Monday, March 4, 2019

Common Issues trial transcript: Day 12

This is the transcript of the 12th day of the Common Issues trial in the Bates and others v Post Office group litigation. 

It was extremely painful to sit through, and anyone who can read the transcript in one sitting deserves a banana. If you can sit through it, understand it and wish to publish a fisk of it, please get in touch.

It is the first day of closing submissions from the claimants' QC Patrick Green, and should be read alongside Mr Green's written closing submission, which you can read on Scrib'd via this link or embedded on this blog here.

This is the menu for the other transcripts and the Common Issues Trial Menu which has links to my write-ups and more documents:

Day 1 transcript - Wed 7 November - Opening arguments
Day 2 transcript - Thu 8 November - Claimants: Alan Bates, Pam Stubbs part 1
Day 3 transcript - Mon 12 November - Pam Stubbs part 2, Mohammad Sabir
Day 4 transcript - Tue 13 November - Naushad Abdulla, Liz Stockdale
Day 5 transcript - Wed 14 November - Louise Dar
Day 6 transcript - Thu 15 November - Post Office: Nick Beal, Paul Williams
Day 7 transcript - Mon 19 November - Sarah Rimmer, John Breeden, AvdB part 1
Day 8 transcript - Tue 20 November - AvdB part 2
Day 9 transcript - Wed 21 November - AvdB part 3, Timothy Dance, Helen Dickinson, Michael Shields part 1
Day 10 transcript - Thu 22 November - Michael Shields part 2, Elaine Ridge, David Longbottom, Michael Webb
Day 11 transcript - Mon 26 November - Michael Haworth, Andrew Carpenter, Brian Trotter
Day 13 transcript - Tue 4 December - Claimants' closing argument: Patrick Green QC - part 2
Day 14 transcript - Wed 5 December - Post Office closing argument: David Cavender QC - part 1
Day 15 transcript - Thu 6 December - Post Office closing argument: David Cavender QC - part 2

Day 12 transcript follows:

                                        Monday, 3 December 2018
   (10.30 am)
                 Closing submissions by MR GREEN
   MR JUSTICE FRASER:  Good morning.  Mr Green.
   MR GREEN:  May it please your Lordship.  Apologies for the
       late delivery of the paper version, I should have
       explained.  There are two errors, amongst doubtless some
       other syntax errors in our closing, but two material
       ones which we have noticed.
           I think both of them were me rather than anyone else
       and I apologise to the court for them.  The first is in
       the section on the defendant's evidence at page 3.
   MR JUSTICE FRASER:  Page 3 of the first part?
   MR GREEN:  Yes, {A/6/7}.  And at paragraphs 8.6 and 8.7
       I have referred to Mr Haworth when I meant Mr Carpenter.
       So at 8.6 "Mr Haworth's reference to an interview at
       Sandsacre".
   MR JUSTICE FRASER:  Should be Mr Carpenter.
   MR GREEN:  Should be Mr Carpenter.  And at 8.7(b)
       Mr Haworth -- I did the same thing again.
           Then the other one we have noticed, and probably
       other infelicities we haven't, but at page 89 {A/6/93}
       in the same fact section of our submissions at
       paragraph 206.1.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  It's 19 April 2012, not 2004.  It was 19/4/12,
       not 19 April 2004.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  My Lord, subject to those corrections, I was
       proposing to take your Lordship immediately to start
       with Yam Seng, if I may, and the law.  Your Lordship
       will have seen that we briefly mentioned in our opening
       submissions what we thought was the correct sequencing
       of issues in terms of the actual way your Lordship
       should decide them, and we don't depart from that
       because that is contractual orthodoxy, ie starting with
       express terms then considering whether there should be
       any implied terms, broadly in that order.  But in this
       case it's quite difficult to separate out the matters
       which inform those two exercises hermetically but we
       will be drawing your Lordship's attention to particular
       aspects of the evidence which should inform one and
       perhaps not the other.
           That said, in our closing, the approach we have
       adopted is to say however your Lordship construes the
       express terms, the relationship that was expected by the
       parties, by which I obviously mean shorthand for
       notional reasonable parties in the position of these
       parties, was one which is quintessentially consistent
       with these being relational contracts.
           So just stepping back, before one gets into the
       precise terms which we will address carefully as well,
       stepping back from it, this relationship in its
       character and structure was, we respectfully submit,
       quintessentially consistent with those relationships
       typified by relational contracts.
           My Lord, can I immediately disavow one point which
       my learned friend made when he opened on the law which
       is we don't say that the mere attaching of a label,
       "relational contract", means that that imports various
       terms.  We respectfully adopt I think a point
       your Lordship made to my learned friend which is that
       "relational contract" is now a reasonably well
       understand tag or legal description of a type of
       contract into which such terms are likely to be implied
       but the precise scope of those terms is dependent on
       context.
           My Lord, can I make that good by reasonably close
       analysis of what is said in Yam Seng {A1.1/43/1}.
       Your Lordship is already familiar with it, and I will
       obviously be guided by your Lordship if I am going into
       too much detail on it, but I think it may be quite
       important to look --it's in the original authorities
       bundle that my learned friend opened with at tab 2.
           My Lord, if I am trespassing on points in relation
       to Yam Seng that your Lordship is already more than
       familiar with, I don't want to waste time.
   MR JUSTICE FRASER:  Can you just tell me the way these
       bundles of authorities work with the original one.
       There's parties' authorities for closings, authorities
       new to trial bundle.
   MR GREEN:  Yes.
   MR JUSTICE FRASER:  And then there is the bundles we already
       have.
   MR GREEN:  Yes.  So the parties agreed authorities for
       closings between themselves that were already on Opus
       and to have hard copies available to your Lordship.
       Those are the two white files.
   MR JUSTICE FRASER:  Volume 1 --
   MR GREEN:  Volume 1 and volume 2.
   MR JUSTICE FRASER:  Which go up to about 40 odd.
   MR GREEN:  Precisely.  Those volumes do not include the
       authorities referred to by my learned friend, or the
       ones that he had a hard copy of for opening, because we
       didn't want to give your Lordship another copy of
       authorities you had already written on.
   MR JUSTICE FRASER:  That was my reaction to the message
       I got from one of your juniors, which is that certain
       hard copies I had already marked up and I would like to
       keep using the same version.
   MR GREEN:  Exactly.  So we have excluded those from the
       agreed one.
   MR JUSTICE FRASER:  But the thing -- the reason I was a bit
       confused is some of these were in fact used in opening.
   MR GREEN:  Were mentioned in opening, my Lord, yes, but they
       weren't in the hard copy bundle my learned friend had
       provided --
   MR JUSTICE FRASER:  I see.
   MR GREEN:  -- as ones that would be referred to.
   MR JUSTICE FRASER:  I see.  When I saw the heading I thought
       they were new ones and I thought you had found 45
       authorities between you that you hadn't mentioned first
       time around.  Then when I looked at them I realised some
       of them you had, and then I thought maybe you had just
       forgotten you had, but obviously you hadn't.
           So these are the hard copies that both of you are
       going to use this week, is that right?
   MR GREEN:  My Lord, and the original one that my learned
       friend had, because it has Yam Seng and Wood and M&S.
       And then there are some additional new authorities which
       are in a separate new authorities bundle as well.
   MR JUSTICE FRASER:  Headed "Authorities New to Trial
       Bundle".
   MR GREEN:  Exactly.
   MR JUSTICE FRASER:  And that is the one that includes Amey v
       Birmingham City Council.
   MR GREEN:  Indeed.  So those are the ones the parties
       thought after opening appropriate to add.
   MR JUSTICE FRASER:  What you mean, after opening they
       thought them appropriate to add?
   MR GREEN:  Those authorities were not ones I think we had in
       mind during opening.  For example, your Lordship
       mentioned Birmingham v Amey during my learned friend's
       submissions in opening.
   MR JUSTICE FRASER:  Yes, because it is a recent
       Court of Appeal that mentions the existence of
       relational contracts.
   MR GREEN:  Precisely.  And because of that, any authority
       that the parties have identified since the trial
       opened --
   MR JUSTICE FRASER:  Is in here.  But not to be relied on
       this week in the sense of taking me to them, or are you
       going to do that as well?
   MR GREEN:  We will take you to some of them.
   MR JUSTICE FRASER:  If you are doing that, why aren't they
       in the other file as well?
   MR GREEN:  My Lord, I think it is because how what
       your Lordship wanted was understood, and if we have
       misunderstood it, I apologise.
   MR JUSTICE FRASER:  Anyway, we are going to Yam Seng which
       is in tab 2 of the bundle Mr Cavender provided for
       opening.
   MR GREEN:  Precisely.  My Lord, we respectfully say a fairly
       close reading of Yam Seng is important because it is
       important to identify with precision what
       Mr Justice Leggatt, as he then was, was saying in
       Yam Seng.  Secondly, to place that in the context of the
       law on implied terms generally.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  And thirdly, to look at this case and place it
       appropriately in that context.  Your Lordship will know
       that the section on implied duty of good faith begins at
       paragraph 119, which is Opus reference {A1.1/43/28} on
       page 1348 of the report.
           My Lord, if I may, can I just identify what the
       architecture of this part of the decision is and then
       deal with the relevant parts of it.
           So Mr Justice Leggatt addresses at 120 the subject
       of whether English law does or should recognise
       a general duty to perform contracts in good faith and
       hasn't had a particular decision where it was fully
       argued cited to him.
           Then he deals with general view of commentators,
       121, and then he looks at Walford v Miles at 122 and
       Professor McKendrick's commentary on traditional English
       hostility.
           And then at 124 he says, and we say importantly:
           "In refusing however if indeed it does refuse ..."
           Which is at large:
           "... to recognise any such general obligation of
       good faith this jurisdiction would appear to be swimming
       against the tide."
           Then Mr Justice Leggatt then deals with the EU
       context in paragraph 124 {A1.1/43/29}.  He then deals
       with the civil law/common law divide at 125, pointing
       out the United States has had the Uniform Commercial
       Code I think since 1951.  So it's not a civil common law
       divide at all.  And the approach of the United States
       obviously takes a snapshot of our common law at the
       moment of independence and develops the common law in
       the United States from that point.
