Foo Jong
Peng [2012] SGCA 55 at [3 11 (emphasis in original).
[2012] SGCA 55 at [32], citing Lord Hofhann, "Anthropomorphic Justice: The Reasonable
Man and His Friends" (1995) 29 L m Teacher 127, and "A conversation with Lord Hofhann" [2010] Law and
Financial Markets Review 242,243.
I4Foo JongPeng [2012] SGCA 55 at [31] (emphasis in original).
15FooJongPeng 120121 SGCA 55 at [32].
l6 Foo Jong Peng [2012] SGCA 55 at [33] (emphasis in original).
l7 Foo Jong Peng 120121 SGCA 55 at [33].
l8 Foo JongPeng [2012] SGCA 55 at [34].
l 9 FOO Jong Peng [2012] SGCA 55 at [35].
20 FOO Jong Peng [2012] SGCA 55 at [36] (emphasis omitted).
l3 Foo Jong Peng
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240 Journal of Business Law
is due to be heard by the same court." Probably of more relevance to a more
international audience, the Court of Appeal also thought that the English cases
decided after Belize have not been entirely uniform in their endorsement or
application of the Belize approach." In particular, the court noted that there does
not appear to be any clear statement in the decided cases as to how the reasonable
man test is to be applied in the absence of any reference to the traditional tests.23
The academic literature also appeared to be equivocal in their support for Beli~e.'~
Evidently, the Court of Appeal was concerned about the very practical question
of application, so much so that it regarded cases that referred to ;Belize as
encompassing the concept of interpretation as being unhelpful.25
The discussion of the Court of Appeal's reasoning in Foo Jong Peng will be
approached in two main parts below. The first pertains to the last-mentioned aspect
of the court's decision, that is, its view that the English cases subsequent to Belize
do not reveal a uniform view of how the Belize approach is to be applied. The
second concerns the more substantive question of whether the Court of Appeal is
correct in stating that the test goveming implication should be kept distinct from
that governing interpretation in general.
Present English approach in implication of terms after Belize
Although a leading textbook is not wrong in pointing out that the Belize approach
has been referred to many times as the starting point for deciding whether should
be implied into a contract? the reality is that some subsequent cases have only
cited Belize without explaining exactly how it is to be applied. A brief examination
of the English cases subsequent to Belize reveals at least three approaches taken
with respect to that case.
Citation of Belize without application or even undermining it
First, some cases cite Belize at length, but do not actually apply it. For example,
in Chantry Estates (South East) Ltd v Anderson? Jacob L.J. cited extensively from
Belize, but yet, when it came to applying the test, phrased his approach as being
"whether in [the relevant option agreement's] relevant provisions as to the option
period must mean what is contended for by the proposed implied terms". He found
that it did not because the option agreement worked perfectly well without the
implied terms.28In other words, he had found the existing agreement "reasonable"
without the implied terms. However, this is rather different from asking what a
''
In SembcorpMarine Ltdv PPL Holdings Pte Ltd [2012] SGHC 118, the Singapore High Court interpretedBelize
to retain the two traditionaltests, although with an exclusionary gloss that the courts will not imply a term if it does
not cohere with a reasonable interpretation of the contract.
FOO Jong Peng [2012] SGCA 55 at [37].
Foo Jong Peng [2012] SGCA 55 at [39].
2 4 ~ oJongPeng
o
[2012] SGCA 55 at [41], citing Kelvin F.K. Low and Kelry C.F. Loi, "The Many 'Tests' for
Terms Implied in Fact: Welcome Clarity" (2009) 125 L.Q.R. 561, and Chris Peters, "The Implication of Terms in
Fact" [2009] C.L.J. 5 13, as contrasted with Elizabeth Mcdonald, "Casting Aside 'Officious Bystanders' and 'Business
Efficacy'?" (2009) 26 J.C.L. 97; Paul S Davies, "Recent developments in the law of impliedterms" [2010] L.M.C.L.Q.
140; and John McCaughran, "Implied Terms: The Journey of the Man on the Clapham Omnibus" [2011] C.L.J. 607.
