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Grounds publishedDecided 29 Apr 2009
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Court of Appeal

Ng Giap Hon v Westcomb Securities Pte Ltd and Others

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[2009] SGCA 19Case no. CA 88/2008

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  1. Introduction

  2. [1] Although the issues in the present appeal are deceptively simple, they belie important issues of principle centring around the inherently problematic doctrine of the implied term. On the one hand, we will need to consider the relationship between implied terms and what are commonly called “entire agreement clauses”. On the other, we will need to consider whether or not a term based on the doctrine of good faith can be implied into a contract. In this last-mentioned regard, there has – as we shall see – been significant controversy in other jurisdictions (in particular, Australia). Indeed, in so far as the Singapore context is concerned, this issue appears to have been raised squarely for the first time in the present appeal.

  3. [2] More specifically, this is an appeal against the decision of the High Court judge (“the Judge”) in Suit No 193 of 2007, in which he dismissed the claim by the appellant, Mr Ng Giap Hon, for commission due in respect of placement shares in initial public offerings (“IPOs”) that were allocated to two customers of the first respondent, Westcomb Securities Pte Ltd (see Ng Giap Hon v Westcomb Securities Pte Ltd [2008] SGHC 101 (“the Judgment”)). The appellant is licensed under the Securities and Futures Act (Cap 289, 2006 Rev Ed) to deal in securities. He was, at the material time, a remisier with the first respondent and is presently a remisier with UOB Kay Hian Private Limited. The first to the third respondents form what is known as “Westcomb Financial Group” in Singapore, while the fourth respondent, Mr Choo Chee Kong, and the fifth respondent, Mr Tan Kah Koon, were, at all material times, the chief executive officer (“CEO”) of the second respondent, Westcomb Financial Group Ltd, and the executive director of the third respondent, Westcomb Capital Pte Ltd, respectively. The fifth respondent has also been a director of the first respondent since 21 June 2004.

  4. [3] The appellant averred that he was entitled to “the remuneration that remisiers [were] customarily allowed in Singapore or, if there was no customary practi[c]e, reasonable remuneration taking into account all the aspects of the transaction [concerned]”.[note: 1] He argued that “the customary rate of commission for remisiers, where [p]lacement [s]hares [were] dealt by or through the remisier, [was] 1% of the value of the [p]lacement [s]hares”.[note: 2] He also argued, inter alia, that there was “an implied duty of good faith between [him] and [the first respondent] as between agent and principal”[note: 3] [underlining in original omitted] and that “it was an implied term of the agency agreement that the [first respondent] would not do anything to deprive [him] from earning his commission”.[note: 4] The appellant further claimed that the second to the fifth respondents had wrongfully conspired with the first respondent to breach the agency agreement entered into between him (ie, the appellant) and the first respondent (“the Agency Agreement”), with the intention of causing loss to him by unlawful means.[note: 5]

  5. [4] Given that the trial was bifurcated, the only issue that arose for consideration before the Judge was the question of liability. As mentioned at [2] above, the Judge found in favour of the respondents.

  6. The facts

  7. [5] The first respondent is a well-known stockbroking company and holds a capital market services licence which permits it to deal in securities and provide custodial services for securities. The second respondent, an investment holding company listed on the Singapore Exchange Ltd (“SGX”), is the parent company of both the first and the third respondents. The third respondent deals in securities as well as provides corporate finance advisory services. As mentioned earlier (at [2] above), the first to the third respondents form what is known as “Westcomb Financial Group” in Singapore; this group has been involved in the launch of numerous IPOs in Singapore as manager, underwriter and placement agent.

  8. [6] The appellant has been working as a remisier in Singapore since 2000. As Prof Walter Woon observed in his article, “The Legal Position of a Remisier” (1992) 4 SAcLJ 346, the position of remisiers in Singapore and Malaysia is unique (at 346):

  9. [7] However, the learned author also clarified, as follows (ibid):

  10. [8] On 3 May 2005, the appellant and the first respondent entered into the Agency Agreement, which was precisely the type of agreement described by Prof Woon above. In particular, the first respondent appointed the appellant as its agent to trade and deal in stocks, shares and other marketable securities (hereinafter collectively referred to as “securities”). The Agency Agreement, a six-page document, set out, inter alia, the duties of the remisier (ie, the appellant), the rights and duties of the stockbroking firm (ie, the first respondent) as well as the remisier’s liability in respect of transactions dealt by or through the remisier in the name of the stockbroking firm. The salient clauses in the Agency Agreement (particularly relevant for our purposes) include the following:[note: 6]

  11. [9] The events that arose in 2006 (and which are relevant in the context of the present appeal) were of considerable dispute. The appellant contended in his second amended statement of claim filed on 16 November 2007 (“the Statement of Claim”) that, on or around 8 February 2006, he met one Julian Lionel Sandt (“Sandt”), the CEO of Orchid Capital Limited (“Orchid Capital”), an Australian listed company, during a networking event.[note: 7] The appellant submitted that, at the networking event, Sandt got along with him very well and revealed that he was looking for investment opportunities with a “particular interest in taking up … [p]lacement [s]hares”.[note: 8] After the appellant indicated that he was a representative of the first respondent, Sandt agreed to be the appellant’s client in his personal capacity and further confirmed that Orchid Capital and/or its subsidiaries would eventually be clients of the appellant. The appellant further alleged that Sandt informed him during this networking event that he (Sandt) was the representative of an Austrian fund investment company known as Aktieninvestor.com AG (“Aktieninvestor”), but did not specify whether he was a formal representative of that company or only had informal connections with it. The appellant claimed that Sandt represented on or around March 2006 that Aktieninvestor would be the appellant’s client as well. The respondents, on the other hand, denied that Sandt and the appellant had as close a relationship as the appellant averred. The respondents contended, firstly, that Sandt’s relationship with the fourth and the fifth respondents in fact predated any relationship between Sandt and the appellant;[note: 9] and, secondly, that before Sandt opened a trading account with the first respondent through the appellant, he was already in talks with the third respondent on his possible involvement in pre-IPO investments.[note: 10]

  12. [10] What is clear from the evidence is that, on or around 6 March 2006, Sandt opened an individual trading account with the first respondent through the appellant.[note: 11] The appellant contended that the opening of this account was the result of a meeting where he introduced Sandt to the fourth respondent. After the meeting, the appellant submitted, Sandt expressed an interest in taking up placement shares for IPOs managed, underwritten or placed out by the first respondent and its related companies.[note: 12] On 7 March 2006, the appellant sent a follow-up e-mail to the fourth respondent informing him of Sandt’s interest:[note: 13]

  13. This was followed by the opening of a corporate trading account for Orchid Emarb Limited (“Orchid Emarb”), a subsidiary of Orchid Capital, with the appellant on 15 March 2006.[note: 14] As mentioned earlier (at [9] above), the respondents submitted that, prior to opening a trading account with the first respondent through the appellant, Sandt was already engaged in discussions with the third respondent on his possible involvement in pre-IPO investments.

