“CX may at its option remove Engines from the Flight Hour Service programme prior to the completion of the Term. A financial reconciliation will be performed with respect to each engine removed from the Flight Hour Service programme in accordance with Schedule 13 …”
“When exercising its option to remove the Engines from the Flight Service programme prior to the completion of the Term, CX will use commercially reasonable endeavors to remove the pre-APU Engines prior to the removal of the APU Engines, and will allow LHT a reasonable opportunity to present commercial proposals to prevent the removal of APU Engines and give reasonable consideration to such proposals.”
“At the time of a major shop visit, the actual on-wing time [since installation/last overhaul] (TSI) accumulated on the individual engine is recorded. The on-wing hours recorded are then multiplied by the Engine Flight Hour (‘EFH’) Rate… This restored Flat Rate Concept provides a predictable flight hour cost over the full period an engine is on wing. The incentive for LHT to apply this concept is a powerful customer benefit. After a shop visit, the TSI of a respective Engine will be reset to zero, and the EFH count starts until the next engine removal.”
“[I]n this calculation model, the Customer will be charged all engine flight hours accumulated from time of installation until the next removal i.e. up to the next shop visit. This model is perfectly variable and allows the Customer to terminate the contract before every renewal with any administrative burden because no money is paid constantly but only upon the occurrence of a shop visit. The Customer is hence not charged for any engine flight hours flown since last shop visit before the contract comes to a (final) end (no prepayments nor constant payments). Note: the full risk of the number of removals and the full risk for the ship visit cost lies with [LHT]. This fact provides the Customer with an additional certainty that the MRO provider is interested to provide as much air time and as little ground time and as few shop visits as possible.”
“It is recognized that the actual flying profile of the Fleet may differ from the assumptions set forth above. Deviation from the assumptions will affect the nature and frequency of the Flight Hour Services which are required to be performed upon the Engines, and therefore the Restored Flight Hour Charges that LHT would have offered CX if LHT had been able to predict the actual operation of the Fleet. Accordingly, at the end of each Reconciliation Period, the parties will conduct a reconciliation, calculated by reference to agreed matrices of variables, so that the Restored Flight Hour Chargers paid by CX reflect the actual operational parameters of the Fleet.”
“Our existing agreements with LHT are designed to allow for flexibility in phasing out engines. This flexibility remains key to our agreements… [A]s flexibility to our fleet planning is key, we cannot commit to not phase any postAPU engines before all pre-APU engines are phased out. Nevertheless, it is in Cathay’s interest to phase out pre-APU-engines before the post APU ones, and we will certainly try to do so.”
“As of the effective date of this Amendment No. 2, the Parties agree that all remaining Engines are deemed to have been removed from the Flight Hours Services permanently in accordance with Clause 21.2”
“Notwithstanding the removal of the remaining engines from the Flight Hours Services with effect from1st January 2013 , the remaining Engines shall continue to be covered by Fixed Price Services and Time and Material Services until the end of the Term with changes set out in this Clause 6 of Amendment No. 2. LHT further agrees to continue to provide engine condition monitoring services for such Engines during the Term. The Parties agree to work together in good faith to put together a mutually agreed procedure for implementing Fixed Price Services and Time and Material Services…”
“Dear Thomas, I would like to follow up on our last meeting in HGK from August 2017. From our talks we have learned that CX intends to remove all or most of the engines from the PW4062 Flight Hour Service programme prior to the completion of the contractual term and to perform a financial reconciliation as stated in clause 21.1 of the contract. CX wishes to keep the affected engines in operation and to continue LHT’s engine service on Time & Material basis until the end of the contractual term on May 23rd 2018. We have understood that CX aims to thereby achieve maximum savings related to PW4062 engine MRO costs. I am afraid that LHT does not share the view that this is a unilateral option of CX. Clause 21.2 has been introduced to the contract in order to respect CX’s operational needs and to enable CX to phase out engines from the operating fleet. An early removal from the Flight Hour Service Programme with the sole objective to maximise savings on CX side and to continue operation for the affected engines is not intended. Such approach is not covered by Clause 21.2. For further evaluation, Rudiger Heck and myself would be available for a meeting in HKG throughout November and early December. Let me know if this approach is fine for you. Best regards Christian”
“1. Meet to understand what room and options we have for a commercial settlement 2. Evaluate compensating business through the whole CX group 3. Ask them to provide data supporting their position 4. Keep a hard line The right strategy is probably a blend of options 1,2 and 3 above…”
“Hi Philippe, We need to discuss this confidentially. We need to remove the LHT engines to avoid the 35 million. Contractually, the first one that we need to remove is the one that didn’t have a shop visit. Them we can either remove the others in one go, or we can stagger it. What would be [smart / cunning] The French word is “malin” would be to remove the at risk engines last (high cycles, reduced inspections etc). Would you be able to evaluate the engine group that would have a higher risk of UER between now and the end of May?...”