           Then he deals with the Canadian and Australian
       authorities at 126 and 127, down I think all the way to
       129 {A1.1/43/30}, finishing 130 with a Scottish case,
       Scottish law recognition of the broad principle of good
       faith and fair dealing.  So that is the overview.
           My Lord, the only point by way of background -- we
       have uploaded, if it is of any interest, on to Opus, the
       UNIDROIT, the UN article in relation to international
       commercial contracts.  It is a matter really of general
       international commercial law background.  It is at
       {A2/62/1} on Opus, if we can bring that up.  It is one
       line, effectively, and it is -- if you go to page 2 of
       that.  Sorry, page 3.
   MR JUSTICE FRASER:  {A2/62/3}.
   MR GREEN:  {A2/62/3}.  This is the short point that
       Article 1.7 provides not only for good faith and fair
       dealing in international trade but also precludes the
       exclusion or limitation of the duty.
           My Lord, I give that by way of background, not
       because that is the situation in English law --
   MR JUSTICE FRASER:  You are just saying it is a concept that
       is widely recognised across the world including
       internationally.
   MR GREEN:  My Lord, yes.
   MR JUSTICE FRASER:  Which I don't think is controversial.
   MR GREEN:  I am grateful.  The more -- the finer issues are
       the analysis of then what follows at 131 onward which
       are points of particular importance {A1.1/43/30}.  131
       we say is one of the most important paragraphs in
       the judgment.
   MR JUSTICE FRASER:  131.  Because it says it is not in all
       commercial contracts but it is in some.
   MR GREEN:  Precisely, and because of the last sentence
       because --
   MR JUSTICE FRASER:  It is:
           "... the presumed intention of the parties."
   MR GREEN:  Yes.  And what is particularly significant,
       my Lord is -- Mr Justice Leggatt says:
           "Nevertheless, there seems to me to be no
       difficulty, following the established methodology of
       English law for the implication of terms in fact [not
       implication of terms in law], in implying such a duty in
       any ordinary commercial contract based on the presumed
       intention of the parties."
           The significance we say of that is that it is for
       your Lordship to make findings of fact on the basis of
       the evidence your Lordship has heard as to what is to be
       taken to be the presumed intention of the parties
       objectively, as your Lordship is well aware.
           It is on that footing specifically that
       Mr Justice Leggatt is contemplating the implication of
       these terms.  This becomes more significant when one
       starts to look at the implication of terms on different
       bases such as in the Geys case where he was suing his
       employer and Baroness Hale identifies the different
       bases upon which terms come to be implied.
           If we look at 132 --
   MR JUSTICE FRASER:  Just give me the Opus reference for
       Geys, if you would.
   MR GREEN:  The Opus reference for Geys is here.  It's in
       your Lordship's bundle V1/31 and the Opus reference is
       at {A1.1/42/1}.
   MR JUSTICE FRASER:  When you said "V", and pointed, is that
       what we are calling that?
   MR GREEN:  Yes, it's what in my notes I call the two
       volumes --
   MR JUSTICE FRASER:  That is fine.  As long as I know what
       that means.  (Pause)  Yes.
   MR GREEN:  Then at -- my Lord, I will just foreshadow what
       the submission will be so your Lordship can see where
       I am going, because I am going through Yam Seng in order
       largely but it is probably right that I foreshadow what
       the point is.  Our submission will be, and I will make
       it good, is that whatever approach you take to implied
       terms, whether you look at it as an implication in fact
       based on presumed intention, or whether you look at it
       on the basis of obviousness and necessity, or whether
       you look at it as Baroness Hale describes in Geys, on
       the basis of the terms which the law will imply in
       particular relationships, all roads lead to Rome.
   MR JUSTICE FRASER:  But in a way that should be -- you
       should get the same answer.
   MR GREEN:  You do.
   MR JUSTICE FRASER:  Whichever order -- well, whatever the
       answer is, one should arrive at the same answer in
       whichever order the test or tests are applied, because
       otherwise if that were not the case, you could in law
       have two different sets of contractual relationships
       depending on the order in which you analysed it, so it
       shouldn't make any difference.
   MR GREEN:  My Lord, yes.  We say that that analysis is
       correct because all of those approaches will generally
       lead to the same result.  But the fact that however you
       answer the question you are driven to the same answer,
       we say reinforces the correctness of that answer through
       those three different prisms.
   MR JUSTICE FRASER:  I can see that.  Because if you say if
       you take three different routes you get the same answer
       by the three different routes, then fair enough.  If
       there were three different routes and you got to
       a different result if you adopted one of the routes,
       that would be rather curious in law, wouldn't it?
       Because that would be deciding there was a difference in
       the meaning of the terms in law --
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  -- depending on whether you decided
       whether it was a relational contract at the end or
       whether you considered it at the beginning.
   MR GREEN:  Yes.
   MR JUSTICE FRASER:  Because it is the nature of the
       relationship, isn't it, that matters?
   MR GREEN:  Your Lordship is absolutely right, which is why
       we say that although these tests may be looked at from
       different standpoints, they are really one exercise.
   MR JUSTICE FRASER:  The exercise being construing the
       contract.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  But there is other authority that says
       that is a unitary exercise anyway.
   MR GREEN:  Precisely, although aspects of the Belize
       decision which Mr Justice Leggatt refers to at 132 have
       been slightly qualified, possibly. {A1.1/43/30}
   MR JUSTICE FRASER:  One has to look at Marks & Spencer, not
       Belize --
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  -- now.  But that didn't exist in 2013
       which is why he doesn't mention it.
   MR GREEN:  Absolutely.  But what we say about 132 is that
       the reference to Belize at 132 is not one of three legs
       of a stool upon which this decision rests, such that if
       Belize is wrong, the decision is wrong.  What we say is
       that Mr Justice Leggatt is simply observing that
       the approach that he is identifying is at least
       consistent with the decision in Belize but not dependent
       upon it.
   MR JUSTICE FRASER:  On the basis that Belize I think is of
       considerably higher authority than a Commercial Court
       first instance decision it would have to be consistent
       with it, wouldn't it?
   MR GREEN:  My Lord, yes.  The only thing is when we look at
       observations in relation to Belize in subsequent
       Supreme Court authority, to the extent my learned friend
       may -- I will take your Lordship through it, I'm just
       foreshadowing what the point is.  But to the extent
       there is any suggestion that Belize may be slightly
       overstating the simplicity of the exercise, we say it
       doesn't have any material, it doesn't unpick the chain
       of reasoning in Yam Seng.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  Then at 133 onward, in our submission what
       Mr Justice Leggatt is doing is he is adopting an
       absolutely vanilla and contractually orthodox approach
       to the construction of contracts made against
       a background of unstated shared understandings which
       inform their meaning.  Because that is the background,
       that is part of the wide background against which
       contracts can be construed.  And then Mr Justice Leggatt
       stresses in the second sentence of 133 the orthodoxy of
       the breadth of that background based on well-known
       statements in ICS and so forth which are for these
       purposes uncontroversial.
           He identifies the shared values and norms at 134,
       third line {A1.1/43/2}, and in the last sentence of 134
       says:
           "Many such norms are naturally taken for granted by
       the parties when making any contract without being spelt
       out in a document recording their agreement."
           We say uncontroversial.
           And then we get into the passage which I think my
       learned friend dealt with in his opening where the
       concepts of honesty and good faith fall to be carefully
       treated and identified with precision, because we
       respectfully say that is an important part of (a) what
       Mr Justice Leggatt was saying, (b), insofar as anyone
       cares about it, what Chitty says --
   MR JUSTICE FRASER:  Chitty is somewhat at odds with this
       current state of the authorities, in my judgment.
       Whether that is because the editor who wrote that
       passage has some academic hostility to the concept or
       otherwise, I do not know.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  Textbooks are all very interesting, but
       in terms of priority it is judgments that make the
       difference.
   MR GREEN:  My Lord, I will just tell you what we say about
       Chitty.
   MR JUSTICE FRASER:  You can take me to Chitty, it might be
       entertaining, but you don't need to do that yet.  But
       you were talking about concepts of honesty and good
       faith, I think --
   MR GREEN:  Yes.
   MR JUSTICE FRASER:  -- fall to be carefully treated, but you
       didn't tell me how they fall to be carefully treated.
   MR GREEN:  That is what I am coming to.  I think there are
       two points.  One is they are not the same thing.
   MR JUSTICE FRASER:  They obviously aren't, because if they
       were --
   MR GREEN:  You wouldn't need --
   MR JUSTICE FRASER:  Also Yam Seng wouldn't make any sense
       because the judge says -- he actually says in terms in
       one particular sentence: all contracts require you to be
       honest, you just can't put it in because the very act of
       saying to someone "I want a contractual requirement that
       you are honest" is going to make them think that
       actually you are probably not going to be honest.
   MR GREEN:  Precisely.  So, my Lord, all I want to make
       absolutely clear is -- and your Lordship has the point
       in relation to the distinction in Yam Seng.
   MR JUSTICE FRASER:  But there is more between the parties in
       this case -- there is no argument that each party
       requires the other one to be honest.
   MR GREEN:  Precisely.  That is uncontroversial as far as
       I understand.
   MR JUSTICE FRASER:  For example, at the interview for any
       subpostmaster it would take an unexpected and
       interesting turn if the subpostmaster or postmistress
       expressed surprise to the interviewer if they told them
       they were expected to be honest.
   MR GREEN:  Yes, exactly.
   MR JUSTICE FRASER:  And vice versa.
   MR GREEN:  My Lord, the only wrinkle on that point which
       I wasn't going to deal with at this stage, but
       your Lordship will remember there is the NFSP wrinkle on
       not making changes dishonestly to the contract.  This is
       their pleaded case, it may be surprising, whatever it
       is, but this is still the pleaded case, even post
       Mr Beal's evidence, that the Post Office is not entitled
       dishonestly to exercise its power to vary.  That is how
       they have chosen to put it.  They've not said not in
       good faith, which would be commercially unacceptable,
       they have pinned their colours to the mast --
   MR JUSTICE FRASER:  That is because the concept of good
       faith is in issue anyway.  It would not be possible for
       them to plead a similar provision based on a requirement
       to act in good faith because it is in issue between
       parties as to whether these contracts have that as
       a requirement or not.