  14. [11] On 27 April 2006, Sandt subscribed for 1.5 million placement shares in the IPO of Natural Cool Holdings Ltd (“Natural Cool”) at $0.20 per share, paying an aggregate amount of $300,000.[note: 15] The first respondent, which was the placement agent, did not charge Sandt any commission on this transaction. On the same day, Aktieninvestor and the second respondent entered into a share subscription agreement (“the Share Subscription Agreement”) under which Aktieninvestor agreed to subscribe for 7.8 million shares in the second respondent.[note: 16] A Mr Raymond Low of Trondheim Consulting was responsible for brokering this deal and was paid commission of $85,000 for his role in this particular transaction.

  15. [12] The appellant alleged that he subsequently arranged for a meeting on or around 17 May 2006 between Sandt and other key figures, namely: Mr Thomas Roggla (“Thomas”), the chairman of the supervisory board of Aktieninvestor and a director of Extra Rum Investments Ltd (“Extra Rum”); Mr Lim Teck Heng Winston (“Winston Lim”), the managing director of the first respondent; as well as Mr Tan Meng Shern, the head of the third respondent’s corporate finance department. The purpose of this meeting was to discuss the possibility of Aktieninvestor taking up placement shares in IPOs. The appellant alleged that, after the meeting ended, Winston Lim approached him to inquire how he came to acquire clients such as Sandt, Thomas and Aktieninvestor. The appellant gave Winston Lim details of how he had met these clients and revealed that he had mailed out the account opening forms to Aktieninvestor.

  16. [13] When the appellant did not receive Aktieninvestor’s account opening forms after several months, he began to suspect that something was amiss. On 27 October 2006, to expedite the processing of the account opening forms, the appellant sent an e-mail to Thomas asking for help:[note: 17]

  17. Thomas responded via e-mail later on the same day stating that Mr Markus Mair (“Markus”), the CEO of Aktieninvestor, was on vacation, but would be in touch with the appellant shortly:[note: 18]

  18. [14] Following a courtesy e-mail from the appellant to Markus on 7 November 2006,[note: 19] Markus wrote to the appellant via e-mail on 9 November 2006 and revealed that he had already sent Aktieninvestor’s account opening forms to the fifth respondent, a director of the first respondent:[note: 20]

  19. [15] A series of correspondence thereafter ensued between the appellant and Markus, through which the appellant found out that the fifth respondent had allegedly intercepted Aktieninvestor’s account opening forms by contacting Markus and asking Markus to send the account opening forms to him (the fifth respondent) instead. The appellant wrote to Markus by e-mail on 9 November 2006 to get to the root of the mystery:[note: 21]

  20. Markus Nair responded on the same day via a short e-mail explaining why the account opening forms had been sent to the fifth respondent instead:[note: 22]

  21. [16] The appellant continued to correspond with Markus, who could not recall how the fifth respondent managed to contact him. This led to much unhappiness, and formed the basis of the appellant’s allegations that the first respondent had bypassed him and had dealt directly with Sandt and Aktieninvestor without his knowledge and that the fifth respondent had intercepted the account opening forms sent to Aktieninvestor. The fourth respondent testified at the trial in the court below that that had been done because Sandt was too important a customer for the appellant and matters such as secondary listings of shares in overseas markets were “too big”[note: 23] for the appellant to handle.

  22. [17] Whether or not the account opening forms were redirected surreptitiously, on 29 May 2006, Aktieninvestor opened an account with the first respondent without going through the appellant and was assigned a dealer in the first respondent.[note: 24] The respondents contended that this account was opened through the facilitation of the fifth respondent pursuant to Aktieninvestor’s private subscription for shares in the second respondent under the Share Subscription Agreement (see [11] above). The appellant denied this and argued that Aktieninvestor would have opened its account with the first respondent through him but for the interception of the account opening forms by the respondents (via the fifth respondent). On 30 October 2006, Aktieninvestor subscribed for 1.5 million placement shares in Swiber Holdings Ltd (“Swiber”) through BBY Pty Ltd, an Australian stockbroking company.[note: 25] Aktieninvestor was not charged any commission for this transaction. On the same day, Sandt subscribed for 750,000 placement shares in Swiber at $0.355 per share, paying an aggregate amount of $266,250;[note: 26] he was not charged any commission on this transaction. It was undisputed that Orchid Emarb did not subscribe for any placement shares, although it did carry out certain trades through the first respondent. The appellant received commission for those transactions by Orchid Emarb.

  23. [18] The appellant further argued that Sandt was responsible for referring other customers to him (ie, the appellant), including Thomas and Extra Rum.

  24. The decision below

  25. [19] The Judge was of the view that it was “probably” (see [3] of the Judgment) the case that the appellant was “the person … [who] formally asked [Aktieninvestor] to open a client account with him in the first [respondent]” (ibid), but he held that this was “not a fact of significance for [several] reasons” (ibid). It is useful to set out the evidence and the Judge’s findings, as follows (ibid):

  26. [20] The Judge rejected the appellant’s submission that the court should imply a term of good faith into the Agency Agreement. He explained that this was because of the entire agreement clause in that agreement (ie, cl 18 (reproduced at [8] above)). According to the Judge, cl 18 “expressly provided that the [Agency] [A]greement embodied the entire agreement between the parties” (see the Judgment at [4]). He further held that there was “a lack of particularization in respect of what the duties entailed, and how they were breached” (ibid).

  27. [21] The Judge concluded that, even if (as the appellant so vigorously sought to establish during the trial) Sandt and Aktieninvestor were clients of the appellant for the purposes of trading in securities, “there [was] no evidence to persuade [him] that the trading company [ie, the first respondent] was obliged to charge commission in respect of IPO shares” (ibid). In the absence of such an obligation, the Judge held, no duty could be implied. He added that the appellant’s case that there was a “customary practice” (ibid) of paying remisiers a commission of 1% of the value of the placement shares taken up by their clients was dubious, and that there was “no reliable evidence” (ibid) to support this assertion.

  28. [22] Instead, the Judge reasoned that the evidence at the trial showed that the second to the fifth respondents had no substantial connection with the appellant’s claim; nor had there been any concerted plan of action by the respondents to, inter alia, deprive the appellant of commission which was due to him. While he noted that the appellant had referred to some “surreptitious actions on the part of the first [respondent] as a company” (see the Judgment at [5]), the Judge was of the view that the appellant had not proved that the respondents had “acted in furtherance of a coherent plan” (ibid). Therefore, in his view, the appellant’s cause of action based on conspiracy could not be substantiated.

  29. [23] The appellant further sought to claim commission on a quantum meruit basis, but the Judge held that, in view of his finding that there had been no breach of contract, the claim based on quantum meruit must also fail (see the Judgment at [6]). Further, he was of the view that this particular claim was “poorly made out in pleading, evidence and counsel’s closing submission” (ibid).

  30. The issues on appeal

  31. [24] The appellant did not pursue his quantum meruit claim before this court. Before proceeding to analyse the appellant’s claim based on implied terms, we should state that we agree with the Judge’s reasoning as well as findings of fact with regard to, first, the appellant’s claim in conspiracy (see [22] above) and, second, the appellant’s contention that there was a “customary practice” (see the Judgment at [4]) of paying remisiers a commission of 1% of the value of placement shares taken up by their clients (see [21] above). There are, in essence, therefore two main issues for our decision, namely:

  32. (a) whether the entire agreement clause in cl 18 of the Agency Agreement precludes the implication of terms into that agreement (“the First Main Issue”) (if this issue is answered in the affirmative, this appeal must fail at the threshold, so to speak); and

  33. (b) if the First Main Issue is answered in the negative, whether terms ought to be implied into the Agency Agreement in favour of the appellant (“the Second Main Issue”).