“Unless a proposal acceptable to CX is received, CX will proceed to remove the Engines from the Flight Hours Service programme as per the phase out schedule provided on April 27th 2018 in accordance with Clause 21.2.”
“Not entitled. The phrased “operational purpose” is a matter of plain English and does not require further exposition beyond that contained in the Defence and Counterclaim (for example, without limitation, at paragraph 19.”
“Without prejudice to the foregoing, the phrase refers to the removal of Engines for fleet planning reasons, including the need/desire to sell aircraft, to return aircraft or to phase out or to retire aircraft”
“Our primary case is that properly construed, clause 21.2 [means that] [an] engine can only be removed for an operational reason, and by that, I mean for reasons that require the removal of the engine from Cathay’s fleet.”
“CX may at its option remove Engines from the Flight Hour Service programme prior to the completion of the Term if, but only if, the Engines are removed from the Fleetfor operational purposes”
“Work required to make an Engine (or any Module, Component or Accessory of that Engine) Serviceable which is not covered by the Flight Hour Services or the Fixed Price Services shall be charged on a time and material basis as set forth below”
“There were meetings in the Lufthansa offices in Sheung Wan where we discussed the flexibility for all 13 engines to be able to remove from the fleet and it was agreed in the meetings in Sheung Wan in Hong Kong with Rainer [Janke]”
“Mr Dutton also argued that even if the language of the clause was apparently unambiguous, the commercial background and the commercial consequences of the literal interpretation showed that something had gone wrong with the language of the clause. The decision of the House of Lords in Chartbrook Ltd v Persimmons Homes Ltd[2009] UKHL 38 ,[2009] 1 AC 1101 showed that in those circumstances the court could correct the mistake as a matter of interpretation. What is necessary to bring this principle into play is (a) that it should be clear that something has gone with the language and (b) that it is clear what a reasonable person would have understood the parties to have meant: Chartbrook at [22] and [25] The first problem with this argument is that if anything has gone wrong with the rent review provisions, as Mr Dutton suggests, it is a failure to think through the consequences of what the parties agreed, rather than any deficiencies in drafting. A failure of that kind cannot be solved by the process of interpretation: ING Bank NV v Ros Roca SA[2011] EWCA Civ 353 ,[2012] 1 WLR 472 at [24] (Carnwath LJ), [80] (Rix LJ); Scottish Widows Fund and Life AssuranceSociety v BGC International[2012] EWCA Civ 607 , 142 Con LR 27 at [21] (Arden LJ); Honda Motor Europe Ltd v Powell[2014] EWCA Civ 437 ,[2014] Pens LR 255 at [37] (Lewison LJ)…”
“The essential question always is whether the relevant power has been abused. Where A and B contract with each other to confer a discretion on A, that does not render B subject to A's uninhibited whim. In my judgment, the authorities show that not only must the discretion be exercised honestly and in good faith, but, having regard to the provisions of the contract by which it is conferred, it must not be exercised arbitrarily, capriciously or unreasonably. That entails a proper consideration of the matter after making any necessary inquiries. To these principles, little is added by the concept of fairness: it does no more than describe the result achieved by their application.”