2 5 ~ oJong
o Peng [2012] SGCA 55 at 1401, refening to Procter & Gamble Co v Svenska CellulosaAktiebolaget
[2012] EWHC 498 (Ch).
26 Sir Kim Lewison, The Interpretation of Contracts, 5th edn (Sweet & Maxwell, 2011), p.284.
Chantry Estates (South East) Ltd v Anderson (2010) 130 Con. L.R. 11 CA (Civ Div).
Chanhy Estates (2010) 130 Con. L.R. 11 at [17].
''
''
''
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Terms Implied in Fact Clarified in Singapore 241
reasonable man would understand the contract, less the implied terms, to mean. It
seems here that the court had evaluated the reasonableness of the contract and
concluded that it was perfectly workable without the proposed terms to be implied.
A similar example is Eastleigh BC v Town Quay Developments Ltd? where Arden
L.J., after citing extensively from Belize, including the part in which Lord H o h a n n
said that it is insufficient for the court to consider that the implied term expresses
what would have been reasonable for the parties to agree to, went on then to
consider exactly what the parties would have ~ontemplated.~"
Indeed, some cases purport to endorse Belize but end up citing autiorities that
undermine the reasoning within. A good example of such a case is Mediterranean
Salvage and Tow~ge.~'
As Davies has pointed out: although Lord Clarke M.R.
predicted that Lord Hohann's analysis in Belize will be very much referred to,
his Lordship did in fact refer to the judgment of Sir Thomas Bingham M.R. in
Philips Electronique Grand Public SA v British Sky Broadcasting Ltd? which
drew a clear distinction between the interpretation and implication of terms.
Bingham M.R. had clearly stated that the implication of contract terms is different
and more ambitious and hence had to be dealt with strictly. This is in contrast with
Lord Hoffmann's approach which, although accompanied with the language of
necessity, nonetheless appears to be focused on the less strict criterion of
reas~nableness.~~
This case has since been cited $ascorrect by the English High
Court in, inter aliaTAETInc Ltd v Arcadia Petroleum Ltd (The Eagle Valen~ia).~~
Citation of Belize butpreferencefor traditional tests
Another class of cases cites Belize but only to substantiate apreferential application
of the traditional tests, rather than as the foremost test to apply. While it is true,
as mentioned above, that Belize does not forbid the use of these traditional tests,
it is probably also true that Lord Hofbann had intended to supersede those tests
with the broad notion of "interpretation". An example of a case in this category is
Garratt v Mirror Group Newspapers Ltd:7 in which Leveson L.J. applied the
"officious bystander" test before saying that this approach is consistent with the
Belize approach.38Yet the relationship between the two tests was not made clear
save for the citation of a passage from Belize that there is only one question, namely,
that premised on interpreting the instrument from the perspective of a reasonable
man. A similar case is GroveholtLtd v Alan HughesP9in which an amalgamation
of the "business efficacy" and "officious bystander" tests were applied with an
especial emphasis on the strict criterion of "ne~essity".~~Belize
was customarily
29~astleigh
BC v Town Quay Developments Ltd [2009] EWCA Civ 1391; [2010] 2 P. & C.R. 2.
30~astleigh
BC [2009] EWCA Civ 1391; [2010] 2 P. & C.R. 2 at [36]-[37].
3' Mediterranean Salvage and Towage [2010] 1 A11 E.R. (Comm) 1 CA (Civ Div).
"Paul S. Davies, "Recent developments in the law of implied terms" [2010] L.M.C.L.Q. 140, 146.
33 philips Electronique Grand Public SA v British Sky Broadcasting Ltd [I9951 E.M.L.R. 472 CA Civ Div at 481.
See also Ultrafiame (UK) Ltd v TailoredRoofng Systems Ltd [2004] 2 All E.R. (Comm) 692; Port of Tilbuiy (London)
Ltd v Stora Enso Transport andDistn'bution Ltd [ZOO91 1 Lloyd's Rep. 391.
34 See p.245.
35 See also Deutsche BankAGv Sebastian Holdings Inc [2009] EWHC 2132 (Comm); [2009] 2 C.L.C. 908 at [48].
3 6 ~ ~Ltdv
~ Arcadia
~ n cPetroleum Ltd (The Eagle Valencia)[2010] 1 Lloyd's Rep. 593 QBD at [4].