  34. [25] We turn now to consider each of these issues seriatim.

  35. The First Main Issue: Entire agreement clauses and the implication of terms

  36. The applicable principles

  37. [26] The applicable principles relating to entire agreement clauses were set out comprehensively by this court in Lee Chee Wei v Tan Hor Peow Victor [2007] 3 SLR 537 (“Lee Chee Wei”). In particular, the following statements of principle by V K Rajah JA, delivering the judgment of the court, bear setting out in full (at [25]–[28]):

  38. [27] Rajah JA also considered the issue of whether or not an entire agreement clause could be ignored (and the relevant extrinsic evidence admitted) if it could be demonstrated that one or more of the exceptions to s 94 of the Evidence Act (Cap 97, 1997 Rev Ed) – the statutory embodiment of the parol evidence rule at common law – applied. He held that this ought not to be the case (see generally Lee Chee Wei ([26] supra) at [29]–[34]), disagreeing (in the process) with the view expressed in the Singapore High Court decision of Exklusiv Auto Services Pte Ltd v Chan Yong Chua Eric [1996] 1 SLR 433 at 439, [21]. He emphasised, however, that much would of course depend, in the final analysis, on the precise construction of the precise language of the entire agreement clause itself (see Lee Chee Wei at [25] and [35]). He also noted that entire agreement clauses might nevertheless be subject (where applicable) to the reasonableness requirements under s 11 of the Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) (“UCTA”) (see generally Lee Chee Wei at [36]–[38]). Further, “[e]ntire agreement clauses [would] usually not prevent a court from justifiably adopting a contextual approach in contract interpretation” (id at [41]; see also the English Court of Appeal decision of Proforce Recruit Limited v The Rugby Group Limited [2006] EWCA Civ 69 (especially at [41]) and, vis-à-vis the contextual approach to contractual interpretation generally, the decision of this court in Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029). Rajah JA added, however, that “unless the contract [was] embraced by the UCTA, it would be theoretically possible for an entire agreement clause to expressly preclude any reference to the factual matrix as an interpretative tool” (see Lee Chee Wei at [41]).

  39. [28] It will be noted that, whilst the general principles set out in Lee Chee Wei ([26] supra) are very helpful, the facts of that case dealt with the more common situation where it was sought to introduce extrinsic evidence (in that case, oral contracts or pre-contractual representations alleged to have been made in the course of negotiations) in order to “infer” a contingent condition that was clearly inconsistent with the express terms of the contract (id at [21]). This was clearly not permissible in law and, indeed, that particular issue could have been decided on that basis alone, although this court then proceeded, “for completeness” (ibid), to discuss the effect of the entire agreement clause in the contract in question. Hence, Lee Chee Wei did not, strictly speaking, deal with the specific issue which we are faced with in the present appeal, viz, whether an entire agreement clause operates to exclude the implication of terms into a contract. Much will, as we have seen (at [26]–[27] above), depend on the precise language of the entire agreement clause concerned as well as the nature of the implied terms that are relied on. However, we will endeavour to set out some guidelines on this particular issue below.

  40. Our decision on the First Main Issue

  41. [29] As already mentioned, the relevant entire agreement clause in the present case is contained in cl 18 of the Agency Agreement, which reads as follows (also reproduced above at [8]):

  42. [30] We find the appellant’s argument to the effect that cl 18 itself contemplates the existence of implied terms persuasive. Indeed, that clause refers expressly to implied terms, as the italicised words in the clause (as reproduced in the preceding paragraph) clearly demonstrate. This is, in fact, sufficient to dispose of the First Main Issue in the present appeal.

  43. [31] However, we would also pause to observe that, even if there is no reference to implied terms in an entire agreement clause, it is arguable that the presence of such a clause in a contract would not, as a matter of general principle, exclude the implication of terms into that contract for several reasons. First, an implied term, by its very nature (as an implied term), would not, ex hypothesi, have been in the contemplation of the contracting parties to begin with when they entered into the contract. Secondly, if a term were implied on, so to speak, a “broader” basis “in law” (as opposed to on a “narrower” basis “in fact”), it would follow, a fortiori, that such a term would not have been in the contemplation of the parties for, as we shall see below (at [38]), a term which is implied “in law” (unlike a term which is implied “in fact”) is not premised on the presumed intention of the contracting parties as such. Thirdly, it is clearly established law that a term cannot be implied if it is inconsistent with an express term of the contract concerned. This principle is, of course, both logical as well as commonsensical. Finally, as pointed out by Nigel Teare QC (sitting as a deputy judge of the English High Court) in Exxonmobil Sales and Supply Corp v Texaco Ltd [2004] 1 All ER (Comm) 435 at [27]:

  44. [32] That having been said, we are not prepared to state that an entire agreement clause can never exclude the implication of terms into a contract. However, for an entire agreement clause to have this effect, it would need to express such effect in clear and unambiguous language. Further, if the effect of the language used renders the entire agreement clause, in substance, an exception clause, the clause would be subject to both the relevant common law constraints on exclusion clauses as well as the UCTA (reference may also be made to Elisabeth Peden & J W Carter, “Entire Agreement – and Similar – Clauses” (2006) 22 JCL 1 at 8–9; cf (not surprisingly, perhaps) a similar approach towards the utilisation of the factual matrix of a contract as an interpretative tool where the contract contains an entire agreement clause (see [27] above)). However, this was clearly not the situation in the present appeal.

  45. [33] We turn now to the Second Main Issue, which centres on the question of whether or not this court ought to imply terms in favour of the appellant into the Agency Agreement. In this regard, it would be appropriate to begin by setting out the applicable principles relating to the implication of terms into contracts.

  46. The Second Main Issue: Implied terms

  47. The applicable principles

  48. Introduction

  49. [34] The law relating to implied terms is now well established in local case law. There are in fact two main categories of implied terms at common law, viz, “terms implied in fact” and “terms implied in law”, respectively. Such terms are “gap-fillers” by which (as we shall elaborate upon below) the courts fill in gaps in contracts on the basis that, in the case of a “term implied in fact”, the contracting parties would have intended the particular gap in question to be filled, and, in the case of a “term implied in law”, the gap concerned ought to be filled on (broader) policy grounds.

  50. “Terms implied in fact”

  51. [35] The nature of “terms implied in fact” has been described in the Singapore High Court decision of Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR 927 (“Forefront”), as follows (at [41]):

  52. This is an important point, especially since it is the focal point of contrast with “terms implied in law”, which we shall deal with briefly below (at [38]–[40]).

  53. [36] The actual tests which are utilised by the courts in relation to this particular category of implied terms (ie, “terms implied in fact”) are also well established. They comprise the “business efficacy” and the “officious bystander” tests, respectively. Both these tests have been described in Forefront ([35] supra), as follows (at [29]–[32]):

  54. [37] The relationship between the “business efficacy” and the “officious bystander” tests was also elaborated upon in Forefront ([35] supra), as follows (at [33]–[40]):

  55. “Terms implied in law”

  56. [38] The category of “terms implied in law” is broader, and has been described in Forefront ([35] supra), as follows (at [42]–[44]):

  57. Particular attention should be paid to the last paragraph just quoted (viz, [44] of Forefront), where the point of difference (and, indeed, contrast) between “terms implied in fact” and “terms implied in law” is made (see also above at [35]).