“When a contract allocates only to one party a power to make decisions under the contract which may have an effect on both parties, at least two questions arise. One is, what if any are the limitations on the decision-maker’s freedom of decision? The other is, what is to happen if the contractual power was not in fact exercised at the time when the relevant party was obliged to make a decision?”
“It is plain from these authorities that a decision-maker’s discretion will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality. The concern is that the discretion should not be abused. Reasonableness and unreasonableness are also concepts deployed in this context, but only in a sense analogous to Wednesbury unreasonableness, not in the sense in which that expression is used when speaking of the duty to take reasonable care, or when otherwise deploying entirely objective criteria: as for instance when there might be an implication of a term requiring the fixing of a reasonable price, or a reasonable time.”
“[32] However, it is unnecessary to reach a final conclusion on the precise extent to which an implied contractual term may differ from the principles applicable to judicial review of administrative action. Given that the question may arise in so many different contractual contexts, it may well be that no precise answer can be given. The particular context of this case is an employment contract, which, as Lord Hodge explains, is of a different character from an ordinary commercial contract. Any decision-making function entrusted to the employer has to be exercised in accordance with the implied obligation of trust and confidence. This must be borne in mind in considering how the contractual decision-maker should approach the question of whether a person has committed suicide.”
“[83] An important feature of the above line of authorities is that in each case the discretion did not involve a simple decision whether or not to exercise an absolute contractual right. The discretion involved making an assessment or choosing from a range of options, taking into account the interests of both parties. In any contract under which one party is permitted to exercise such a discretion, there is an implied term. The precise formulation of that term has been variously expressed in the authorities. In essence, however, it is that the relevant party will not exercise its discretion in an arbitrary, capricious or irrational manner…”
“There is no justification for implying into clause 5.8 a term that the Trust will not act in an arbitrary, irrational or capricious manner. If the Trust awards more than the correct number of service failure points or deducts more than the correct amount from any monthly payment, then that is a breach of the express provisions of clause 5.8. There is no need for any implied term to regulate the operation of clause 5.8.”
“[136]. Mr Collins QC accepted on behalf of the Trust that where one party to a contract has a discretion to exercise which will potentially impact upon the contractual rights and entitlements of another party to the contract the courts are more willing than heretofore to interpret the provisions conferring that discretion as being subject to implicit limits. Thus where one party to a contract has a discretionary power to decide whether a port is safe (The Product Star (No 2)[1993] 1 Lloyd’s Rep 397 ); or discretion to decide whether an employee should be paid a bonus, and if so how much (Horkulak vCantor Fitzgerald International[2005] ICR 402 ; Khatri v Cooperative Centrale[2010] EWCA Civ 397 ); or discretionary power to raise interest rates (Paragon Finance plc vNash[2002] 1 WLR 685 ) an arbitrary or capricious exercise of discretion will be invalid. Indeed in some cases a failure to exercise a discretion or an arbitrary or capricious exercise of discretion will amount to a free-standing breach of contract sounding in damages (Horkulak v Cantor Fitzgerald International). But the rationale for interpreting discretionary powers as subject to implicit limitations is that without such limitations the discretion would be unfettered; or, as Leggatt LJ put it in The Product Star (No 2), the exercise of the power would be the decision maker’s “uninhibited whim”
“[154] The contract in the present case is a detailed one which makes specific provision for a number of particular eventualities. The specific provisions include clauses 5.8, 6.3 and 6.5. In a situation where a contract makes such specific provision, in my judgment care must be taken not to construe a general and potentially open-ended obligation such as an obligation to “co-operate” or “to act in good faith” as covering the same ground as other, more specific, provisions, lest it cut across those more specific provisions and any limitations in them.”
