Monday 21 December 2015

UK: England and Wales: articles of association - interpretation and implied terms

Judgment was given last Friday in Cosmetic Warriors Ltd v Gerrie & Anor [2015] EWHC 3718 (Ch). A first instance decision concerning the interpretation of terms in a set of articles of association would not, ordinarily draw much attention. The judgment comes, however, after two important Supreme Court decisions concerning contract construction and implied terms - Arnold v Britton [2015] UKSC 36 and Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd (Rev 1) [2015] UKSC 72 - and, in particular, observations therein concerning the approach adopted by Lord Hoffmann in Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10.

The trial judge held, amongst other things, that there was no absolute prohibition on considering extrinsic material for the purpose of interpreting the articles of association of a company; however, that admissible background was, for the purposes of construction, limited to what any reader of the articles would reasonably be supposed to know. In contrast, the trial judge held, the implication of a term based on extrinsic evidence of which only a limited number of people would have known was impermissible.

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