   MR GREEN:  Indeed.  But they have made a specific concession
       in relation to the power to vary that where the
       agreement -- where the change is not made with the
       involvement or agreement of NFSP ... I need to be
       precise, actually.  They are not allowed to exercise
       their power to vary dishonestly.  And given that honesty
       is supposed to run in every contract, that is a very
       surprising position to adopt.
           So, my Lord, I mention it because what appears to be
       thought to be uncontroversial in Yam Seng, and people
       generally might regard as uncontroversial, is not --
   MR JUSTICE FRASER:  Mr Cavender made clear on the first day
       how he was approaching the concept of honesty/relational
       contracts/good faith.  But so far as your case is
       concerned, you are drawing a distinction between honesty
       which you say applies anyway to all commercial
       contracts.
   MR GREEN:  Yes.
   MR JUSTICE FRASER:  And a requirement of good faith which is
       different and in some situations potentially a lower
       hurdle.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  Is that right?
   MR GREEN:  Indeed.  My Lord, the only observation we make in
       relation to honesty is simply to say the requirement of
       honesty in all contracts is not obviously consistent
       with what has been pleaded and is still pleaded --
   MR JUSTICE FRASER:  That may or may not -- that is a bit of
       a forensic point on the pleading really.  In terms of
       the characterisation of these contracts, you say -- and
       I don't currently understand this to be in issue and
       I am sure it isn't but, if it is, Mr Cavender will sort
       it out on Wednesday -- both parties or all parties
       obviously were expecting to conduct themselves honestly.
   MR GREEN:  Indeed.  That is what we say and we say that is
       clear.  Then the second point your Lordship made to me
       is that we also go further and say that the obligations
       of good faith, fair dealing, transparency and mutual
       trust and confidence in issue 1 are to be implied in
       this case.
   MR JUSTICE FRASER:  Because it is a relational contract,
       because they are relational --
   MR GREEN:  Because they are relational, precisely.
   MR JUSTICE FRASER:  Because there is more than one --
   MR GREEN:  They are relational contracts --
   MR JUSTICE FRASER:  -- type of form --
   MR GREEN:  Exactly.
   MR JUSTICE FRASER:  And that, you say, arises as a result of
       the particular type or characterisation of these
       particular contracts to run branch post offices for the
       Post Office.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  I understand that.
   MR GREEN:  On the basis of all the evidence your Lordship
       has heard.
   MR JUSTICE FRASER:  I understand that.  However, to knock
       you off your course slightly early, probably, but it
       still needs to be dealt with, if you turn back to
       Lord Bingham in Interfoto who is quoted at
       paragraph 121, he is dealing with the late 1980s
       approach to this, paragraph 121 {A1.1/43/28}.  He
       says -- he is summarising what could be said to be the
       traditional approach of English contract law, that is
       there is no such legal principle.  But in his final
       paragraph or passage at G, Mr Green, he says:
           "English law has characteristically committed itself
       to no such overriding principle but has developed
       piecemeal solutions in response to demonstrated problems
       of unfairness."
           So what he says is there is no such overriding
       principle.  But the way English law does it, it develops
       a rather patchwork quilt type approach if there is
       a demonstrated problem of unfairness.
           Now, taking the second part of that sentence for the
       purposes of argument, if that is correct, how does
       English law go about analysing whether there is such
       a demonstrated problem of unfairness such that it
       decides it needs to adopt a piecemeal solution?  Because
       one of -- to adopt some imagery Mr Cavender used when he
       told me I was looking at privilege from the wrong end of
       the telescope, if you look at this from two ends of the
       telescope, one of them is from the beginning of the
       telescope the Yam Seng: look at the relationship as
       a whole, is it a relational contract for this host of
       reasons?  And, if it is, that characterises the type of
       relationship the parties have.
           Lord Justice Bingham is saying if there is
       a demonstrated problem of unfairness, then English law
       might develop or would develop a piecemeal solution,
       which seems to be rather from the other end of the
       telescope.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  So what factors does the court take into
       account, or should it, if it wants to analyse the
       situation as whether or not there is a demonstrated
       problem of unfairness?
   MR GREEN:  My Lord, what we respectfully say is the factor
       that seems -- you can find by analogy across the piece,
       and I will show your Lordship how that works in adjacent
       situations, is a stark asymmetry of bargaining power
       between the parties and a stark asymmetry of power
       within the terms of the contract.  So that is the
       unfairness perspective.  But we would respectfully say
       that in fact what has happened with Yam Seng has not
       sprung directly from that analysis because it can also
       apply in contracts where the parties are on a relatively
       equal footing --
   MR JUSTICE FRASER:  I know, and it is obvious that Yam Seng
       is different to what Lord Justice Bingham said.  That is
       why I am asking you the question.  You are saying
       a piecemeal solution would be suitable or called for if
       there is a demonstrated problem of unfairness and in
       that case you say the unfairness is the asymmetry of
       bargaining power.
   MR GREEN:  And it is the asymmetry of bargaining power
       coupled with the fact that the architecture of the
       contractual relationship is such that the contracts are
       replete with discretion and control in the hands of the
       defendant including the making of decisions as between
       the defendant and the claimants, or subpostmasters
       generally, within the course of the relationship.
   MR JUSTICE FRASER:  What sort of decisions?
   MR GREEN:  For example, whether to agree a disputed
       transaction correction.  For example, Mr Bates.  In his
       conditions of employment, my Lord, he was specifically
       required to have a National Lottery terminal in
       a prominent position in his branch.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  In his COA.  Not in the SPMC somewhere, in his
       specific conditions of appointment that he thought were
       his contract.  He builds up, doubles the sales.  He
       relies on that income in his business plan in committing
       to the relationship, he builds up the sales hugely, and
       about, I can't remember, it was a year down the line or
       so, Post Office say "Yes, we are taking the Lottery and
       putting it in another less profitable post office".
           In a context where the defendant prays in aid this
       is a business-to-business relationship, that is
       an example of the perhaps surprising level of control in
       relation even to what products and services someone is
       allowed to offer when they have entered into the entire
       relationship on the viability of the post office in
       reliance on having income from that source.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  So I give that as a practical example which is
       perhaps different to some of these other examples we
       have been canvassing more extensively in evidence.
   MR JUSTICE FRASER:  But putting factual examples to one
       side, you are saying it is the imbalance -- the
       unfairness of bargaining power, the asymmetry of how the
       relationship would or could operate, and the discretion
       and control in the hands of the Post Office --
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  -- in terms of that.
   MR GREEN:  Indeed.  And, of course, your Lordship will
       appreciate that from whatever angle you look, the
       authorities are replete with support for that approach.
   MR JUSTICE FRASER:  For your approach?
   MR GREEN:  Indeed.  Because if you look at -- even if you
       look at the old cases on an account, if you look at --
   MR JUSTICE FRASER:  Very, very old cases.
   MR GREEN:  Very, very old cases on account.  The commanding
       position of, in that case, the agent driving up the
       bill, it is that asymmetry of position.  The lack of
       information, because there is also the asymmetry of
       information point which I would add to the list.  It is
       the commanding position of the agent and the lack of
       full and proper information of in that case the
       principal, who was in the weaker position, which led to
       the account being unconscionable for the court to allow
       the person in the commanding position to take advantage
       of what was said to be an account.  So that is that
       case.
           Autoclenz, which I lost in the Supreme Court.  The
       imbalance in the position of the parties who were not
       employees.  I'm not sure that has been fully taken
       on board by my learned friend, they are workers but not
       employees.  The imbalance in the relationship between
       the parties is what Lord Clarke finds to be the key
       factor allowing the court to look particularly carefully
       at what the true agreement really is.  So that is in
       that situation.
           You have then got the cases to which
       Mr Justice Leggatt is referring in 145 at {A1.1/43/33}.
   MR JUSTICE FRASER:  You are now going on to the relational
       side of it?
   MR GREEN:  No, I am not, my Lord.  I am still on the point.
   MR JUSTICE FRASER:  So where are we going?  145?
   MR GREEN:  {A1.1/43/33}, paragraph 145 at H.
   MR JUSTICE FRASER:  That is within the framework of your
       primary case on it being relational.
   MR GREEN:  It is.  But I am just giving this example as
       where imbalance in power has been addressed by implied
       terms, because that is your Lordship's question.
   MR JUSTICE FRASER:  No, it isn't actually, it's a slightly
       different point.  Well, it might be a markedly different
       point.
           What I was exploring was if the court doesn't adopt
       the Yam Seng relational approach but adopts the
       traditionally English hostile approach to general
       concepts and concentrates on a piecemeal solution in
       response to a particular problem, how do you identify in
       the first place whether that particular problem arises,
       or, sorry, is present or not?  Because unless you know
       there is a problem then you cannot go on to consider
       a piecemeal solution.
   MR GREEN:  Absolutely.  The point I was seeking to make,
       perhaps not sufficiently clearly, is that obviously
       we -- I have given the accounting example, disparity of
       power, as an indicator of a problem which requires
       addressing, piecemeal addressing.  Autoclenz, a common
       law response, piecemeal addressing.  And then if you
       look at --
   MR JUSTICE FRASER:  In Autoclenz you say it was the
       imbalance of the relationship between the parties, it's
       the principle I get from that.  And as well as that, we
       have also got the asymmetry of how the relationship was
       to operate.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  And the extent of discretion and control
       in the hands of one of the contracting parties.
   MR GREEN:  Exactly.  And just by way of example of the
       extent of discretion and control the courts have
       responded to the unfairness that, unchecked, that would
       allow with a piecemeal solution that Mr Justice Leggatt,
       albeit for narrative purposes, almost, refers to at 145.
       Because what he is dealing with, if your Lordship looks
       halfway down 145, the sentence "Moreover":
           "Moreover such a concept is, I believe, already
       reflected in several lines of authority that are
       well-established.  One example is a body of cases
       already mentioned in which duties of cooperation in the
       performance have been implied."
           And then another consists of authorities which show
       that a power conferred by a contract on one party to
       make decisions which affects them both must be exercised
       honestly and in good faith for the purpose for which it
       was conferred, and must not be exercised arbitrarily,
       capriciously or unreasonably.