37 Garratt v Mirror Group Newspapers Ltd [2011] LC.R. 880 CA (Civ Div).
38 Gawatt vMirror Group [2011] I.C.R. 880 at [45]-[46].
39 GroveholtLtd v Alan Hughes [2010] EWCA Civ 538.
40 Groveholt [2010] EWCA Civ 538 at [44].
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242 Journal of Business Law
referred to but explained as placing a "'superstructure of interpretation' on the
conditions necessary for the implication of a terms [sic]on the grounds of business
effi~acy".~'
An English High Court example, among others," is that of North Shove
. ~problem
~
with these cases is that Belize
VenturesLtd v Anstead Holdings I ~ cThe
did not only place a conceptual explanation over implication, it in fact imposed a
test of interpretation that arguably superseded the traditional tests. In fact, the
continued references to the requirement of necessity in these cases also go against
(as will be argued below44)a clear preference of "reasonableness" over "necessity"
in Belize. The courts' continued reference to the traditional tests, either in place
or in elaboration of the Belize approach, may well evince an uneasiness over the
application of a test based on "interpretation" alone.
Citation and proper application of Belize
In contrast with the earlier classes of cases, other cases have properly applied
Belize. 1nKG ~ominjlht~unker~esellschaftfu'r
~ineralolembH & Co v Petroplus
Marketing AG (The Mercini Lady): Rix L.J. properly asked if the additional
implied term was "part of the intention of the parties" or whether it would
"understoodby reasonable merchants to have been part of its meaning".46Another
example, among others? is Lomas v JFB F i ~ t hRixon Inc (International Swaps
and Derivatives Association intervening), in which the English Court of Appeal
asked whether the contracts "'mean' that the suspended payment obligation
disappears on the maturity of the tran~action".~~
A more realistic view?
The brief examination of just a few sample cases above show that whle Belize is
frequently cited, that does not by itself mean that it has been applied correctly.
Indeed, rather than regarding Belize as representing the present orthodoxy, a more
41 Groveholt [2010] EWCA Civ 538 at [45].
42 See, e.g., Ross River Ltdv Waveley CommercialLtd
[2012] EWHC 81 (Ch) at [224]; Miscela Ltdv Coffee
Republic Retail Ltd [2011] EWHC 1637 (QB) at [50]-[51]; Cassa di Rispamio della Repubblica di San Marino SpA
vBarclays BankLtd [2011] EWHC 484jComm); [2011] 1 C.L.C. 701 at [542]; Talbot v GeneralFederation of Trade
Unions [2011] EWHC 84 (QB) at [41]; Hildron Finance Ltd v Sunley Holdings Ltd [2010] EWHC 1681 (Ch); [2010]
3 E.G.L.R. 1 at [40] (drawing a distinction between Belize approach and more traditional test of "necessity"); North
Shore VenturesLtdv AnsteadHoldings Inc [2010] EWHC 1485 (Ch); [2011] 1 W.L.R. 2265 at [247] (continued
reference to traditional tests); Rutherford v Seymour Pierce Ltd [2010] EWHC 375 (QB); [2012] 1 Costs L.O. 1 at
[21]-[24]; and Fortis Bank S M V Indian Overseas Bank [2010] EWHC 84 ( C o r n ) ; [2010] Bus. L.R. 835 at
[63]-[69].
North Shore VenturesLtd v Anstead Holdings Inc [2011] 1 All E.R. ( C o r n ) 81 Ch D at (2471.
44 See p.245.
45 KG Bominflot Bunkergesellschaj?fiir MineralGle mbH & Co v Petroplus Marketing AG (The Mercini Lady)
[2011] 2 All E.R. (Comm) 522 CA (Civ Div).