  58. [39] However, as has been pointed out by this court in Jet Holding Ltd v Cooper Cameron (Singapore) Pte Ltd [2006] 3 SLR 769 (“Jet Holding”), the category of “terms implied in law” is not without its attendant difficulties (at [90]):

  59. [40] That having been said, it is nevertheless clear that “terms implied in law” are now firmly established as part of our law. As this court observed in Jet Holding ([39] supra) at [91]:

  60. Our decision on the Second Main Issue

  61. Introduction

  62. [41] It is unclear precisely which category of implied terms the appellant was relying upon. In his submissions before this court, he did not draw a clear distinction between “terms implied in fact” and “terms implied in law”. Indeed, it would appear that it is only from the relevant part of the Statement of Claim that it can be surmised that the appellant was, in fact, relying on both categories in the alternative.

  63. [42] The implied terms which the appellant sought to rely upon are (as just mentioned) framed in the alternative and are to be found in para 14 of the Statement of Claim,[note: 27] as follows:

  64. We shall hereafter refer to the former term (ie, that relating to the implied duty of good faith) as “the First Implied Term”, and to the latter term (ie, that relating to the first respondent’s obligation not to do anything to deprive the appellant from earning his commission) as “the Second Implied Term”.

  65. [43] The First Implied Term is (as can be seen from the quotation in the preceding paragraph) premised on the general doctrine of good faith and (more importantly) appears to fall within the broader category of “terms implied in law”. (Indeed, in addition to the broad manner in which the First Implied Term has been framed, two learned authors have, in fact, also recently observed that the more recent (Australian) decisions (see, for example, the New South Wales Court of Appeal decisions of Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 (“Renard”), Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558 and Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 (“Alcatel”)) appear to prefer “the idea that the [implied term of good faith] should be regarded as one implied in law” [emphasis added] (see J W Carter & Elisabeth Peden, “Good Faith in Australian Contract Law” (2003) 19 JCL 155 (“Carter & Peden on ‘Good Faith’”) at 163).) The Second Implied Term is more specific and appears to fall within the narrower category of “terms implied in fact”.

  66. Is there an implied duty of good faith (based on a “term implied in law”)?

  67. [44] It is clear, in our view, that if a term relating to good faith is to be implied into the Agency Agreement, that term cannot be premised on the broader category of “terms implied in law”, especially having regard (in the context of the present appeal) to the general doctrine of good faith that constitutes the pith and marrow of the First Implied Term. Let us elaborate.

  68. [45] On a general level (which applies to both “terms implied in fact” as well as “terms implied in law”), an implied term, as R E Megarry so aptly put it, is “so often the last desperate resort of counsel in distress” (see R E Megarry, Miscellany-at-Law (Stevens & Sons Limited, 1955) at p 210, an observation which was also cited by this court in Panwah Steel Pte Ltd v Koh Brothers Building & Civil Engineering Contractor (Pte) Ltd [2006] 4 SLR 571 at [8]). This is understandable as it is necessary to ensure that the concept of sanctity of contract is not undermined, except in exceptional circumstances and in accordance with the established legal rules and principles set out above (see also Forefront ([35] supra) at [29] (reproduced at [36] above)). This leads us to the next (and more specific) reason as to why a duty of good faith cannot be implied as a “term implied in law” into the Agency Agreement in the present case.

  69. [46] As noted above (at [38]), implying a “term implied in law” into a contract not only involves broader policy considerations, but also establishes a precedent for the future. Put simply, the implication of such a term into a contract would entail implying the same term in the future for all contracts of the same type. This would, in and of itself, require that caution should be exercised on the part of the court before implying a “term implied in law” (which, upon being implied into the particular contract at hand, would also, ex hypothesi, be implied into all future contracts of the same type as well). Indeed, the fact that broader policy considerations are (as just mentioned) involved where “terms implied in law” are concerned furnishes a further reason for caution as well. Moreover (and this is a separate, albeit related, point), in the present case, the content of the First Implied Term (with its correspondingly broad implications) involves a concept which is itself controversial (at least at the present time). More specifically, the concept concerned relates to the doctrine of good faith, to which our attention must now briefly turn.

  70. [47] The doctrine of good faith is very much a fledgling doctrine in English and (most certainly) Singapore contract law. Indeed, a cursory survey of the relevant law in other Commonwealth jurisdictions appears to suggest a similar situation. This is, perhaps, not surprising in view of the fact that, even in the academic literature (which has witnessed the most discussion as well as analysis of the doctrine), there are differing views as to what the doctrine of good faith means as well as how it is to be applied (and, for the operation of this doctrine in the somewhat different context of collective sales under s 84A(9)(a)(i) of the Land Titles (Strata) Act (Cap 158, 1999 Rev Ed), which provides that the Strata Title Board must not approve an application for a collective sale if it is satisfied that “the transaction is not in good faith”, see this court’s recent decision in Ng Eng Ghee v Mamata Kapildev Dave [2009] SGCA 14 at [126]–[133]).

  71. [48] In an extrajudicial lecture, for example, Lord Steyn identified both a subjective element as well as an objective element in the doctrine of good faith (see Johan Steyn, “Contract Law: Fulfilling the Reasonable Expectations of Honest Men” (1997) 113 LQR 433 (“Lord Steyn’s 1997 article”)). In so far as the former element was concerned, the learned law lord was of the view that there had to be a “threshold requirement … that the party must act honestly” (at 438), whilst, in so far as the latter element was concerned, there had to be “the observance of reasonable commercial standards of fair dealing in the conclusion and performance of the transaction concerned” (ibid). However, although Lord Steyn acknowledged the existence of the doctrine of good faith in the above-mentioned article, he was not prepared to advocate the introduction of a general duty of good faith in English contract law (see Lord Steyn’s 1997 article at 439; see also similar pronouncements by Lord Steyn in two other articles, “Does Legal Formalism Hold Sway in England?” (1996) 49 CLP 43 (“Lord Steyn’s 1996 article”) at 52 as well as “The Role of Good Faith and Fair Dealing in Contract Law: A Hair-Shirt Philosophy?” [1991] Denning LJ 131 at 140).

  72. [49] There have, in fact, also been other formulations of the concept of good faith as well. One formulation is the famous “excluder thesis” advanced by Prof R S Summers in his seminal article, “‘Good Faith’ in General Contract Law and the Sales Provisions of the Uniform Commercial Code” (1968) 54 Va L Rev 195. Under this thesis, the concept of “good faith” is “a phrase which has no general meaning or meanings of its own, but which serves to exclude many heterogeneous forms of bad faith” (at 196) – hence, the appellation “excluder” (ibid). Another formulation, the “forgone opportunities thesis”, is by Prof Burton (see Steven J Burton, “Breach of Contract and the Common Law Duty to Perform in Good Faith” (1980) 94 Harv L Rev 369, especially at 373). Significantly, there was in fact a subsequent debate between the two writers just referred to in the present paragraph (see Robert S Summers, “The General Duty of Good Faith – Its Recognition and Conceptualization” (1982) 67 Cornell L Rev 810 and Steven J Burton, “More on Good Faith Performance of a Contract: A Reply to Professor Summers” (1984) 69 Iowa L Rev 497; see also, generally, Emily M S Houh, “The Doctrine of Good Faith in Contract Law: A (Nearly) Empty Vessel?” [2005] Utah L Rev 1, especially at 5-13, as well as Harold Dubroff, “The Implied Covenant of Good Faith in Contract Interpretation and Gap-Filling: Reviling a Revered Relic” (2006) 80 St John’s L Rev 559 at 591–609).