           So that is actually a piecemeal solution to
       unfairness that would result if that imbalance of power
       were able to find expression unchecked in the operation
       of the contract.
           My Lord, that reference to that line of authority
       pre-dates the Braganza authority which your Lordship
       will find in V2 at 38.
   MR JUSTICE FRASER:  Are we going there now?
   MR GREEN:  I can just tell your Lordship what the point is
       {A1.1/59/1}.  If your Lordship looks at page 9 of that
       authority {A1.159/9}, paragraph 18 -- or perhaps one
       should start at 17 to give it context.  Your Lordship
       will remember the case, it was a widow whose husband had
       disappeared at sea.
   MR JUSTICE FRASER:  Who might have committed suicide.
   MR GREEN:  Yes:
           "This case raises two interlinked questions of
       principle, one general and one particular.  The
       particular issue is the proper approach of a contractual
       fact-finder who is considering whether a person may have
       committed suicide.  Does the fact-finder have to bear in
       mind the need for cogent evidence before forming the
       opinion that a person has committed suicide?  The
       general issue is what it means to say that the decision
       of a contractual fact-finder must be a reasonable one.
       There are many statements in the reported cases to the
       effect that the principles are well settled and well
       understood, but this case illustrates that all is not as
       clear or as well understood as it might be.  Then he
       deals with the contractual terms which give one party:
           "... the power to exercise a discretion or to form
       an opinion as to relevant facts are extremely common."
           My Lord, pausing there.  What Baroness Hale is
       dealing with at this point is this general category of
       discretion, or discretionary decision-making, either, in
       the hands of one party over the other.  It is not
       limited to decisions on particular facts at this point.
           "It is not ..."
           Quite rightly, and, my Lord, I don't want any of our
       submissions to be understood as contradicting this:
           "It is not for the courts to rewrite the parties'
       bargain for them, still less to substitute themselves
       for the contractually agreed decision-maker."
           That is not what is being contended:
           "Nevertheless, the party who is charged with making
       decisions which affect the rights of both parties to the
       contracts has a clear conflict of interest.  That
       conflict is heightened where there is a significant
       imbalance of power between the contracting parties as
       there often will be in an employment contract.  The
       courts have therefore sought to ensure that such
       contractual powers are not abused.  They have done so by
       implying a term as to the manner in which such powers
       may be exercised, a term which may vary according to the
       terms of the contract and the context in which the
       decision-making power is given."
           As your Lordship knows, the decision goes on to find
       that there is in fact an implied term governing the --
       your Lordship will see it on page 1 in the headnote,
       an implied term governing the exercise of the
       contractual power.
           As summarised in the headnote:
           "Where contractual terms gave one party to
       a contract the power to exercise a discretion or form an
       opinion as to relevant facts, it is not for the court
       make that decision for them."
           Uncontroversial.
           "But where the decision would affect the rights and
       obligations of both parties there was a conflict of
       interest and the court would seek to ensure power was
       not abused by implying the term in appropriate cases
       that the power should be exercised not only in good
       faith but also without being arbitrary, capricious or
       irrational in the sense in which that term was used when
       reviewing the decisions of public authorities and, that
       it followed that such a decision could be impugned not
       only where it was one that no reasonable decision-maker
       could have reached but also where the decision-making
       process had failed to exclude extraneous considerations
       or take into account all obviously relevant ones."
           So, my Lord, it is obviously importing effectively
       a public law test but the premise for its import is
       twofold: firstly, an implied terms approach to which --
       which we see in ordinary commercial contracts, to which
       Mr Justice Leggatt has referred at 145H generally,
       nothing controversial about that.
   MR JUSTICE FRASER:  Are we going back to Yam Seng now?
   MR GREEN:  I'm still in Braganza, just to make the point
       good.  But then we see it, how does that find expression
       in a situation such as this where the imbalance between
       the parties makes the conflict of interest particularly
       acute?
           So it is that point which wherever you look across
       the spectrum of the common law you find piecemeal
       solutions being developed adjacently.  So we
       respectfully say that if you look from the Interfoto
       perspective of piecemeal solutions, the terms for which
       the claimants are contending in this case would be
       directly specific piecemeal solutions on the basis of
       the specific provisions and nature of this contract in
       any event.  So your Lordship would arrive at the same
       answer by identifying I think probably the right order,
       which I think may have been what your Lordship was
       asking me, in terms of how one actually identifies
       whether there is this type of unfairness to which
       Lord Justice Bingham, as he then was, was referring.
           It may be to look at the position of the parties
       themselves to see whether they are on equal footing,
       then to look at the contractual terms and see what
       contractual discretion, power and control does the
       contract afford, one party over another.  Then to look
       at what controls would it be assumed the parties --
       honest and reasonable parties in the position of the
       contracting parties, would assume prior to contracting,
       would govern the exercise of those powers of control.
           So, for example, how would a contracting
       subpostmaster anticipate that a disputed shortfall would
       be resolved?  Would it be by ignoring a plainly relevant
       factor or would it be by taking it into account, the
       Braganza approach?  Would it be by making a manifestly
       unreasonable decision, or would it be by making one that
       fell within the wide bounds of Wednesbury
       reasonableness?
   MR JUSTICE FRASER:  It is not how would a contracting
       subpostmaster anticipate a disputed shortfall to be
       resolved --
   MR GREEN:  It is both parties.
   MR JUSTICE FRASER:  Exactly.  It is what would be the
       presumed intention of both parties about how that would
       happen.
   MR GREEN:  Indeed.  My Lord, we respectfully say it would be
       uncontroversial that a reasonable person, reasonable
       party in the position of the Post Office, would agree.
   MR JUSTICE FRASER:  It is highly controversial.
   MR GREEN:  My Lord, not when you get their witnesses in
       the witness box and ask them, and not when you read
       their induction booklet.
   MR JUSTICE FRASER:  That is all subjective intention.
   MR GREEN:  My Lord, yes, up to a point.
   MR JUSTICE FRASER:  I can't remember which witness it was,
       I think it was Mr Beal, said that the provision in the
       NTC that deals with losses was intended to have exactly
       the same effect as the provision in the SPMC.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  If that is right, it is drafted
       remarkably differently.  But that is subjective
       intention anyway, so it's not particularly notable or
       relevant.
   MR GREEN:  The only thing I think that -- there are two
       points which the evidence about what people understood
       goes to.  Three points.  The first point is subjective
       intention is not the right test which is
       uncontroversial --
   MR JUSTICE FRASER:  You will only ever get subjective
       intention out of a witness.
   MR GREEN:  Of course, precisely.  So that is all you get
       from a witness.  But what you can tell is as to the
       clarity, the alleged clarity of the terms, if none of
       Post Office's witnesses, some of whom appear to have
       been, at least from the witness statements' perspective,
       people actually explaining on the ground on branch
       transfer day what these things meant.  None of them even
       understood those things, and even people charged with
       policy don't understand them.  That may inform the
       court's view as to how clear they would be likely to be
       to subpostmasters and inform the court's view as to
       where we are on the Wood spectrum on clarity of
       drafting.
           So that is quite an important point because as
       your Lordship may have noticed, my learned friend rather
       finesses the Wood spectrum.  Can I deal with that point
       really quickly because it is a short point albeit in the
       course of rather wider submissions.
           It's in my learned friend's closing at page 24 which
       is {A/8/28}.
   MR JUSTICE FRASER:  Which paragraph?
   MR GREEN:  Paragraph 62, internal page 24.  Mine has printed
       out differently.
   MR JUSTICE FRASER:  So has mine.
   MR GREEN:  So it's {A/8/27}.  Paragraph 62.  My Lord, we
       respectfully suggest that the Post Office's attempt to
       suggest that their contractual documents are at the
       clear, sophisticated, negotiated and prepared with the
       assistance of skilled professionals end of the spectrum
       for the purposes of a Wood analysis is wholly flawed and
       wrong on the evidence your Lordship has heard.  That is
       obviously a matter for the court.  But the point that
       I wish to draw your Lordship's attention to is the
       finessing of the wording within Wood in paragraph 62, so
       halfway between the two hole-punches.  Does
       your Lordship see the underlined words? {A/8/28}
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  It is:
           "... and because they have been negotiated and
       prepared ..."
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  "... with the assistance of skilled
       professionals."
           That is the Herbert Smith, Linklaters point.
           Then your Lordship looks at 63 --
   MR JUSTICE FRASER:  I saw this in opening, it is the:
           "... carefully negotiated and/or professionally
       drafted ..."
           Because the situation insofar as negotiation is
       concerned is rather different in this case than it is in
       that one.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  But it was undoubtedly professionally
       drafted.
   MR GREEN:  Indeed.  It was drafted by professional people.
   MR JUSTICE FRASER:  That is what professionally drafted
       means.
   MR GREEN:  My Lord, yes.  We respectfully --
   MR JUSTICE FRASER:  You are saying professional people
       instructed by the Post Office to draft for the
       Post Office rather than somebody instructed to act for
       a subpostmaster.
   MR GREEN:  We do.  So it wasn't negotiated --
   MR JUSTICE FRASER:  To which Mr Cavender would say it was
       negotiated with the National Federation of
       Subpostmasters who are effectively either a trade union
       or an independent body whose purpose is to represent
       subpostmasters.
   MR GREEN:  Yes.  I'm not sure the SPMC can necessarily --
   MR JUSTICE FRASER:  No, the SPMC may not, but the SPMC was
       drafted in somewhat clearer terms than the NTC, at least
       so far as losses is concerned.
   MR GREEN:  Indeed.  The short point we make is that what is
       being envisaged conjunctively by that phrase in Wood --
   MR JUSTICE FRASER:  Parties both professionally represented,
       yes, and you say that is different to this.
   MR GREEN:  Yes.  That's point one.  And the second point is
       this is looking at -- the quality of the drafting and
       its clarity is also a factor in making a proper
       appraisal of where you are in this spectrum for the
       purposes of looking at how sufficient and clear and
       decisive the language of the express terms is.  We say
       that was not very clear either.
   MR JUSTICE FRASER:  What do you say is not very clear?
   MR GREEN:  The way that the contractual -- the contracts
       were presented and their content.