“The Lender [i.e. RBS] may, at any time, require the Valuer [i.e. Lambert Smith Hampton or such other valuer or surveyor as RBS might appoint] to prepare a Valuation of each Property [i.e. each of the properties over which RBS held security]. The Borrower [i.e. PAG] shall be liable to bear the cost of that valuation once in every 12 month period from the date of this Agreement or where a default is continuing.”
“that clause 21.5.1 of the 2011 facility did not involve any discretion, assessment or choosing from a range of options and that there was therefore no scope for any implied term to arise.”
“The power conferred by clause 21.5.1 of the 2011 facility was not wholly unfettered. We agree with Mr Handyside that the provision will have been inserted for the benefit of RBS, and there is, of course, no question of RBS having owed fiduciary duties. In the circumstances, it seems to us that RBS must have been free to act in its own interests and that it was under no duty to attempt to balance its interests against those of PAG. It can, however, be inferred that the parties intended the power granted by clause 21.5.1 to be exercised in pursuit of legitimate commercial aims rather than, say, to vex PAG maliciously. It appears to us, accordingly, that RBS could not commission a valuation under clause 21.5.1 for a purpose unrelated to its legitimate commercial interests or if doing so could not rationally be thought to advance them.”
“[W]hilst I accept that the circumstances in which such terms can be implied into commercial agreements is an incrementally developing area of the law, I consider it clear that on the current state of the authorities, the Braganza doctrine has no application to unqualified termination provisions within expertly drawn complex commercial agreements between sophisticated commercial parties such as those in this case. As Mr. Foxton QC submitted on behalf of the claimants, if a right of the sort being exercised by the claimants in this case was to attract a Braganza qualification, then there is almost no contractual provision that would not attract them. That would have profound implications for English commercial and contract law …”
“ [49] In my judgment these authorities speak with a single voice – where the parties choose to include within their agreement a provision that entitles one or more of the parties to terminate the agreement between them, that clause takes effect in accordance with its terms”
“Whilst it is true to say that the right to terminate in this case was a right to terminate one party’s role as Operator, leaving the agreement in place and RRUK as a participant, RRUK has not demonstrated any principled difference between such a provision and any of the other termination provisions that have been considered over the years. There is no reason to treat a provision which brings the relationship of the parties to an end differently from one that entitles one party to terminate a particular role carried on by one of the parties under the agreement in question, at any rate whereas here the parties are expressly permitted to act on what they perceive to be their own best interests. Even if such a distinction does have a principled basis, in my judgment that does not lead to the conclusion that a term should be implied that qualifies an otherwise unqualified express term in Braganza terms because to imply such a term would be to depart from the cardinal rule that “… if a contract makes express provision ... in almost unrestricted language, it is impossible in the same breath to imply into that contract a restriction …”
“[54.] However, it is not every decision which a party to a contract makes which can properly be characterised as a contractual discretion and to which the principles identified in Socimer and Braganza apply. Where, for example, a commercial contract gives one party a right to terminate in certain circumstances, it will not ordinarily be appropriate to subject the exercise of that right to obligations of procedural or substantive fairness akin to the public law duties which apply to the decisions of the executive. In Lomas & Ors v JFB Firth Rixson[2012] EWCA Civ 419 at [46], the Court of Appeal noted: “the right to terminate is no more an exercise of a discretion, which is not to be exercised in an arbitrary or capricious (or perhaps unreasonable) manner, than the right to accept repudiatory conduct as a repudiation of a contract” … [57.] Similarly, where a commercial contract gives one party an option to extend the contract, or as to the amount of goods to be supplied or acquired, or as to the ports or berths to or from which cargo is to be shipped, that party will not ordinarily be under any duties of the kind recognised in Braganza in relation to the exercise of that option.” 183.In light of these case law cited above, in my judgement, it is clear that no Braganza / Socimer ought to be implied into the Agreement as a fetter on the exercise of the Option for the following reasons: a. The Option is far closer in nature and type to the sorts of clauses which have been held to be not subject to a Socimer-Braganza type implied term than the sorts of discretionary powers in which this type of restriction has been implied. b. The Option is closely analogous to the partial termination clause considered in the Taqa case. Just as in that case, the exercise of the power brings one part of the relationship of the parties to an end (the provision of Flight Hour Services) but the contractual relationship as a whole continues. c. The exercise of the Option is not as Chief Master Marsh put it in UBS v Rose is “the type of decision where one party is given a role in the on-going performance of the contract such as where an assessment has to be made”
“Under English law a duty of good faith is implied by law as an incident of certain categories of contract, for example contracts of employment and contracts between partners or others whose relationship is characterised as a fiduciary one. I doubt that English law has reached the stage, however, where it is ready to recognise a requirement of good faith as a duty implied by law, even as a default rule, into all commercial contracts. Nevertheless, there seems to me to be no difficulty, following the established methodology of English law for the implication of terms in fact, in implying such a duty in any ordinary commercial contract based on the presumed intention of the parties.”