  73. [50] It should be noted that there have also been vigorous arguments canvassed against the doctrine of good faith as well, notably by Prof Bridge (see Michael G Bridge, “Does Anglo-Canadian Contract Law Need a Doctrine of Good Faith?” (1984) 9 CBLJ 385, where, inter alia, both the views of Prof Summers and those of Prof Burton as noted in the preceding paragraph are subject to critique).

  74. [51] Indeed, the copiousness as well as the variety of (and, perhaps more importantly, the debates in) the academic literature (coupled with the relative dearth of case law) suggest that the doctrine of good faith is far from settled. The case law itself appears to be in a state of flux: see, for example (and most notably), the conflicting views expressed (in the Australian context) by Priestley JA in the New South Wales Court of Appeal decision of Renard ([43] supra) at 263–268 on the one hand and by Gummow J in the Federal Court of Australia decision of Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 117 ALR 393 (“Service Station Association”) at 401–407 on the other (it should be noted, however, that, in terms of the number of precedents, there appears to be some support for the approach adopted in Renard: see, for example, the Federal Court of Australia decision of Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 at 36–37 per Finn J (cf the Privy Council’s decision in the New Zealand case of Pratt Contractors Ltd v Transit New Zealand [2004] BLR 143, especially at [45]), the New South Wales Court of Appeal decisions of Alcatel ([43] supra) and Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15, as well as the Federal Court of Australia decision of Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903; see also, generally, Elisabeth Peden, “Incorporating Terms of Good Faith in Contract Law in Australia” (2001) 23 Syd L Rev 222 (“Peden’s 2001 article”) and Tyrone M Carlin, “The Rise (and Fall?) of Implied Duties of Good Faith in Contractual Performance in Australia” (2002) 25 UNSW LJ 99).

  75. [52] However, two writers have recently argued vigorously that good faith is inherent in all aspects of the law of contract and that there is therefore no reason for any term concerning good faith to be implied into a contract (see generally Carter & Peden on “Good Faith” ([43] supra) as well as Elisabeth Peden, Good Faith in the Performance of Contracts (LexisNexis Butterworths, 2003) at ch 6). Peden is of the view (at para 1.10 of Good Faith in the Performance of Contracts) that:

  76. In a similar vein, the learned authors of Carter & Peden on “Good Faith” argue that good faith is not an independent concept, but, rather, something “already inherent in contract doctrines, rules and principles” (at 163). They take the view that, where the court implies a term of good faith, the court is implying either a term which is actually redundant or a term which, by definition, would impose a more onerous requirement. Such a term must be justified, the learned authors contend, by reference to the particular circumstances of each case and not by a general principle (ie, that of good faith). Reference may also be made to S M Waddams, “Good Faith, Unconscionability and Reasonable Expectations” (1995) 9 JCL 55, and the differing views adopted in two leading textbooks (see generally N C Seddon & M P Ellinghaus, Cheshire and Fifoot’s Law of Contract: Ninth Australian Edition (LexisNexis Butterworths, 2008) at paras 10.43–10.47; contra (and not surprisingly perhaps) J W Carter, Elisabeth Peden & G J Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th Ed, 2007) at ch 2).

  77. [53] It is true, as Prof McKendrick pertinently points out, that “there are signs that the traditional English hostility towards a requirement of good faith might be abating” (see Ewan McKendrick, Contract Law (Palgrave Macmillan, 7th Ed, 2007) (“McKendrick”) at p 265) and that “[t]he courts have adopted a more sympathetic stance on a number of occasions recently” (ibid) (see also the cases cited therein (ibid); and cf the oft-cited observations by Bingham LJ in the English Court of Appeal decision of Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433 at 439, which observations were reiterated in the (also) English Court of Appeal decision of Timeload Limited v British Telecommunications plc [1995] EMLR 459 at 468 per Sir Thomas Bingham MR). However, this is still far from a ringing endorsement of the doctrine of good faith as such (and see generally Prof McKendrick’s own essay, “Good Faith: A Matter of Principle?”, in Good Faith in Contract and Property (A D M Forte ed) (Hart Publishing, 1999) at ch 3). Indeed, the more open approach under English law in recent years may be due in no small part to the fact that there are, owing to the civil law influences that have become relevant as a result of the UK’s membership of the European Community (and see in this regard Hugh Collins, “Good Faith in European Contract Law” (1994) 14 OJLS 229 as well as Good Faith in European Contract Law (Richard Zimmermann & Simon Whittaker eds) (Cambridge University Press, 2000)), express references to “good faith” in the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999 No 2083) (UK) and the Commercial Agents (Council Directive) Regulations 1993 (SI 1993 No 3053) (UK) (see McKendrick at p 265; reference may also be made to the House of Lords decision of Director General of Fair Trading v First National Bank plc [2002] 1 AC 481), none of which applies in the Singapore context.

  78. [54] Prof Furmston confirms the observation which we have just made in the preceding paragraph, ie, that the doctrine of good faith, although not lacking in supporters, particularly from theoretical as well as aspirational perspectives (see, for example, Roger Brownsword, “‘Good Faith in Contracts’ Revisited” (1996) 4 CLP 111 and, by the same author, “Two Concepts of Good Faith” (1994) 7 JCL 197), is nevertheless still far from being an established doctrine under English law, as follows (see M P Furmston, Cheshire, Fifoot and Furmston’s Law of Contract (Oxford University Press, 15th Ed, 2007) at pp 32–33):

  79. [55] Indeed, it would appear that even a more limited reform in the context of recognising a duty of good faith in the negotiation of contracts is met by the obstacle presented by the House of Lords decision of Walford v Miles [1992] 2 AC 128 (“Walford”), where Lord Ackner, who delivered the leading judgment, stated (at 138):

  80. It should, however, be noted that Lord Steyn has commented that the above ruling in Walford is “surprising” (see Lord Steyn’s 1997 article ([48] supra) at 439). The learned law lord has also (in an extrajudicial lecture) stated that, “[w]hile [he does] not argue for the introduction of a general duty of good faith in contract law, it is difficult to see why an express agreement to negotiate in good faith should be invalid” [emphasis added] (see Lord Steyn’s 1996 article ([48] supra) at 52) (on the issue of whether there is a duty of good faith in the context of contract negotiations, reference may also be made to A F Mason, “Contract, Good Faith and Equitable Standards in Fair Dealing” (2000) 116 LQR 66 at 80–83 and, generally, the contrasting approach adopted in the New South Wales Court of Appeal decisions of Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 and Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104; although cf J W Carter & M P Furmston, “Good Faith and Fairness in the Negotiation of Contracts: Part I” (1994) 8 JCL 1 and, by the same authors, “Good Faith and Fairness in the Negotiation of Contracts: Part II” (1995) 8 JCL 93). It should also be observed that – for the moment at least – Walford appears to be good law in the Singapore context (see, for example, the Singapore High Court decisions of Climax Manufacturing Co Ltd v Colles Paragon Converters (S) Pte Ltd [2000] 1 SLR 245 at [32], United Artists Singapore Theatres Pte Ltd v Parkway Properties Pte Ltd [2003] 1 SLR 791 at [214] and Grossner Jens v Raffles Holdings Ltd [2004] 1 SLR 202 at [43]). On a broader level, in fact, discourse on the doctrine of good faith continues and the legal topography in this particular area of the law is far from settled (see, for example (in addition to the legal literature already cited above), Good Faith in Contract: Concept and Context (Roger Brownsword, Norma J Hird & Geraint Howells eds) (Ashgate, 1999) (“Good Faith in Contract”) and Vanessa Sims, “Good Faith in Contract Law: Of Triggers and Concentric Circles” (2005) 16 KCLJ 293).