   MR JUSTICE FRASER:  They are two different points.
   MR GREEN:  They are two different points.  We say both of
       them were unhelpful.  Your Lordship has our point on
       presentation which is a separate one.
   MR JUSTICE FRASER:  That is a completely separate --
   MR GREEN:  In relation to the contractual terms, the precise
       terms of which I will deal with later, if I may, we are
       going to respectfully say that actually what they are
       addressing is not actually that clear, partly because
       the SPMC was drafted prior to Horizon coming in.  It is
       dealing with cash and stock at the branch.
   MR JUSTICE FRASER:  Correct.
   MR GREEN:  As is plain from the heading.
   MR JUSTICE FRASER:  But it does that in two different
       places.
   MR GREEN:  It does.
   MR JUSTICE FRASER:  It deals with cash and stock
       specifically and then it also deals with losses
       specifically.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  But within the context of a paper-based
       system.
   MR GREEN:  Precisely.  And if one looks at the heading, that
       is the heading of the whole section, and no change to
       that express wording was made when Horizon was
       introduced, so that is the context of that.
   MR JUSTICE FRASER:  But if subjectively the Post Office, as
       they say, only ever intended and expected to hold
       subpostmasters post-Horizon to losses which had arisen
       as a result of their fault or carelessness, they would
       not have needed to make any changes.
   MR GREEN:  My Lord, we say precisely.  Yes.  We say the fact
       no change was made is not insignificant.  But the short
       point is that the precise way the wording and contract
       is structured had not had in mind the way Horizon
       in fact operated.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  So that is the point in relation to that.
   MR JUSTICE FRASER:  But we are moving a little bit off the
       point.
   MR GREEN:  Yes, because I went to Wood just briefly to
       highlight --
   MR JUSTICE FRASER:  We went to Braganza because of me and
       then we went to Wood.
   MR GREEN:  So can I come back to Yam Seng.
   MR JUSTICE FRASER:  Can I put Braganza away?
   MR GREEN:  My Lord, yes.
   MR JUSTICE FRASER:  Back to Yam Seng.
   MR GREEN:  Yes {A1.1/43/1}.  So just tracing it through we
       then get, if we go back to this section that goes from
       134 onwards, at 135 {A1.1/43/31} Mr Justice Leggatt
       takes the general norm of the expectation of honesty.
       Can I call it bare honesty just for clarity.  And he
       then says that that has been recognised effectively at
       the highest level authority in the House of Lords, and
       refers to Lord Bingham:
           "... will assume the honesty and good faith of the
       other; absent such an assumption they would not deal."
           My Lord, we respectfully say it is not hugely
       important but it is significant that Lord Bingham by
       that date in 2003, his language in that judgment is not
       as antipathetic as at least one construction of what he
       was saying in Interfoto.
   MR JUSTICE FRASER:  So this is HIH Casualty you are talking
       about now.
   MR GREEN:  Indeed, my Lord, just in passing, because that is
       what Mr Justice Leggatt has in mind.
   MR JUSTICE FRASER:  So, sorry, you are saying by the time he
       has become Lord Bingham, in HIH Casualty he is not
       actually using particularly different wording, is that
       what you're saying?
   MR GREEN:  No, I am saying he is using different wording.
       The point is that in Interfoto he didn't hear argument
       specifically on the universal application of good faith
       principle.  You can see that because no cases were cited
       to him.  If you look at Interfoto you can see the
       reason, for example, he didn't mention the US principle
       of good faith was because the sort of survey that was
       undertaken in Yam Seng, because it was focusing on the
       relevance of good faith as a term implied in more than
       one case, if I can put it neutrally, that survey was
       simply not carried out by Lord Justice Bingham because
       that is not what he was focusing on in that authority.
       It was part of his reasoning but more by way of assumed
       background and a contradistinction with civil law
       generally.
   MR JUSTICE FRASER:  Which case are you talking about now?
   MR GREEN:  In Interfoto.
   MR JUSTICE FRASER:  By the time we get to HIH Casualty it is
       a slightly wider issue.
   MR GREEN:  Things have moved on.
   MR JUSTICE FRASER:  They have moved on, but it is
       approaching -- it is considering a wider issue.
   MR GREEN:  Precisely.  And specifically a wider issue
       specifically about honesty and good faith.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  At that point.  Wider, exactly.
           So what one can say with confidence, because it is
       the same judge, is that such antipathy, if it was
       antipathy in Interfoto, was at least much more muted, if
       there at all, by the time we get to HIH.
   MR JUSTICE FRASER:  But regardless of the position pre-HIH,
       it is safe to conclude that from 2003 onwards this court
       is bound by findings that parties entering into
       a commercial contract will assume the honesty and good
       faith of the other absent an assumption that they
       wouldn't.
   MR GREEN:  There is one footnote, my Lord, which I should
       fairly identify to your Lordship.  That there is
       an unresolved question which I hadn't prepared to take
       your Lordship through, but it is right I just say it for
       precision.  There is an unresolved question as to the
       extent to which parties in English law can exclude
       an expectation of honest dealing.
   MR JUSTICE FRASER:  I know.
   MR GREEN:  I am sorry.
   MR JUSTICE FRASER:  But in this case --
   MR GREEN:  Subject to that tiny footnote --
   MR JUSTICE FRASER:  -- that doesn't arise at all --
   MR GREEN:  It doesn't arise.
   MR JUSTICE FRASER:  No.  And in fact all of the -- I think
       it can safely be said -- well, it depends what you mean
       by common assumption.  Because when subpostmaster X
       contracts with the Post Office, the Post Office will
       undoubtedly hope that subpostmaster X will behave
       honestly.  They will, however, have direct relevant
       experience not of subpostmaster X but of subpostmasters
       and postmistresses A, B, C and D over a period of years,
       who may have gone to prison and hence were not acting
       honestly.  Because they know that although they want all
       their subpostmasters to act honestly, from time to time
       they don't.
   MR GREEN:  My Lord, yes, but that I think is a different
       point.
   MR JUSTICE FRASER:  What I mean is when one says a common
       assumption, which is the phrase --
   MR GREEN:  Sorry, it's probably not the right --
   MR JUSTICE FRASER:  The reason I use "common assumption" is
       that is what Lord Hoffmann says, he uses the expression
       "common assumption" in HIH.  But here it is not
       necessarily the same as two commercial parties entering
       into a contract for a particular thing where they will,
       because they are prepared to go into business with each
       other, be assuming the other one is going to act
       honestly.
   MR GREEN:  Yes.  My Lord, there is a distinction, I think it
       is in Director General of Fair Trading v First National
       Bank, I'm not sure we have it in the bundle,
       a distinction between contractual expectations on the
       one hand and an unwelcome contingency.  Because a
       contract may make provision for unwelcome contingencies
       but they are not the broad thrust of the parties'
       contractual expectations.
           It may be that that helps to inform what is meant by
       common assumption, in the sense that the assumption post
       interview is, yes, this person seems like an honest
       person.  That is not to exclude the possibility that the
       assumption may turn out to be wrong, but they
       specifically interview to get a feel for whether the
       person is likely to be a good honest subpostmaster.
           So, my Lord, I think we would say that actually the
       common assumption in every individual case is that they
       will be, but it doesn't preclude the possibility that
       the common assumption will turn out to be wrong in
       a small number of cases.  My Lord, although the
       prosecution case in this group action are stayed, that
       aspect, I should just footnote that obviously the
       claimants don't accept that the fact that one has
       in fact been convicted is the same as having actually
       in fact acted dishonestly.  Your Lordship has that
       point.
   MR JUSTICE FRASER:  That is a very important but separate
       issue.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  But in --
   MR GREEN:  Your Lordship's point is still a good --
   MR JUSTICE FRASER:  -- these circumstances it cannot be
       ignored because it is a direct relevant feature of this
       action, isn't it?
   MR GREEN:  Indeed.  Indeed.
   MR JUSTICE FRASER:  Of the cohort, one person has been
       convicted, is that right?
   MR GREEN:  My Lord, I think of the entire -- I think there
       are I'm not sure how many of the CCRC cases.  We can
       find your Lordship the answer.
   MR JUSTICE FRASER:  It doesn't matter.
   MR GREEN:  It's a tiny --
   MR JUSTICE FRASER:  It is not a hidden feature.
   MR GREEN:  No.
   MR JUSTICE FRASER:  I had to give the Civil Evidence Act
       warning to two of the witnesses.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  But it does fall to be addressed when
       one is dealing with a phrase that is common assumption.
       But the difference probably is the difference between
       a common assumption and a contractual expectation
       actually.
   MR GREEN:  I think that may be right.  It's a difference
       which -- it's a distinction with a difference in this
       case in circumstances where it may not have been
       a distinction with a difference in the case
       Lord Hoffmann was considering.
   MR JUSTICE FRASER:  Exactly.  But you say good faith is
       wider than that.
   MR GREEN:  Indeed it is.
           My Lord, the other point, just going -- just to
       reinforce the expectation assumption point, is: is
       Post Office, as a result of the presumed intention of
       the parties based on expectations, is Post Office
       entitled to expect honesty of subpostmasters
       contractually?  The answer is yes.  That is why in the
       event that they are disappointed, it is breach of
       contract.  Even regardless of any other terms that make
       provision for that.
           So we respectfully say that would actually reinforce
       the point, that distinction with a difference in this
       case between expectation and assumption.
   MR JUSTICE FRASER:  So we are back at 136, yes?
   MR GREEN:  Indeed.  {A1.1/43/31}
           If we move now to 137, this is I think maybe why
       Chitty has gone slightly adrift.  It says:
           "As a matter of construction, it is hard to envisage
       any contract which would not reasonably be understood as
       requiring honesty in its performance.  The same
       conclusion is reached if the traditional tests for the
       implication of a term are used."
           My Lord, that is why I teed up at the beginning the
       three prisms, effectively, all leading to one answer,
       which I think -- your Lordship already has that point.
       But this is where Mr Justice Leggatt himself looks
       through two of those three prisms.  So he deals with the
       presumed intention, perspective, based on contractual
       expectations, totally orthodox.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  Then he says, okay, let me look through
       a separate prism as a control, and he looks through the
       prism at paragraph 137 and says:
           "The same conclusion is reached if the traditional
       tests for the implication of a term are used.  In
       particular the requirement that parties will behave
       honestly is so obvious that it goes without saying.