46 The Mercini Lady [2011] 2 All E.R. (Comm) 522 at [44].
47 See also Fitzhugh v Fitzhugh [2012] EWCA Civ 694; [2012] 2 P. & C.R. 14 at [19]-[21]; Procter & Gamble
Co v Svenska Cellulosa Aktiebolaget [2012] EWHC 498 (Ch) at [8 11-[83]; Thompson v GoblinHiNHotels Ltd [2011]
UKPC 8; [2011] 1 B.C.L.C. 587 at [27]-[28]; PlayUp Interactive Entertainment (UK)PPTYLtd v GivemefootbaNLtd
[2011] EWHC 1980 (Comm); (2011) 108 L.S.G. 16 at [55];LordMayor and Citizens of Westminsterv Urban Wimax
Ltd [2010] EWHC 1166 at [30]; Sectorguard Plc v Dienne PIC [2009] EWHC 2693 (Ch) at [29]; Sawiris v Manvan
[2010] EWHC 89 (Comm) at [53]; Re Lehman Brothers International (Europe) (In Administration) 120091EWHC
2545 (Ch) at [88]; Manoudakis v Easy Group Holdings Ltd [2011] EWHC 3614 (QB) at [76]; F&CAltemative
Investments (Holdings) Ltdv Barthelemy [2011] EWHC 1731 (Ch); [2012] Ch. 613 at [271]-[272]; JBWGroup Ltd
v Westminster City Council [2009] EWHC 2697 (QB) at [21]; and Choil Trading SA v Addax Energy SA [2009]
EWHC 2472 (Comm); (2009) 106 L.S.G. 22 at [32].
4 8 ~ o m avsJFB Firth Rixon Inc (International Swaps andDerivatives Association intervening) [2011] 2 B.C.L.C.
120 at [57].
[2013] J.B.L., Issue 2 O 2013 Thomson Reuters (Professional)UIC Limited and Contributors
Terms Implied in Fact Clarified in Singapore 243
realistic view might be Arden L.J.'s view in Stena Line Ltd v P & 0 Ferries Ltd9
that the Belize approach is one "which the courts are probably still absorbing and
ingesting"50and that "[tlhe implications of Belize on the case law on implied terms,
which puts forward the different formulae referred to above, is not wholly clear".51
Indeed, Vos J. in Spencer v Secretary of State for Defence5' recognised that the
"other cases after Belize do not entirely speak with one voice" in that some cases
appear to view Lord Holkann as simply restating the existing law, whereas others
thought the case to stand for a substantive departure from that existing law." This
probably accords with the Court of Appeal's point in Foo Jong Peng that although
Belize is frequently referred to, there remains no definitive pronouncement on the
precise status of the .traditionaltests and, more importantly, on how the reasonable
man test is to be applied in the context of impli~ation.~~
T k s does lend some strength
to the Court of Appeal's view that the implication of terms should be governed by
a distinct test from that for interpretation.This brings us nicely to an examination
of the Court of Appeal's more substantive holding that the implication of terms
cannot be governed by the same test that applies for interpretation.
Can implication of terms be reduced to interpretation?
Is implication distinctfrom interpretation?
The first point raised by the Court of Appeal in Foo Jong Peng was that implication
is distinct from interpretation. Before Belize, some judges thought the processes
of interpretation and implication ought to be kept distinct.55The authors of Chitty
on Contract thought likewise. While maintaining that there is a "certain affinity"
between the processes of implication and the construction of express terms, they
state that there is nonetheless a difference between the relevant principles. What
accounts for the affinity is that, in both cases, the court tries to establish what the
parties must be taken to have agreed having regard to the commercial purpose of
the contract as a whole and the relevant background of the tran~action.~~
However, after Belize, the idea that implication is a facet of interpretation is
regarded having been acknowledged for some time. In this regard, cornrnentatorss7
sometimes use Lord Steyn's speech in Equitable Life Assurance Society v Hyman58
to support the proposition that interpretation and implication are part of the same
process. However, on closer reading, it is clear that Lord Steyn actually drew a
distinction between three concepts: interpretation, implication and construction;
he saw the former two as part of the overall concept of "c~nstruction".~~
McMeel
acknowledges that this is a different understanding of "construction" as compared
with the norm, which regards both "construction" and "interpretation" to mean
P & 0 Ferries Ltd [2010] EWCA Civ 543; [2011] Pens. L.R. 223.