  81. [56] The situation in other jurisdictions does not appear to be much clearer. For instance, we have already seen (at [51] above) that the situation in the Australian context is, at best, ambiguous.

  82. [57] It is also interesting to note that one learned commentator has recently pointed to the fact that the American doctrine of good faith in contract law (which is firmly established as an implied covenant under both § 1-203 of the Uniform Commercial Code and § 205 of the American Law Institute’s Restatement (Second) of Contracts, albeit in relation to the performance and enforcement of contracts as opposed to pre-contract negotiations) is no longer as settled as it used to be thought and is also apparently in a state of flux (see Howard O Hunter, “The Growing Uncertainty about Good Faith in American Contract Law” (2004) 20 JCL 50, which was written almost a decade after the somewhat sanguine essay by Prof Farnsworth (see E Allan Farnsworth, “Good Faith in Contract Performance” in Good Faith and Fault in Contract Law (Jack Beatson & Daniel Friedmann eds) (Clarendon Press, 1995) at ch 6)).

  83. [58] In Canada, there was a proposal by the Ontario Law Reform Commission to the effect that legislation should give recognition to the doctrine of good faith in the performance and enforcement of contracts based on § 205 of the (American) Restatement (Second) of Contracts referred to in the preceding paragraph (see ch 9 of Ontario Law Reform Commission, Report on Amendment of the Law of Contract (1987)). However, that was over two decades ago. Further, the doctrine may well be in a state of flux not only in the American context (as noted briefly in the preceding paragraph), but also (apparently) in the Canadian context as well (see generally David Stack, “The Two Standards of Good Faith in Canadian Contract Law” (1999) 62 Saskatchewan L Rev 201).

  84. [59] A valuable (albeit somewhat dated) comparative overview of the doctrine of good faith can be found in a work already referred to, viz, Good Faith in Contract ([55] supra). It is also significant in the present regard because there appear (from this particular work) to be substantive difficulties with the doctrine of good faith even in jurisdictions where it has been legislatively mandated – which difficulties appear to be general ones that are unlikely to have altered with the passage of time since this work was published.

  85. [60] In the circumstances, it is not surprising that the doctrine of good faith continues (as mentioned at [47] above) to be a fledgling one in the Commonwealth. Much clarification is required, even on a theoretical level. Needless to say, until the theoretical foundations as well as the structure of this doctrine are settled, it would be inadvisable (to say the least) to even attempt to apply it in the practical sphere (see also Service Station Association ([51] supra), especially at 406–407 (per Gummow J); cf Peden’s 2001 article ([51] supra) at 228–230). In the context of the present appeal, this is, in our view, the strongest reason as to why we cannot accede to the appellant’s argument that this court should endorse an implied duty of good faith in the Singapore context. The First Implied Term should not, therefore, be implied into the Agency Agreement.

  86. Should a term be implied “in fact”?

  87. [61] Our decision on the First Implied Term does not conclude the Second Main Issue (as set out at sub-para (b) of [24] above) in favour of the respondents. It will be recalled that the appellant also argued that the Second Implied Term (reproduced at [42] above) ought to be implied into the Agency Agreement either in addition or as an alternative to the First Implied Term. The Second Implied Term is much more specific and would (as already pointed out above at [43]) fall within the other category of implied terms, viz, “terms implied in fact” (cf the recent English Court of Appeal decision of Socimer International Bank Ltd v Standard Bank London Ltd [2008] 1 Lloyd’s Rep 558, although cf, in turn, Elisabeth Peden, “‘Implicit Good Faith’ – or Do We Still Need an Implied Term of Good Faith?” (2009) 25 JCL 50). It will also be recalled that, for this particular category of implied terms, whether the term in question ought to be implied into the contract depends upon the particular factual matrix concerned (see above at [35]). Hence, a close scrutiny of the relevant facts of the present proceedings is imperative. It should, however, be observed at this juncture that, although it is possible to incorporate the doctrine of good faith into a contract under this narrower category of implied terms (cf Peden’s 2001 article ([51] supra) at 227–228), this would not, in our view, be a very persuasive argument, having regard to the state of flux that the doctrine of good faith continues to be in (see generally the analysis above at [46]–[60]). However, even if the doctrine of good faith is not directly applicable as such (ie, as a “term implied in fact”), this does not necessarily mean that the concept of good faith would also be excluded (see also Carter & Peden on “Good Faith” ([43] supra) and Good Faith in the Performance of Contracts ([52] supra) at ch 6). Nevertheless, what is clear in the context of an analysis based on the category of “terms implied in fact” is that, whilst the concept of good faith (or, more likely, the elements thereof) might be present, the focus of the court would, as already stated earlier in the present paragraph, be on the particular factual matrix before it.

  88. [62] We earlier observed (at [45] above) that the caveat by R E Megarry (as set out at, likewise, [45] above) is a general one and applies equally to the situation where it is sought to imply a “term implied in fact” (as opposed to a “term implied in law”) into a contract. Indeed, this is implicit, in any event, in the two tests that are applicable for the purposes of determining whether a “term implied in fact” should be implied into a contract, viz, the “business efficacy” and the “officious bystander” tests, respectively (see [36] above). Underlying both tests, in this regard, is the concept of necessity.

  89. [63] The contractual relationship between the appellant and the first respondent in the present appeal is one of agency. Indeed, one of the key provisions in the Agency Agreement is cl 6, which reads as follows (also reproduced above at [8]):

  90. [64] It would appear, at first blush, that the appellant is not entitled to claim any commission from the first respondent simply because the transactions upon which his claim is based (“the relevant transactions”) were not completed in accordance with the terms of cl 6. This, however, is precisely why the appellant argues for the implication of the Second Implied Term, namely, that the first respondent would not do anything to deprive him from earning his commission. Put simply, the argument advanced by the appellant is that he would have had at least the opportunity to complete the relevant transactions pursuant to cl 6 (and thereby earn the corresponding amount of commission) had the first respondent not intervened and (crudely put) “hijacked” those transactions by dealing with both Sandt and Aktieninvestor directly. That is why, the appellant argues, the court must imply the Second Implied Term into the Agency Agreement. The appellant cited a number of cases to support his argument that this particular term ought to be implied into the Agency Agreement. We should point out at this juncture that, as a matter of general principle, the courts should treat case precedents in the context of “terms implied in fact” with some caution. This is because, by the very nature of this category of implied terms, whether or not such a term is to be implied into a contract is heavily dependent upon the particular factual matrix concerned. There may, of course, be situations where the factual matrix of the case at hand is on all fours with that to be found in an earlier case. However, such situations will, in the nature of things, be relatively rare. Hence, where “terms implied in fact” are concerned, prior decisions ought, in our view, to be utilised (at best) as guides only (in particular, as guides for general principles), unless (as just mentioned) the fact situation before the court is on all fours with that in the prior case(s) relied on. In the present appeal, the fact situations in the cases cited by the appellant in support of his claim based on the Second Implied Term are not on all fours with the fact situation before this court. Indeed, as we shall see, those cases involve more compelling fact situations which clearly merited the implication of the terms in question. Let us elaborate.