       Such a requirement is also necessary to give business
       efficacy to commercial transactions."
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  So just pausing there, the solidity of the
       reasoning in Yam Seng up to this point is reinforced by,
       we respectfully say rightly, and it may be that this
       analysis hasn't necessarily been stated, this latent
       common analysis has not been stated out loud, or maybe
       it has by people saying it is really one analysis of
       construing the contract.  But we respectfully say
       your Lordship is right to identify the point that these
       tests essentially converge and it would be bizarre if
       they didn't.
           So the strength of the Yam Seng judgment up to this
       point, and this informs how one should read the
       paragraphs that follow, is that Mr Justice Leggatt there
       specifically reminds himself of the traditional prism of
       necessity and obviousness at that point.  And therefore
       what comes after that, as well as what has gone before,
       needs to be seen through the prism of Mr Justice Leggatt
       being acutely aware of those tests and their rigour.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  Just to foreshadow a point I will make good in
       a moment, when we trace through Marks & Spencer and
       Al Nehyan we see this point made absolutely good
       post-Marks & Spencer going back to this point.
           Then 138 is important because this is the second
       layer above honesty.  We don't really -- Chitty just
       simply does not acknowledge the care of this judgment
       properly.
   MR JUSTICE FRASER:  I am sure Mr Cavender will spend some
       time with Chitty because I know he relies on it, but for
       the moment let's just concentrate on the authorities.
   MR GREEN:  I am grateful, my Lord.
           At this point Mr Justice Leggatt says:
           "In addition to honesty, they are other standards of
       commercial dealing which are so generally accepted that
       contracting parties would reasonably be understood to
       take them as read without explicitly stating them in
       their contractual document.  A key aspect of good faith,
       as I see it, is the observance of such standards.  Put
       the other way round, not all bad faith conduct would
       necessarily be described as dishonest."
           Then he gives two examples at the end of 138 and in
       139 which he pulls together in 140.  {A1.1/43/32}
   MR JUSTICE FRASER:  The one at the end of 138 he actually
       uses as a counter-example because he goes on to say he
       is putting it the other way round and not all bad faith
       conduct is dishonest.
   MR GREEN:  Precisely.  So what emerges is that good faith is
       something more than honesty, bare honesty.  Good faith
       means that you will not engage in conduct which is
       contrary to objective standards of impropriety, or
       propriety, commercial acceptability and conscionability.
   MR JUSTICE FRASER:  Even though it is not dishonest.
   MR GREEN:  Even though it is not dishonest.
   MR JUSTICE FRASER:  So really it is honesty and dishonesty
       as two descriptive terms --
   MR GREEN:  Top and bottom.
   MR JUSTICE FRASER:  -- which are antonyms to one another.
       Good faith and bad faith are also antonyms but they
       don't mean exactly what honesty and dishonesty mean.
   MR GREEN:  Precisely.  And good faith and bad faith describe
       the undistributed middle between honesty and dishonesty.
   MR JUSTICE FRASER:  If you're going to see them on a scale
       that might be right, or you could draw a Venn diagram,
       but they're --
   MR GREEN:  The meaning is clear.
   MR JUSTICE FRASER:  Well, it is an essential -- the
       essential simple question boils down to this, doesn't
       it: is good faith something other than simply being
       honest?
   MR GREEN:  And the answer is yes.
   MR JUSTICE FRASER:  You say the answer is yes.  Chitty and
       Mr Cavender say no, they effectively say they are the
       same thing.  There are grounds for both approaches and
       one of the things I am going to have to decide is who is
       right about that.
   MR GREEN:  My Lord, we say on the authorities there is only
       one answer --
   MR JUSTICE FRASER:  I know you do.  But if you are right and
       good faith can't be fully described as --
   MR GREEN:  Within honesty alone.
   MR JUSTICE FRASER:  Well, not just within but being one and
       the same as being honest, how would you define it?
   MR GREEN:  It is defined as observing objective standards
       of --
   MR JUSTICE FRASER:  That doesn't tell me what those
       standards are, though.  Go on: observing objective
       standards ...
   MR GREEN:  Of propriety, conscionability and commercially
       acceptable conduct.
   MR JUSTICE FRASER:  And commercially acceptable conduct.
   MR GREEN:  Those find expression elsewhere as including
       fidelity to the parties' bargain, transparency and fair
       dealing.  That is why later on Mr Justice Leggatt tags
       on "and fair dealing" to explain good faith, which I am
       coming to.
   MR JUSTICE FRASER:  I think one of the authorities, and
       I don't think it is this one but I might be wrong, uses
       the concept of a reasonable businessperson.
   MR GREEN:  Yes.  That is the objective element of the
       standard, that it's commercially acceptable --
   MR JUSTICE FRASER:  To a reasonable businessperson.
   MR GREEN:  Exactly, to a reasonable businessperson.
       Reasonable and honest in fact is the phrase.  Not that
       there is any difference but ...
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  My Lord, is that a convenient moment?  Because
       I am about to go into the next section.
   MR JUSTICE FRASER:  Yes, it is.  Have we finished with
       Yam Seng?
   MR GREEN:  Not quite.
   MR JUSTICE FRASER:  So you mean we are going to the next
       section of Yam Seng.  Is it the Al Nehyan that uses
       reasonable -- that says reasonable businessperson?
   MR GREEN:  I think it is.  Can I check over --
   MR JUSTICE FRASER:  No, don't check over the --
   MR GREEN:  I have it all set out.
   MR JUSTICE FRASER:  You don't need to check.  I am just
       thinking aloud.
   MR GREEN:  I think we have identified it in our appendix,
       my Lord, in those first -- in that first section.
   MR JUSTICE FRASER:  I'm sure you have.
           All right, we will come back at 12 o'clock.  We will
       have a short break for the shorthand writers.  If
       everyone can be back for 12 o'clock I would be very
       grateful.
   (11.51 am)
                         (A short break)
   (12.02 pm)
   MR JUSTICE FRASER:  Mr Green.
   MR GREEN:  My Lord, just to finish off on Yam Seng before
       following through to those cases.  I think the answer to
       your Lordship's questions was actually Bristol
       Groundschool first and then Al Nehyan but I will take
       you to those in a moment.
           The point at 140 in Yam Seng {A1.1/43/32} is that
       Mr Justice Leggatt is not spiriting an implied term of
       good faith and its content out the air.  He specifically
       makes reference to the aspects of good faith which he
       has identified as being consistent with the way in which
       express contractual duties of good faith have been
       construed.
   MR JUSTICE FRASER:  Where are we looking now?
   MR GREEN:  This is at paragraph 140.
   MR JUSTICE FRASER:  What are those two aspects, though, that
       he is talking about?
   MR GREEN:  They are the ones above, my Lord.  So I slightly
       skipped over that.  The last line of -- I mentioned just
       before the break that the last line of, well,
       paragraph 138, including the epithets at the end of 138,
       and 139 is fidelity to the parties' bargain.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  Are aspects of good faith.
   MR JUSTICE FRASER:  So the second one is fidelity to the
       bargain.
   MR GREEN:  Indeed.  And so the two aspects he is picking up
       at 140, he says those are aspects:
           "... I have identified which are consistent with the
       way in which express contractual duties have been
       interpreted in recent cases."
           So having identified that, he then at 141 -- that is
       totally solid and uncontroversial.  He then looks at
       what good faith requires, again totally uncontroversial.
       What good faith requires is sensitive to context.  It
       includes the core value of honesty:
           "In any situation it is dishonest to deceive ..."
           And then he deals in the rest of 141 with how
       honesty itself, the requirements of honesty itself can
       go further.  So that is like all those cases in
       Spencer Bower on actionable misrepresentation, about
       continuing representations not being corrected being
       false, and also the second limb of Derry v Peek type of
       deceit where -- Nelsonian blindness, effectively, where
       you don't look for fear of what you would find if you
       did.  That is on honesty.
           Then 142, he focuses on the relevant background
       expectations extending further than the content of
       honesty.  So our respectful submission is that honesty
       has an objective meaning but its content may be wider or
       narrower in particular circumstances.
           So what honesty -- and this is a distinction made
       later on as well.  The fulfilment of a standard of
       honesty may vary but the concept itself is objective.
       But what he is going on to deal with at 142 is the false
       dichotomy, which we can see is false, between
       partnership, trusteeship and fiduciary relationships at
       one end of the spectrum and relationships at the other
       end of the spectrum as if there is nothing in between
       them.
           What he says at 142 is that the relevant background
       expectations may extend further to an expectation that
       the parties will share information relevant to the
       performance of the contract.  Because that was
       a particular point that arose in Yam Seng on the
       updating -- on the foreshadowing of what was going to be
       available to sell and how that information had changed.
       But we see at 143 that point was not specifically argued
       in that way in Yam Seng, so at 143 he says he doesn't
       need to deal with that particular --
   MR JUSTICE FRASER:  Have we gone on to 143 now?
   MR GREEN:  We haven't, I'm just foreshadowing it.
   MR JUSTICE FRASER:  We are on 142.
   MR GREEN:  We are on 142 {A1.1/43/32}.  And there, four
       lines down on the right, he says:
           "English law has traditionally drawn a sharp
       distinction between certain relationships, such as
       partnership, trusteeship and other fiduciary
       relationships, on the one hand, in which the parties owe
       onerous obligations of disclosure to each other, and
       other contractual relationships in which no duty of
       disclosure is supposed to operate.  Arguably at least
       that dichotomy is too simplistic."
           We say it is beyond arguably because otherwise
       you can't make sense of all the intermediate cases that
       we have seen where there are duties of positive
       co-operation, effectively, between the parties to which
       in fact Mr Justice Leggatt has already referred and
       refers to elsewhere.  So we say arguably he is
       understating what the cases show because there is clear
       central category and we see it again in the Geys case of
       what other relationships give rise to.  So that
       dichotomy is too simplistic and it is basically wrong,
       we say.
           It is right to distinguish from where a peculiarly
       fiduciary obligation arises from where it doesn't.  That
       is a sharp dichotomy.  But we say that is not the right
       analysis for the purposes of these terms.