“ …. many contracts do not fit [the model of simple exchange] and involve a longer term relationship between the parties in which they make a substantial commitment. Such ‘relational’ contracts, as they are sometimes called, may require a high degree of communication, cooperation and predictable performance based on mutual trust and confidence and involve expectations of loyalty which are not legislated for in the express terms of the contract but are implicit in the parties’ understanding and necessary to give business efficacy to the arrangements. Examples of such relational contracts might include some joint venture agreements, franchise agreements and long-term distributorship agreements.”
“It does not follow from the conclusion that he did not owe any fiduciary duties to Mr Kent that the Sheikh’s entitlement to pursue his own self-interest was untrammelled. I have previously suggested in [Yam Seng], at para 142, that it is a mistake to draw a simple dichotomy between relationships which give rise to fiduciary duties and other contractual relationships and to treat the latter as all alike. In particular, I drew attention to a category of contract in which the parties are committed to collaborating with each other, typically on a long-term basis, in ways which respect the spirit and objectives of their venture which they have not tried to specify, and which it may be impossible to specify, exhaustively, in a written contract. Such ‘relational’ contracts involve trust and confidence but of a different kind from that involved in fiduciary relationships. The trust is not in the loyal subordination by one party of its own interests to those of another. It is trust that the other party will act with integrity and in a spirit of cooperation. The legitimate expectations which the law should protect in relationships of this kind are embodied in the normative standard of good faith”
“The ratio of the decisions in Yam Seng and Sheikh Tahnoon are ones that any first instance judge must follow unless he or she were satisfied that they were wrong. I shall follow them.”
“I agree with Fancourt J in UTB LLC v Sheffield United Ltd[2019] EWHC 2322 (Ch) at [196] to [205] that, rather than trying to identify first whether a contract is a “relational contract” and for that reason includes an obligation of good faith, the better starting point for the reasons he gives is the application of the conventional tests for the implication of contractual terms, as authoritatively restated by Lord Neuberger in Marksand Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd and another[2016] AC 742 (“Marks and Spencer”) at [16] to [31], that is whether a reasonable reader would consider that an obligation of good faith was obviously meant, or the obligation was essential to the proper working of the contract since it would otherwise lack commercial or practical coherence (the business efficacy test). This was the approach adopted by Leggatt LJ in Al Nehayan when he went on to find in that case, where the parties had not tried to specify the details of their collaboration in a written contract and that collaboration “involved much greater mutual trust than is inherent in an ordinary contractual bargain between shareholders”, that the implication of a duty of good faith was essential to give effect to the parties’ reasonable expectations, and satisfied the business necessity test (see in particular at [173] and [174]). Leggatt J had also adopted that approach in the earlier case of Yam Seng Pte Ltd v International TradeCorp Ltd[2013] EWHC 111 (QB) .”
“I would also reach the same conclusion by applying the test adumbrated by Lord Wilberforce in Liverpool City Council v Irwin [1976] A.C. 239 at 254 for the implication of a term in law, on the basis that the nature of the contract as a relational contract implicitly requires (in the absence of a contrary indication) treating it as involving an obligation of good faith.”