  91. [65] The leading decision in the context of the present appeal is probably that of the House of Lords in Luxor (Eastbourne), Limited v Cooper [1941] AC 108 (“Luxor”). Although the decision is somewhat dated, we find that the general principles enunciated therein are still helpful today. Because of its importance, we need to examine this particular decision in some detail. Before proceeding to do so, however, it should be noted that, in the leading textbook on the law of agency by Prof F M B Reynolds, Bowstead and Reynolds on Agency (Sweet & Maxwell, 18th Ed, 2006) (“Bowstead and Reynolds”), the issue is raised (at para 7-035) as to whether or not, instead of focusing on the question of implied terms, the House in Luxor ought to have focused on the question of an implied collateral contract on the basis of the “unilateral contract” analysis, as opposed to the “bilateral contract” analysis (as to the difference between these two modes of analysis, see id at para 7-038). However, notwithstanding the interesting questions raised from the perspective of conceptual analysis, it is clear (as Prof Reynolds himself accepts (id at para 7-035)) that Luxor was in fact decided on the basis of implied terms.

  92. [66] Simplifying the fact situation in Luxor ([65] supra) somewhat, in that case, an agent (“the plaintiff agent”) sued his two principals (“the defendant companies”) for commission which he alleged the latter had agreed to pay him in relation to the introduction by him of purchasers of the property of these companies. Unfortunately, however, the sale to these purchasers never took place as the defendant companies sold the property in question to another party. The plaintiff agent thus premised his claim (for commission or, alternatively, damages for breach of contract) on the basis of an implied term in the contract between him and the defendant companies to the effect that the latter undertook not to do anything to prevent him from earning his commission (“the alleged implied term in Luxor”). The plaintiff agent’s claim was dismissed by Branson J at first instance, but that decision was reversed and the claim upheld by the English Court of Appeal. The defendant companies then appealed to the House of Lords.

  93. [67] It should be noted, at the outset, that Luxor ([65] supra) was decided before the broader category of “terms implied in law” had been formulated; in other words, it dealt with the narrower category of “terms implied in fact” (which focuses, as we have noted at [35] above, on the presumed intention of the contracting parties). We are likewise presently dealing with this latter category where the Second Implied Term is concerned, having rejected the attempt by the appellant to imply the First Implied Term based on the former category for the reasons detailed above (at [44]–[60]). It should also be noted that it has been argued persuasively that (see Bowstead and Reynolds ([65] supra) at para 7-038):

  94. Indeed, we would tend to agree with this view and, consequently, most terms implied in this particular context – namely, that involving what we shall hereafter refer to as a “commission contract”, ie, a contract under which an agent is entitled to be paid commission if a certain event (“the Event”), which involves the rendering of some service or the doing of some work by the agent on behalf of its principal, occurs – would be “terms implied in fact” as opposed to “terms implied in law”.

  95. [68] Returning to the facts of and the holding in Luxor ([65] supra), the House of Lords held that the alleged implied term in Luxor (viz, that the defendant companies would “do nothing to prevent the satisfactory completion of the transaction so as to deprive the [plaintiff agent] of the agreed commission” (id at 115)) could not be implied in favour of the plaintiff agent. It is significant that Viscount Simon LC noted (at 116) that the plaintiff agent “was not appointed [as the] sole agent, and there might have been half-a-dozen competitors for the proffered commission” [emphasis added] (and, on the topic of sole or exclusive agency, see generally Bowstead and Reynolds ([65] supra) at para 7-036). On the substantive issue proper, the learned law lord was of the view that the alleged implied term in Luxor could not be implied in favour of the plaintiff agent because it was by no means clear that the defendant companies (which were the vendors of the subject property) would have acquiesced in giving up all their freedom of choice by binding themselves irrevocably to sell to the purchaser recommended by the plaintiff agent (and no other purchaser) (see Luxor at 116–117). As Viscount Simon put it (id at 117):

  96. He added (id at 118):

  97. Again, in a similar vein, the learned law lord observed a little later in his judgment, as follows (id at 120–121):

  98. [69] Viscount Simon accepted, however, that there might be situations where the court would be prepared to imply a term (along the lines of the alleged implied term in Luxor ([65] supra)) in favour of the agent (id at 118):

  99. [70] In the final analysis, everything must, as a matter of general principle, depend on the precise factual matrix of the case at hand as well as on the general principles of the common law of contract. As Lord Russell of Killowen (with whom, it should be noted, Lord Thankerton agreed (id at 129)) put it (id at 124–125):

  100. [71] That having been said, Lord Russell found no reason to imply the alleged implied term in Luxor ([65] supra) in favour of the plaintiff agent on the facts before him. In his view, the fact that the agent, under a commission contract in which the Event was the sale of the principal’s property, might not receive any commission if the principal sold the subject property to a purchaser other than the purchaser procured by the agent was of no legal relevance inasmuch as “[t]he agent [took] the risk in the hope of a substantial remuneration for comparatively small exertion” (id at 125; see also id at 120–121 per Viscount Simon (reproduced above at [68])). However, Lord Russell too, like Viscount Simon (see Luxor at 118 (reproduced at [69] above)), was prepared to imply a term (along the lines of the alleged implied term in Luxor) in favour of the agent in certain other circumstances (see Luxor at 126):

  101. In a similar vein, he observed later in the judgment thus (id at 128–129):

  102. [72] And, like Viscount Simon (id at 118 (reproduced at [69] above)), Lord Russell was of the view that, where the Event involved the carrying out by the agent of some work which required the principal’s co-operation, a term ought also to be implied to the effect that “the principal [would] do nothing to prevent the agent from doing the work which the contract [bound] him to do” (see Luxor ([65] supra) at 128). However, as already mentioned, the factual scenario in Luxor was quite different (id at 126):

  103. [73] Turning to Lord Wright’s judgment in Luxor ([65] supra), it is clear that the learned law lord was likewise of the view that there was no magical formula which governed commission contracts and that, “when deciding disputes in regard to commission [contracts]” (id at 130), everything would depend on the precise terms as well as the context of the contract in question (see also id at 124 per Lord Russell (reproduced above at [70])). As Lord Wright pertinently observed (see Luxor at 130):

  104. [74] Lord Wright also issued a salutary reminder that the court ought not to rewrite contracts for the parties, utilising the implied term as a convenient tool or instrument for this purpose (id at 137–138):

  105. [75] In so far as the particular contract between the plaintiff agent and the defendant companies in Luxor ([65] supra) was concerned, Lord Wright made the following observations, which merit setting out in some detail (id at 138–140):