           He then says:
           "Whilst it seems unlikely that any duty to disclose
       information in performance of the contract would be
       implied where a contract involves a simple exchange,
       many contracts do not fit this model and involve
       a longer term relationship between the parties to which
       they make a substantial commitment."
           Can I just pause there, my Lord.  One of the
       background factors to which we respectfully say the
       court should have regard is the context in which the
       common law has developed.  If one looks historically
       back, and this is -- there will be exceptions which
       prove the rule, we say, but broadly speaking, if one
       looks at the genesis of the common law say up to
       50 years ago or even more recently than that, long-term
       relationship contracts --
   MR JUSTICE FRASER:  Are you saying "relationship"
       deliberately?
   MR GREEN:  Long-term -- I am putting it neutrally at the
       moment.  Long-term contractual relationships that went
       on for 30 years, facilities management agreements or
       PFI-type agreements, were rare.
   MR JUSTICE FRASER:  There was no PFI 50 years ago.
   MR GREEN:  Precisely.  But relationships of that type, which
       were essentially framework agreements within which many,
       many individual transactions will be conducted
       underneath, were relatively rare, other than those which
       the law recognised in some of these categories.
           So the law historically catered broadly for those
       relationships on a piecemeal basis.  But what we have
       had in the last perhaps 30 or 40 years is we have had
       a very considerable expansion in long-term framework
       agreements, tendering regulations.  That overall weather
       system on the law and commercial practice has led to the
       need for the common law to respond to those types of
       contracts.  And we respectfully say it is only
       a background matter but it does tend to explain how the
       law has developed since the 1980s in this respect.  And
       how, if there were previously a dichotomy say at the
       start of 20th century, that dichotomy, whether it once
       existed or not, is clearly now out-of-date.  So that is
       just by way of an additional background submission to
       the point that a dichotomy is now, on any view, wrong.
           At the bottom he is referring to the:
           "... longer-term relationship between the parties to
       which they make a substantial commitment."
           This part of the judgment is obviously going to be
       incredibly familiar to your Lordship as probably the
       rest of it is as well.  But:
           "Such 'relational' contracts, as they are sometimes
       called, 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 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 agreement, franchise
       agreements and long-term distributorship agreements."
           Just unpacking what Mr Justice Leggatt has said
       there, your Lordship will note that he is in fact
       identifying that both the implication by fact and his
       second approach that we saw in paragraph 137, both tests
       are satisfied.  He is actually stating both tests in the
       same sentence.
   MR JUSTICE FRASER:  Whereabouts is he doing that?
   MR GREEN:  So he says -- he refers to what is not legislated
       for in the express terms at the foot of page 1352
       {A1.1/43/32}, and then he says in the last six words:
           "... but are implicit in the parties'
       understanding ..."
           So that is the fact based expectations analysis.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  "... and necessary to give business efficacy to
       the arrangements."
   MR JUSTICE FRASER:  So those first two conventional routes.
   MR GREEN:  He has done both.  And that is picking up what he
       said at 137 {A1.1/43/31} which is:
           "The same conclusion is reached if the traditional
       tests for the implication of a term are used."
           Then I don't need to trouble you with 143, that
       deals with how the case is argued and what he thought
       was arguably entitled to the estimates.
           At 144 he highlights the point that the test of good
       faith is objective in that it doesn't depend on one
       party's perception and so forth.  {A1.1/43/33}
           And then five lines down in the middle:
           "The standard is thus similar to that described by
       Lord Nicholls of Birkenhead in a different context in
       his seminal speech in Royal Brunei Airlines ... This
       follows from the fact that the content of the duty of
       good faith is established by a process of construction
       which in English law is based on an objective
       principle."
           Pausing there.  There is another sort of big global
       point which arises both here and in relation to
       Marks & Spencer, which is that the precise principles
       both of contractual construction and in relation to the
       implication of terms in English law show an antipathy to
       the court restriking the parties' bargain afterwards in
       the light of perhaps changed circumstances or something
       of that type.
   MR JUSTICE FRASER:  That is Arnold v Britton.
   MR GREEN:  Precisely.  But that is nothing to the point
       where what in fact is being done is analysing with care
       what on the facts, and it is for your Lordship to find
       the facts on the evidence, the parties -- the presumed
       intention of the parties objectively is.  And
       proceeding --
   MR JUSTICE FRASER:  That is why you can construe a contract
       without having any evidence at all.
   MR GREEN:  My Lord, it is.  The only difficulty in reality
       is your Lordship is also required to have regard to the
       commercial and practical implications, and where you are
       engaged in the Marks & Spencer analysis which I am going
       to come to in a moment, you have to look at commercial
       and practical coherence.  And where there are important
       aspects of commercial common sense on the one hand or
       commercial and practical coherence on the other, which
       can only be understood by the court understanding
       for example how accounting on Horizon worked,
       your Lordship has to have that evidence to be able to
       reach, firstly, an informed view of what the commercial
       implications of rival interpretations would be when you
       are looking at construction and, secondly, to be able to
       make an informed value judgment as in the sixth
       proposition in Marks & Spencer at paragraph 21 which
       I will come to.
           So your Lordship is absolutely right that if how
       the -- if the commercial implications of a particular
       construction are uncontroversial, your Lordship doesn't
       need any evidence.  But to resolve the common issues in
       this case your Lordship, we respectfully say, does need
       evidence, even on the issues of contractual
       construction, in order to be able to form a view about
       what the commercial implications of rival
       interpretations would be on construction in any event,
       what the presumed intention of the parties would be --
   MR JUSTICE FRASER:  How does evidence help on presumed
       intention of the parties?
   MR GREEN:  Because the --
   MR JUSTICE FRASER:  Otherwise you are not presuming it, are
       you?  You are finding their intention?
   MR GREEN:  My Lord, I think the answer is that
       your Lordship's decision on what the presumed intention
       of the parties is is not a prisoner to the subjective
       understandings of witnesses who have given evidence.
   MR JUSTICE FRASER:  That is rather my point.
   MR GREEN:  But the idea that your Lordship will make the
       decision disregarding factual matters which inform what
       a reasonable person in the position of the parties would
       expect we say appears wholly unrealistic.  So it's a --
       it's rather like, my Lord, in the field of
       discrimination law, you may not be able to identify
       an actual comparator but you can identify a hypothetical
       comparator, and you can give evidence about people who
       are not that hypothetical comparator so that
       an employment tribunal can say, well, we heard evidence
       from Mr So-and-So who was not a comparator, we heard
       evidence about Mrs So-and-So who wasn't a comparator
       either.  From that evidence, we are able to say that in
       our judgment the hypothetical comparator would have
       these following characteristics.
           So for your Lordship to reach an informed judgment
       on that, some aspects of the factual matrix will be
       important, we say, and I will come to which later, if
       I may.
           Just returning to 144 {A1.1/43/33}, the objectivity,
       the content of the duty of faith being established by
       the process of construction, which in English law is
       based on an objective principle.
           Then it follows:
           "The court is not concerned ..."
           This is on your Lordship's point.
           "... with the subjective intentions of the parties
       but with their presumed intention, which is ascertained
       by attributing to them the purposes and values which
       reasonable people in their situation would have had."
           So, my Lord, at its very lowest, identifying the
       situation that the parties were in is necessarily
       anterior to identifying what reasonable people in that
       situation would expect or have as their presumed
       intention.
           Then at 145 there is quite an important point to
       make on this just in defence of Lord Justice Steyn, as
       he then was, because I think this passage has been
       misunderstood.  It arises in Yam Seng in
       Mr Justice Leggatt's judgment at 145.  He says:
           "Understood in the way I have described, there is in
       my view nothing novel or foreign to English law in
       recognising an implied duty of good faith in the
       performance of contracts."
           He is not there saying in every contract, he is
       saying in the performance of contracts at all.
           Then he goes on to say, and this is the important
       bit.  I just want to be clear what our submission is:
           "It is consonant with ..."
           So he not saying dependent upon:
           " ... the theme identified by Lord Justice Steyn as
       running through our law of contract that reasonable
       expectations must be protected."
           Then he cites First Energy and the LQR article.
           Pausing there.  My Lord, what we respectfully submit
       Lord Justice Steyn meant by the word "reasonable
       expectations" was not that the court should
       ex post facto impose back on the parties a reasonable
       bargain -- a bargain that the court thinks is reasonable
       but wasn't the one that the parties struck.  That is
       absolutely not what he was saying.  What he was doing
       was he was confining the expectations that should be
       protected to those of notional reasonable people in the
       position of the parties, in shorthand, we respectfully
       submit.  Because we will see later there are some
       observations as to the extent to which that has been
       understood incorrectly.
           So two points on that.  One is Mr Justice Leggatt's
       decision was not dependent upon that understanding but
       merely consonant with it, and we say the reference there
       to what he was saying is correct on contractual
       orthodoxy for that reason.
           Then after the LQR article:
           "Moreover such a concept is I believe already
       reflected in several lines of authority that are
       well-established."
           Then:
           "... duties of co-operation in the performance of
       contracts have been implied."
           And I will come to Ukraine on that point in
       a moment.
           "Another consists of the authorities which show that
       a power conferred by a contract on one party to make
       decisions ..."
           That is the point in commercial contracts generally,
       and in Braganza as I have already shown your Lordship.
       I don't need to spend time on that.
           Bottom of that paragraph just above J, a further
       example is where the consent of one party shouldn't be
       unreasonably withheld.
           Then the last two lines:
           "Yet another example I would suggest is the line of
       authorities of which the Interfoto Picture Library case
       is one which hold that an onerous or unusual contract
       term on which a party seeks to rely must be fairly
       brought to the notice of the other party if it is to be
       enforced."
           He then makes his six observations in relation to
       the good faith.  {A1.1/43/34} One:
           "... dependent on context and is established through
       a process of construction of the contract ..."
           This is consistent with the case by case approach
       favoured by the common law.  So totally orthodox.
           "Second, as the basis of the ... presumed intention
       of the parties and the meaning of their contract, its
       recognition is not an illegitimate restriction on the
       freedom of parties to pursue their own interests."
