Robert Bou-Simon v BGC Brokers LP
| Jurisdiction | England & Wales |
| Judge | Lady Justice Asplin,Lord Justice Singh,Lord Justice Hickinbottom |
| Judgment Date | 05 July 2018 |
| Neutral Citation | [2018] EWCA Civ 1525 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2017/1694 |
| Date | 05 July 2018 |
[2018] EWCA Civ 1525
Lord Justice Hickinbottom
Lord Justice Singh
and
Lady Justice Asplin
Case No: A2/2017/1694
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Before HHJ CURRAN QC (Sitting as a Judge of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Luke Pearce and Mark Tushingham (instructed by Woodfords Solicitors LLP) for the Appellant
Schona Jolly QC and Rachel Barrett (instructed by in-house solicitors) for the Respondent
Hearing date: 14 June 2018
Approved Judgment
The question on this appeal is whether HHJ Curran QC, sitting as a judge of the High Court, was right to imply a term into an agreement dated 21 December 2011 which was made between the Appellant, Mr Bou-Simon, and BGC Brokers LP (“BGC”) (the “Agreement”) and as a result by an order sealed on 30 May 2017, to give judgment in favour of BGC in the sum of £401,361.19 being £336,000 plus interest. Mr Pearce on behalf of Mr Bou-Simon contends that although the Judge set out the right test for the implication of contractual terms in his judgment of 10 February 2017, he did not apply it correctly and the term requiring monies paid to Mr Bou-Simon to be repaid where Mr Bou-Simon had failed to remain in BGC's employment for four years should not have been implied.
I take the essential facts from the judgment. BGC is an inter-dealer brokerage firm which specialises in facilitating transactions involving financial instruments such as interest and currency swaps. Mr Bou-Simon was employed by BGC as a broker from 1 February 2012. By an agreement dated 1 October 2012, his employment was transferred to BGC Services (Holdings) LLP. He reigned on 3 June 2013. He had previously worked for BGC from 2000 until 2005. During that period, HMRC had investigated BGC's bonus scheme and Mr Bou-Simon had fallen within the scope of the investigations. As a result, he had become very sensitive to tax issues. In any event, after negotiations in the autumn of 2011, Mr Bou-Simon signed the Agreement on 8 December 2011. It had been prepared by and revised by professional legal advisers on both sides. On the same date, Mr Bou-Simon signed an employment contract and a “side letter” concerning the grant of partnership units in BGC Holdings LP (the “Side Letter”). During the negotiations which led to the execution of the Agreement certain provisions were deleted on Mr Bou-Simon's behalf from a draft of the Agreement and it is said that those deletions are relevant to the process of the implication of terms. As it makes more sense to consider them in the light of the finalised wording of the Agreement itself, I will return to the deletions and their relevance below.
As I have already mentioned, Mr Bou-Simon commenced his second period of employment with BGC on 1 February 2012. It was intended by all that he would become a partner in BGC Holdings LP and it was acknowledged in the Side Letter that he was eligible to receive a grant of “equity interests” in BGC Holdings LP, known as “REUs” which were subject to the terms and conditions of the Partnership Agreement, as defined. In fact, prior to the commencement of the proceedings it was assumed that Mr Bou-Simon had become a partner, although it seems that the necessary documentation was never signed and he did not. Nevertheless, a sum of £336,000 was paid to Mr Bou-Simon on 21 February 2012 purportedly under the terms of the Agreement.
It was BGC's case that the £336,000 paid to Mr Bou-Simon pursuant to the Agreement was a loan and that if he left employment within four years it became repayable in full with interest. Mr Bou-Simon's resignation was within the four year period and therefore, it was alleged that the outstanding sum plus interest was due. At trial, BGC contended that the money was due either as a result of an express term of the Agreement or pursuant to a term which should be implied to that effect. The implied term as pleaded was that “the Loan [£336,000] would become repayable in full where the Maker [Mr Bou-Simon] failed to serve the full term of the Initial Period” (the “Implied Term”). The claim in relation to an express term was dismissed by the judge and there is no appeal in that regard.
Mr Bou-Simon contended that the payment was a “golden hello” and was never intended to be repaid. That was also rejected by the judge and his finding at [51] of the judgment that on the balance of probabilities it was known to Mr Bou-Simon before any negotiations began that golden hellos had not been known in the business for over ten years is not appealed. Belatedly, and for the first time at the commencement of the trial, it was also alleged that the monies were never due and payable to Mr Bou-Simon under the Agreement at all and therefore, were not repayable because the sum was only payable to him if he became a partner in BGC Holdings LP and was only repayable if he ceased to be so within the four year period and that did not occur. That was also rejected by the judge on the basis that both parties had proceeded on the basis that the £336,000 was paid in accordance with the Agreement which they regarded as binding.
The Agreement and deletions from a previous draft
The relevant terms of the Agreement are in the following form:
“
This agreement is between BGC Brokers L.P… . . (“the Lender”) and yourself, Robert Bou-Simon (the “Maker”). The Maker hereby agrees with the Lender that Lender will lend Maker such principal sum in USD that is equal to GBP 336,000 as converted from GBP to USD using such currency exchange rates and terms as the Lender may reasonably determine in its sole and absolute discretion (the “Loan”), pursuant to the terms of this Agreement.