5 0 ~ t e nLine
a [2010] EWCA Civ 543; [2011] Pens. L.R. 223 at [36].
Stena Line [2010] EWCA Civ 543; [2011] Pens. L.R. 223 at [44].
52 Spencer v Secretaiy of Statefor Defence [2012] EWHC 120 (Ch); [2012] 2 All E.R. (Comm) 480.
49 Stena Line Ltd v
53 Spencer [2012] EWHC
120 (Ch); [2012] 2 All E.R. (Comm) 480 at [52].
Jong Peng [2012] SGCA 55 at [39].
55See, e.g., National CommercialBank Jamaica Ltd v Guyana Refrigerators Ltd (1998) 53 W.L.R..229; Equitable
Life Assurance Society v Hyman [2002] 1 A.C. 408 HL at 459.
56 Chitty on Contracts, 30th edn, edited by H.G. Beale (Sweet & Maxwell, 2008), 11.887.
57 Gerard McMeel, The Construction of Contracts, 2nd edn (Oxford University Press, 2011), p.318.
5 8 ~ y m a n[2002] 1 A.C. 408.
59 ~ ~ r n [2002]
an
1 A.C. 408 at 459.
s4 FOO
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244 Journal of Business Law
the same thing.60Indeed, although he aclaowledges Lord Steyn to be emphatic
it
that the process of implication is part of the "overall process of c~nstruction",~'
is clear that the meaning that Lord Steyn attributed to "construction" is not the
interchangeable equivalent of "interpretation". For one, Lord Steyn himself stated
that:
"It is necessary to distinguish between the processes of interpretation and
implication. The purpose of interpretation is to assign to the language of the
text the most appropriate meaning which the words can legitimately bear."62
McMeel himself notes that the process of implication "goes further and pennits
the court to plug what it perceives to be gaps in the express terms or explicit
language of the parties' agreement".63Thus Lord Steyn clearly regarded implication
and interpretation to be different, and it is the sum of these distinct concepts that
constitutes "construction". Lord Hoffmann, on the other hand, ascribes a quite
different meaning to the word "construction". In h s view, it means the same thing
as "interpretation". Thus, when he said in South Australia Asset Management Colp
v York Montague Ltd that "[als in the case of any implied term, the process is one
of constructionof the agreement as a whole in its commercial setting"? he regarded
implication as a facet of interpretation, a view that was to become cemented in
Belize. Yet this view may not represent the orthodox view before Belize.
In contrast, the prevailing orthodoxy before Belize seems to be as Sir Thomas
Bingham M.R. said in Philips Electronique Grand Public SA v British Sky
Broadcasting Ltd5:
"The courts' usual role in contractual interpretation is, by resolving ambiguities
or reconciling apparent inconsistences, to attribute the true meaning to the
language in which the parties have themselves expressed their contract. The
implication of contract terms involves a different and altogether more
ambitious undertaking: the interpolation of terms to deal with matters which,
ex hypothesi, the parties themselves have made no provision. It is because
the implication of terms is so potentially intrusive that the law imposes strict
constraints on the exercise of this extraordinary power ... ."
Although not referred to by the Court of Appeal in Foo Jong Peng, this is entirely
in line with its reasoning that the processes of implication and interpretation are
quite distinct.
Has there been conjlation between implication and interpretation?
Assuming that the processes of implication and interpretation are dstinct, the next
issue arising from Foo Jong Peng is whether the Court of Appeal was correct in
stating that Belize resulted in a conflation of the tests that govern both processes.
After all, as is well lmown, although Lord Hoffmann in Belize said that implication
6 0 ~ c ~ e The
e l , Construction of Contracts (2011), p.3 15.
McMeel, The Construction of Contracts (201I), p.3 15.
6 2 ~ y m a[2002]
n
1 A.C. 408 at 458.
63McMeel,The Construction of Contracts (2011), p.315.
6 4 ~ ~Australia
~ t h AssetManagement Corp v YorkMontague Ltd [I9971 A.C. 191 HL at 212.