“Was the contractual relationship between the Post Office and Subpostmasters a relational contract such that the Post Office was subject to duties of good faith, fair dealing, transparency, co-operation, and trust and confidence (in this regard, the Claimants rely on the judgment of Leggatt J in Yam Seng Pte v International Trade Corp[2013] EWHC 111 )?”
“What then, are the specific characteristics that are expected to be present in order to determine whether a contract between commercial parties ought to be considered a relational contract? I consider the following characteristics are relevant as to whether a contract is a relational one or not: 1. There must be no specific express terms in the contract that prevents a duty of good faith being implied into the contract. 2. The contract will be a long-term one, with the mutual intention of the parties being that there will be a long-term relationship. 3. The parties must intend that their respective roles be performed with integrity, and with fidelity to their bargain. 4. The parties will be committed to collaborating with one another in the performance of the contract. 5. The spirits and objectives of their venture may not be capable of being expressed exhaustively in a written contract. 6. They will each repose trust and confidence in one another, but of a different kind to that involved in fiduciary relationships. 7. The contract in question will involve a high degree of communication, co-operation and predictable performance based on mutual trust and confidence, and expectations of loyalty. 8. There may be a degree of significant investment by one party (or both) in the venture. This significant investment may be, in some cases, more accurately described as substantial financial commitment. 9. Exclusivity of the relationship may also be present. I hesitate to describe this as an exhaustive list. No single one of the above list is determinative, with the exception of the first one. This is because if the express terms prevent the implication of a duty of good faith, then that will be the end of the matter. However, many of these characteristics will be found to be present where a contract is a relational one. In other cases on entirely different facts, it may be that there are other features which I have not identified above which are relevant to those cases.”
“In all the circumstances therefore, and in the context of the commercial relationship between each SPM and the Post Office, I find that these were relational contracts. I find that this means the contracts included an implied obligation of good faith. This means that both the parties must refrain from conduct which in the relevant context would be regarded as commercially unacceptable by reasonable and honest people. Transparency, co-operation, and trust and confidence are, in my judgment, implicit within the implied obligation of good faith.”
“However, it would be wrong to conclude that they all are. In my judgment, it is necessary to consider each of them individually to consider firstly, are they simplyconsequential upon my finding that these are relational contracts; and secondly, if not, are they to be implied terms because they are necessary to give business efficacy to the contracts under the first category as set out by Baroness Hale in Geys v SocieterGeneral.”
“Having considered the different terms in the light of my finding there is an implied obligation of good faith, those that are consequential upon, in my judgment, orincidents of that finding that these are relational contracts are those identified as terms in Common Issue 2 at (i)(c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n)(as amended by me), (o)(as amended by me), (p), (q), (r) and (s).”
“In particular in respect of these four, if I am wrong in my finding that these are relational contracts, and/or if I am wrong that these terms are consequential upon that finding, then I find that these four would be implied into the contract in any event, and separately from the issue of relational contracts, as being necessary to give business efficacy to the contracts.”
‘Would a reasonable reader of the contract consider an obligation of good faith to be so obvious as to go without saying or is such an obligation necessary for the proper working of the contract?’
“… as seen from the Carewatch Care Services case, an implication of a duty of good faith will only be possible where the language of the contract, viewed against its context, permits it. It is thus not a reflection of a special rule of interpretation for this category of contract.”
“Such ‘relational contracts … may require a high degree of communication, co-operation and predictable performance based on mutual trust and confidence and involve expectations of loyalty which are not legislated for in the express terms of the contract …”
"The Actual Average Utilisation shall be derived by calculating the average annual Utilisation for each Aircraft and then calculating a fleet average to the nearest 50 hours for the Relevant 287. Period (the "
“Deviation from the assumptions will affect the nature and frequency of the Flight Hours Services which are required to be performed upon the Engines, and therefore the Restored Flight Hours Charges that LHT would have offered CX if LHT had been able to predict operation of the Fleet”