  106. [76] Although Lord Wright was of the view that, in entering into a commission contract, “[t]he agent in practice [took] what [was] a business risk” (id at 141; see also id at 120 (per Viscount Simon) and 125 (per Lord Russell) (reproduced above at [68] and [71], respectively)), he did observe that there might nevertheless be exceptional situations where the agent was entitled to a remedy even though the Event (in the context of Luxor ([65] supra), the sale of the principal’s property) had not occurred (id at 141–142; see also id at 126 and 128–129 per Lord Russell (reproduced above at [71])):

  107. In a similar vein, the learned law lord observed later in his judgment (see Luxor at 149–150):

  108. [77] And, like both Viscount Simon and Lord Russell (id at, respectively, 118 and 128 (reproduced at, respectively, [69] and [72] above)), Lord Wright was also of the view that another exception would occur where the principal prevented the agent from performing its part of the bargain, which performance would entitle the agent to the commission promised under the commission contract. Indeed, Lord Wright was of the view that such conduct should, in and of itself, constitute a wrong (which would generally be a breach of contract) (see Luxor ([65] supra) at 148–149):

  109. [78] Lord Wright neatly summarised many of the points made above towards the end of his perceptive judgment thus (id at 150–151):

  110. [79] Lord Romer, who delivered the final judgment of the House, also emphasised many of the points made by his colleagues above, as follows (id at 153–155):

  111. [80] Returning to the facts of the present appeal, it might be argued that Luxor ([65] supra) can be distinguished inasmuch as the case related to a much clearer (and easier) fact situation. In particular, the defendant companies had sold the property concerned to an entirely different purchaser altogether from the purchaser introduced by the plaintiff agent, whereas, in the present appeal, there was an actual (or, vis-à-vis Aktieninvestor, a potential) relationship between the agent (ie, the appellant) and the purchasers concerned (ie, Sandt and Aktieninvestor). Although this is not an unpersuasive argument, one must return to general principles. And, in so far as general principles are concerned, the decision in Luxor does set out at least four fundamental – and useful – guidelines which (as we shall see) are of assistance in the context of the present appeal.

  112. [81] The first guideline is perhaps an obvious one and is, in any event, inherent in any attempt to imply a term into a contract. It is that the court will not rewrite the contract for the parties based on its own sense of the justice of the case. The key focus is simply (in relation to “terms implied in fact”) to give effect to the presumed intention of the parties. The word “presumed” is important simply because the term concerned is not, ex hypothesi, expressed by the parties. However, it is implied by the court if it is necessary to give business efficacy to the contract and is such that, (pursuant to the “officious bystander” test) if the parties had been asked by an officious bystander as to whether or not they would have included it in the contract had it not slipped their minds at the time the contract was concluded, they would unhesitatingly have responded, “Oh, of course!”

  113. [82] The second – and perhaps most important – guideline laid down in Luxor ([65] supra) (“the Second Guideline”) is that the court will not interfere with the freedom of any contracting party, except in the most exceptional circumstances. Hence, in Luxor, the House refused to impose fetters on the right of the defendant companies to sell their property as they deemed fit. It also, as we have seen (at [68], [71] and [78] above), observed that the plaintiff agent had taken a business risk in laying the necessary groundwork for a successful purchase of the defendant companies’ property, upon the completion of which purchase he would have received his commission. Indeed, this important point centring on the principal’s freedom to, inter alia, deal with its property as it deems fit is emphasised by the law lords throughout Luxor (see the comments by Viscount Simon (id at 117), Lord Wright (id at 138–140) and Lord Romer (id at 153–155) as reproduced at [68], [75] and [79], respectively; see further Luxor at 143 per Lord Wright). As Lord Wright aptly put it (id at 145):

  114. [83] The third guideline set out in Luxor ([65] supra) (“the Third Guideline”) is related to – and arises from – the Second Guideline: It is that, in balancing the rights of the contracting parties, the court may, in exceptional circumstances, nevertheless imply a term in favour of the agent so as to entitle the agent to claim commission even though the Event has not occurred. One of the most obvious situations where this may be done (which is, in fact, covered in Luxor itself at, inter alia, 126 and 141–142 (see the passages reproduced above at [71] and [76], respectively)) is where the agent has done all that it can and is obliged to do pursuant to the commission contract to bring about the Event. Put simply, there is nothing more that the agent need (or, indeed, can) do in order to be entitled to the commission promised under the commission contract. The problem that arises is that, in the usual case (absent any express term to the contrary), where the Event is a transaction between the principal and a third party introduced by the agent, the agent would only be entitled to be paid its commission after the completion of the transaction concerned (the agent being the effective cause of that transaction since it introduced the third party to the principal). If, for example, the principal refuses to complete the transaction even though it has already entered into a binding contract with the third party, the agent would, strictly speaking, not be entitled to its commission. In such circumstances, however, the court will imply a term that the principal will not refuse to complete the transaction, given the fact that the agent has done all that it can do to bring about the transaction and, being the effective cause of that transaction, has a legal right to commission, which right (as Lord Russell and Lord Wright put it in Luxor at, inter alia, 126 and 129 as well as 141–142, respectively (see the passages reproduced above at [71] and [76])) has, in a manner of speaking, been “vested” in the agent.

  115. [84] Another obvious situation where the court may imply a term in favour of the agent under the Third Guideline (which situation is also covered in Luxor ([65] supra) (see above at [69], [72], [76], [77] and [79])) is where the principal attempts to conduct itself in such a manner as to prevent the agent from performing its part of the bargain. Such conduct on the principal’s part strikes at the very heart of the commission contract, and it would surely be wrong to allow the principal to benefit from what is, in essence, its own wrong. In this scenario, it is eminently logical and commonsensical to imply into the commission contract a term to the effect that the principal will not conduct itself so as to prevent the agent from fulfilling its part of the bargain. This accords not only with the “business efficacy” test, but also with the unanimous answer in the positive which the contracting parties would have given had an officious bystander intervened at the time they entered into the contract and asked if they intended to include the said term in their contract (pursuant to the “officious bystander” test).

  116. [85] A possible variation of the situation referred to in the preceding paragraph is where it is proved by the agent that there has been a wilful default by the principal in order (and solely) to avoid payment of the commission to the agent (see, in particular, the House of Lords decision of L French and Company, Limited v Leeston Shipping Company, Limited [1922] 1 AC 451 (“L French and Company”)). This appears, however, to be a much more specific (and, indeed, more limited) situation, which is clearly not established where it can be proved that the principal is merely exercising the contractual freedom which is the basis of the Second Guideline (see above at [82] as well as L French and Company, especially at 456). The Second Guideline (viz, that the court will not usually interfere with the freedom of any of the contracting parties) is the general rule, to which only limited exceptions would apply pursuant to the Third Guideline. One must, however, be careful about the particular situation posited in this paragraph. Indeed, it would appear that the clearest example in this regard would be one where the agent has done all that it has undertaken to do pursuant to the commission contract, but the principal nevertheless indulges in conduct in order (and solely) to avoid paying commission to the agent. However, it would be realised by now that we have, in effect, come full circle – and back to the very situation set out in the first example given in respect of the Third Guideline, viz, where the right to the commission concerned has been “vested” in the agent (see [83] above).

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