65
Philips Electronique v British Slg~Broadcasting [I9951 E.M.L.R. 472 at 481. See also UItraf;ame [2004] 2 All
E.R. (Comm) 692; Port of Tilbury [2009] 1 Lloyd's Rep. 391.
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Terms Implied in Fact Clarified in Singapore 245
is a question of interpretation, he did not purport to supersede or render obsolete
the traditional tests for the implications terms in fact. Indeed, his Lordship had
preserved the high threshold of "necessity" pursuant to the "business efficacy"
test before a term could be implied. This seemingly means that there was no
conflation as the Court of Appeal had alluded to in Foo Jong Peng. However,
although it is true that Lord Hoffmann in Belize did expressly say that a court
might find the traditional tests helpfu1,66 the fact is that Lord Hofhann actually
undermined the strict requirement of "necessity" by referencing the criterion of
"reasonableness". As has been pointed out: the test of "interpretation", which
Lord Hoffmann says applies to the entire process of implication, broadens the
traditional requirement of "necessity" in relation to the implication of terms in fact
to one of "reasonableness". This is because, according to Investors Compensation
Scheme Ltd v WestBromwich Building Society,68 interpretationis the "ascertainment
of the meaning which the document would convey to a reasonable person having
all the background knowledge which would reasonably have been available to the
Thus the
parties in the situation in which they were at the time of the c~ntract".~~
restriction which Lord Hofhann placed on the word "necessity" in the context
of the "business efficacy" test is no longer whether the implication is necessary
to give effect to business efficacy, but whether the implication is necessary to
convey the meaning as understood by a reasonable person. The criterion of
"reasonableness" has instead become the governing test over that of "necessity".
This explains why the Court of Appeal in Foo Jong Peng regarded the tests
governing implication and interpretation as having been conflated.
If there is conflation where there ought not to have been, then it is easy to
understand why the Court of Appeal in Foo Jong Peng held that the approach in
Belize should not be followed in Singapore. More to the point, while
"reasonableness" itself-the underlying criterion in the Belize approach-is not
an objectionable criterion, it is the potential uncertainty that it engenders that is
open to criticism.
Is there nonetheless roomfor interpretation to govern implication?
However, it may be possible to conceive of an approach that straddles the positions
taken in Belize (which stresses the over-arching test of "interpretation") and Foo
Jong Peng (which stresses the primacy of the traditional tests). This is the view
that there are a variety of terms implied in fact. By this view, by no means accepted,
in certain instances the courts are really "interpreting" the contract even while
implying terms. This is because they are simply extrapolating from the existing
material what the parties had in their minds, but left unexpressed. Some support
for this may be derived from Lord Wilberforce's speech in Liverpool City Council
v Irwin, where his Lordship suggests that implication consists of "shades on a
continuous
He said this:
66~elize
[2009] 1 W.L.R. 1988 at [21].
6 7 ~ MacDonald,
.
"Casting Aside 'Officious Bystanders' and 'Business Efficacy'?" (2009) 26 J.C.L. 97,99.
6 8 ~ n v e ~Compensation
t~r~
Scheme Ltd v West Bromwich Building Society [I9981 1 W.L.R. 896 HL.
691nvestorsCompensation [I9981 1 W.L.R. 896 at 912 (emphasis added).
70 ~ i v e ~ oCity
o l Council v Invin [I9771 A.C. 239 HL at 253.
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246
Journal of Business Law
"To say that the construction of a complete contract out of these elements
involves a process of 'implication' may be correct; it would be so if
implication means the supplying of what is not expressed. But there are
varieties of implications which the courts think fit to make and they do not
necessarily involve the same process.
(1)
Where there is on the face of it, a complete, bilateral contract, the
courts are sometimes willing to add terms to it, as implied terms:
this is very common in mercantile contracts where there is an
established usage: in that case the courts are spelling out what both
parties know and would, if asked, unhesitatingly agree to be past of
the bargain.
In other cases, where there is an apparently complete bargain, the
(2)
courts are willing to add a term on the ground that without it the
contract will not work - this is the case, if not of The Moorcock
itself on its facts, at least of the doctrine of The Moorcock as usually
applied. This is, as bas pointed out by the majority in the Court of
Appeal, a strict test -though the degree of strictness seems to vary
with the current judicial trend -and I think that they were right not
to accept it as applicable here.