The Loan is payable by the Lender within thirty (30) days of the Maker becoming a partner in the Partnership (as defined below) or within thirty (30) days after the parties' execution of this Agreement whichever shall be the later, subject to the terms set out below… .
1. Repayment of the Loan
The Maker agrees that he will repay the Loan from the net partnership distributions on any of Maker's partnership units from BGC Holdings, LP (the “Partnership”). These repayments will continue until the Loan is repaid in full. In the event that Maker ceases to be a partner any unpaid amounts will be written off by the Lender only if the Maker served at least the full Initial Period as defined in the Maker's employment contract with the Lender dated [21 December 2012] (the “Contract”). Maker hereby assigns all Partnership distributions to Lender so long as this Loan is outstanding, represents and warrants that he has not otherwise assigned them, and promises not to assign them during the term of this Loan Agreement and Promissory Note. Maker may prepay this Loan Agreement and Promissory Note at any time.
2. Circumstances causing the Loan to become immediately repayable in its entirety, on demand, to the Lender
Notwithstanding anything set out above the Loan shall become immediately due and payable to the Lender if at any time that a material impairment of Maker's creditworthiness occurs, such as Maker's becoming insolvent, that customarily permits lenders to accelerate payment.
3. Interest
Maker will pay interest on all sums due under this note at 3% per annum or such greater rate as applicable tax law would impute to this loan and note if that rate is not charged hereon.”
The phrase “Initial Period” which appears in clause 1 of the Agreement is defined at clause 1(b) of the employment contract, as an initial period of four years from the Commencement Date which in the circumstances which occurred, was 1 February 2012.
The Agreement also contained some unnumbered provisions which where relevant, provided as follows:
“THE PARTIES TO THIS AGREEMENT CONTEMPLATE THAT THERE MAY BE OTHER AGREEMENTS ENTERED INTO BETWEEN MAKER AND LENDER … This Agreement is independent of and not integrated with any such other agreement.”
As I have already mentioned, a previous draft of the Agreement had contained terms which were deleted as a result of negotiation. The deletions were made on Mr Bou-Simon's behalf and were accepted on behalf of BGC. The earlier draft form of clause 2 of the Agreement had read as follows:
“2. Circumstances causing the Loan to become immediately repayable in its entirety, on demand, to the Lender
Notwithstanding anything set out above the Loan shall become immediately due and payable to the Lender on the occurrence of any of the following events:-
(a) if you do not receive any Partnership Units;
(b) if at any time prior to the expiry of the Initial Period, you cease to be a partner or
(c) at any time that a material impairment of Maker's creditworthiness occurs, such as Maker's becoming insolvent, that customarily permits lenders to accelerate payment.”
As is immediately apparent, clause 2(a) and (b) did not appear in the Agreement in its executed form.
The relevant legal test
As I have already mentioned, the appeal is on the grounds that although the judge identified the correct test for the implication of contractual terms, to be found in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742, he did not apply it properly. There is no dispute as to the test itself or the type of contractual implied term with which this case is concerned. It is a term to be implied into the Agreement “in the light of the express terms, commercial common sense, and the facts known to both the parties at the time the contact was made” as described by Lord Neuberger PSC in the Marks & Spencer case at [14]. Having begun the consideration of the many judicial observations as to the nature of the requirements which must be satisfied before a term can be implied in a detailed...
To continue reading
Request your trial
-
Alan Bates and Others v Post Office Ltd
...as at the time the contract is made is essential. The pitfalls of doing otherwise were made clear in Bou-Simon v BGC Brokers LP [2018] EWCA Civ 1525. Asplin LJ stated at [18], giving the leading judgment: “[18] In my view, therefore, the reasonable reader, taking into account all of the ex......
-
Complex Commercial Litigation Law Review – England and Wales
...UKSC 55.29 Marks & Spencer Plc v. BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72.30 Bou-Simon v. BGC Brokers LP [2018] EWCA Civ 1525.31 Wells v. Devani [2019] UKSC 4.© 2020 Law Business Research LtdEngland and Wales114There have been a number of recent decisions regard......
-
Complex Commercial Litigation Law Review - Fifth Edition - England & Wales
...UKSC 55.29 Marks & Spencer Plc v. BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72.30 Bou-Simon v. BGC Brokers LP [2018] EWCA Civ 1525.31 Wells v. Devani [2019] UKSC 4.© 2022 Law Business Research England and Wales76ere have been a number of recent decisions regarding j......
-
Complex Commercial Litigation Law Review – England & Wales
...373. 19 Marks & Spencer Plc v. BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72. 20 Bou-Simon v. BGC Brokers LP [2018] EWCA Civ 1525. © 2019 Law Business Research England & Wales 63 IV DISPUTE RESOLUTION Dispute resolution in England is largely conducted through the cour......
-
COT's Top Four Commercial Issues - July 2018
...are considered unfair practice in all circumstances. Implied terms A recent case in the Court of Appeal (Bou Simon v BGC Brokers LLP [2018] EWCA 1525 (Civ)) provides a useful reminder that it is not appropriate to seek to imply a term in a commercial contract because it seems fair to do so ......