There is a third variety of implication, that which I think Lord
(3)
Denning MR favours, or at least did favour in this case, and that is
the implication of reasonable terms. But although I agree with many
of his instances, which in fact fall under one or other of the preceding
heads, I cannot go so far as to endorse his principle; indeed, it seems
to me, with respect, to extend a long, and desirable, way beyond
sound authority.
The present case, in my opinion, represents a fourth category, or I
(4)
would rather say a fourth shade on a continuous spectrum. The court
here is simply concerned to establishwhat the contract is, the parties
not having themselves fully stated the terms. In this sense the court
is searching for what must be implied."
This passage supports three types of terms implied in fact: first, terms implied as
a matter of interpretation or, more precisely, extrapolation from the express terms
Secondly, terms implied as a consequence
as a matter of logic or obvio~sness.~'
of specific (albeit limited) creation, here, in pursuance of the aim of achieving
"business efficacy". Thlrdly, terms implied as a matter of general (again limited)
creation, here, in pursuance of a broader notion of reasonableness. It suffices to
note that McLauchlan, who divides terms implied in fact into several distinct
sub-categories, alluded to the idea that there are distinct types of terms implied in
fact. He identifies three such sub-categories:terms that are implied to give business
efficacy to a contract, terms that are implied to fill gaps in an agreement intended
to be binding that would otherwise be void for incompleteness, and terms that are
implied as a matter of necessity. Where terms are implied as a matter of necessity,
or as an extrapolation from the express terms of the contract, it may be argued that
there is a case for equating it with interpretingthe contract,but only in that situation.
71 cf. McMeel,
The Construction of Contracts (2011), pp.316327.
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Terms Implied in Fact Clarified in Singapore 247
However, it may equally be true that this does not occur all the time, particularly
when courts imply individualised terms as to a reasonable price or time.
Returning to the Singapore context, it is clear that this approach does not find
currency in Singapore. This is because the courts adopt the view that the traditional
tests are complementary, inasmuch as the officious bystander test is the practical
mode by which the business efficacy test is implemented." With the rejection of
the interpretation approach in Belize, it is clear that the Singapore courts prefer a
singular conception of implied terms in fact.
Conclusion
In conclusion, it is clear that the English approach towards the implication of terms
in fact after Belize is not as uniform as is usually believed. Indeed, while many
cases cite Belize in apparent endorsement, the actual application of Belize is not
clearly in line with the reasoning in Belize. The Singapore approach in Foo Jong
Peng, which rejects the Belize approach, affords a useful contrast to the supposedly
uniform view in England. However, it may nonetheless be possible to adopt a
middle ground between the Belize approach and Foo Jong Peng by positing a
spectrum of terms implied in fact, of which one type corresponds to interpreting
the contract, but others correspond to the more traditional tests, which go beyond
interpretation. More broadly, although this is not a point developed above, it is
also suggested that the Court of Appeal's approach in Foo Jong Peng also shows
a uniquely Singaporean approach to contract law-that is, the preference for clear
tests supportedby broad, unifymg concepts. This is to be preferred over an elevation
of the unifying concepts to the test itself and was demonstrated most specifically
in the area of contractual remoteness and, now, the implication of terms. Such an
approach is defensible and commercially practicable in so far as it achieves a
balance of theoretical soundness, and the maintenance of a sense of practical
balance."
72 See Forefront Medical Technology (Pte) Ltd v Modem-Pak Pte Ltd [2006] 1 S.L.R.(R) 927 at [36]; and Chua
Choon Chengv ANgreen Properties [2009] 3 S.L.R.(R) 724 at [63]. See also generally the important article ofAndrew
Phang, "Implied Terms, Business Efficacy and the Officious Bystander -A Modem History" [I9981 J.B.L. 1.
73 See G. Yihan and P. Tan, "An Empirical Study of the Development of Singapore Law" (2011) 23 S. Ac. L.J.
176 for a general account of how Singapore law has developed independently in more recent times.
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