           And he says there:
           "The essence of contracting is that the parties bind
       themselves in order to co-operate to their mutual
       benefit."
           My Lord, we say it is of significance in this case
       that the implied term as to co-operation, necessary
       co-operation, which is accepted by Post Office, is
       relevant and important.  We make two points as to that
       parenthetically.  The first is that the Ukraine case,
       the judgment of Lady Justice Gloster, the Ukraine case
       shows that implication of Stirling Maitland and
       necessary co-operation terms are not automatic.  So that
       means that accepting the need for those terms is
       a recognition of a lacuna in the express terms of the
       contract.
   MR JUSTICE FRASER:  By definition the acceptance of any
       implied terms.
   MR GREEN:  Precisely.  But Ukraine puts it beyond doubt
       because Ukraine says they are not routinely to be
       implied.  So there is an even clearer threshold to that
       point, we respectfully say.
           And the second point is that by the concession -- by
       the concession of the necessary co-operation term,
       Post Office itself recognises, if this were
       controversial, which I don't think it should be, that
       an important essential feature of the relationship was
       at least to some extent co-operation.
           So even on the basis of the uncertain concession as
       to necessary co-operation, because we don't know how far
       that goes, this is a case even on the defendant's case
       where the essence of contracting is the parties bind
       themselves in order to co-operate for their mutual
       benefit, and that is at least to some extent implicitly
       recognised in the concession made by the defendant:
           "The obligations which they undertake include those
       implicit in their agreements as well as those which they
       have made explicit."
           Third, the parties can always modify the scope of
       the duty by express terms, in principle at least.  And
       that is the footnote on honesty, my Lord, which
       I mentioned earlier.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  Which is 149.
           Fourth, and this is the tag on of the phrase, the
       three words "and fair dealing" which I mentioned
       earlier:
           "I see no objection ... and some advantage in
       describing the duty as one of good faith and fair
       dealing.  I see no objection as the duty does not
       involve the court imposing its view of what is
       substantively fair on the parties.  What constitutes
       fair dealing is defined by the contract and by those
       standards of conduct to which, objectively, the parties
       must reasonably have assumed compliance without the need
       to state them.  The advantage of including reference to
       fair dealing is that it draws attention to the fact that
       the standard is objective and distinguishes the relevant
       concept of good faith from other senses in which the
       expression 'good faith' is used."
           So, my Lord, that is the point that helps to explain
       what was in 138 as to the reach of good faith.  So
       Mr Justice Leggatt gives the examples of improper,
       commercially unacceptable and unconscionable, and then
       he gives the fidelity to the parties' bargain, and that
       is the reason I mentioned the addition of the words "and
       fair dealing" because it helps to identify that it is
       not an outcome-based analysis, the court is not imposing
       outcomes on the parties, the court is imposing standards
       of conduct which ought to be uncontroversial in the
       parties' dealings with each other in the performance of
       the contract.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  At 151:
           "Insofar as English law may be less willing than
       some other legal systems to interpret the duty of good
       faith as requiring openness of the kind described by
       Bingham LJ in the Interfoto Picture Library case as
       'playing fair', 'coming clean' or 'putting one's cards
       face upwards on the table', this should be seen as
       a difference of opinion which may reflect different
       cultural norms about what constitutes good faith and
       fair dealing in some contractual contexts rather
       than a refusal to recognise that good faith and fair
       dealing are required."
           All we would say, your Lordship already has our
       respectful submission that by the time Lord Bingham is
       in the House of Lords and it's 2003, the position going
       forward from there is clear.  But I think all we would
       say is that on a one-time -- a simple exchange contract,
       a contract of sale or exchange or something like that,
       it is clearly a different situation to these longer term
       relationships which were in issue and being considered
       in Yam Seng, and therefore the antipathy that English
       law might have in requiring openness of some sort across
       the whole piece, we say, if you read the judgment as
       a whole, is actually put in context by looking at
       different cultural norms and what constitutes good
       faith.
           So there is in a sense a reference back to
       contrasting English law with other systems, where in
       other systems, for example civil law systems or in
       international commercial sales, even in a one-off sale
       case there is, as we saw in Article 1.7, there is an
       obligation of good faith and fair dealing which you
       can't contract out of.
           I think all Mr Justice Leggatt is saying here is
       that that may be a difference, an English law difference
       across the whole piece reflecting different cultural
       norms, but it is doesn't have any bearing on the precise
       type of contract which Yam Seng was considering.
           Finally, sixth:
           "The fear that recognising a duty of good faith
       would generate excessive uncertainty is unjustified.
       There is nothing unduly vague or unworkable about the
       concept.  Its application involves no more uncertainty
       than is inherent in the process of contractual
       interpretation."
           My Lord, we say two things about that.  Firstly, it
       is obviously right.  But secondly, it does have
       a bearing on the defendant's approach to implied terms
       more generally.
           Your Lordship will note at 154 Mr Justice Leggatt
       says:
           "I have emphasised in this discussion the extent to
       which the content of the duty to perform a contract in
       good faith is dependent on context.  It was Mr Salter's
       submission that the relevant content of the duty in this
       case was captured by two more specific terms which
       Yam Seng contends are to be implied into the agreement.
       I therefore turn to consider these."
           Your Lordship will have seen that in our closing
       submissions we have made the observation that -- and
       I will deal with this probably tomorrow, but in relation
       to the issue of the utility of the Common Issues trial,
       which we addressed in our opening submissions at ...
   MR JUSTICE FRASER:  Page 3.
   MR GREEN:  Page 3 {A/1/7} and then in more detail at page 65
       {A/1/69}.  My Lord, those ensuing pages trace the
       defendant's position that it admits terms at a very high
       level of generality, and then says we're not prepared to
       engage on the content or incidence of those terms
       because you have to look at the practical consequences
       on the facts of every individual case.
           We respectfully say there has never been a GLO
       involving implied terms where that is the right
       approach, ever, because it makes a GLO pointless,
       because you have to try out the facts of every single
       case without even being able to do the normal exercise
       of triage on particular issues.  So that they are here
       (indicates), and they say you can't tell what that means
       unless you look at 557 cases.
           What we would respectfully say, and that is why we
       included the words "or incidence of implied terms" in
       the common issue, it may be more accurate to say
       "content" which is the word Mr Justice Leggatt uses in
       paragraph 154.  But to gain reasonable or optimal
       utility from the common issues trial, we will invite the
       court to make findings on the implied obligations which
       we have set out under the heading "Implied Terms" to
       identify --
   MR JUSTICE FRASER:  Your case as I understand it on those is
       that they are component parts of the contracts being
       relational.
   MR GREEN:  Precisely.  They are either component parts or
       they would be implied even if they weren't.  We're
       agnostic as to the route --
   MR JUSTICE FRASER:  That might be two different ways of
       saying the same thing.  But that is why you have used
       the slightly curious phrase "incidence" of implied
       terms.
   MR GREEN:  Yes.  And it may be that "incidence" is
       infelicitous as a word, but the concept is perfectly
       clear from 154 in Yam Seng because the content of the
       obligation which is capable of being an implied term in
       itself is able to find expression in two more specific
       implied terms.  And indeed when it suits the defendant,
       whether it is in the Court of Appeal making a concession
       in Lalji or whether it is -- and we have covered these
       in our written submissions -- or whether it is with
       Mr Bates trying to get access to his branch after
       everyone -- after relationships have gone south, they
       are perfectly capable of formulating specific implied
       terms when it suits them.  They say in Mr Bates' case
       there is a specific implied term for you to allow
       reasonable access.
           So when it suits them it's absolutely fine, but in
       the face of repeated RFI's and an order from this court,
       no particularity beyond this lofty, high level
       concession which they say is an end of the inquiry by
       the court.
           So the only point I wished to make in relation to
       that on Yam Seng was this point at 154 which we have
       hitherto regarded as totally uncontroversial but it does
       appear to remain in controversy in this case.
           My Lord, can I now turn to the follow on cases just
       to trace through.  It may be helpful to have the
       appendix handy.
   MR JUSTICE FRASER:  Which appendix?
   MR GREEN:  Our authorities appendix that your Lordship asked
       for.  Just on the inside cover your Lordship will see
       how the authorities appendix is laid out.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  There is a reference to the relevant annex to our
       original opening submissions {A/7/1}.  So Annex I is
       an annex to the opening submissions where we dealt with
       those principles in more depth than we had in the
       opening itself.  There is then the relevant -- the key
       authorities on those areas, there is obviously the Opus
       reference, and then there is the page of this document
       on which your Lordship will find the case.
           So if we go to relational contracts at page
       {A/7/13}, your Lordship will see our summary of
       Bristol Groundschool there.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  In relation to honesty and breach, two of the
       legal propositions identified in paragraph 196 of
       Bristol Groundschool, we summarise them there.  That
       paragraph is at {A1.1/52/1} and your Lordship will find
       Bristol Groundschool in volume 1 at tab 34.  V1 at
       tab 34.  Right at the back.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  I think the essential part that we need to look
       at is on page 86 {A1.1/52/86}.  Obviously the finding in
       (i), the relational contract, it did contain an implied
       duty of good faith.  (ii), reference back to Yam Seng.
       And then it's interesting that regard was at least had
       to the reaction of an individual witness at (iii).
       Obviously, my Lord, that was looking at breach, but at
       least in terms of the standard identifying context of
       what reasonable parties, reasonable notional parties
       might expect, the duty was recognised by the witness
       there.
           Then there is reference to the YSP case which is
       cited earlier on:
           "... good faith extends beyond but at the very least
       includes the requirement of honesty."
           I think that is simply repeating at first instance
       the point that Mr Justice Leggatt himself made.
           Then (v):
           "The relevant test is that of conduct that would be
       regarded as 'commercially unacceptable' by reasonable
       and honest people in the particular context involved."
           So, my Lord, that goes back to Royal Brunei
       Airlines, which was the point that I identified to
       your Lordship in Mr Justice Leggatt's judgment at 144.
       It is Lord Nicholls' well-known speech in that case that
       is referred to in Yam Seng at paragraph 144.  That is
       1353D to E on {A1.1/43/33}, should your Lordship need to
       go back to that.
   MR JUSTICE FRASER:  What was the Yam Seng paragraph again?
   MR GREEN:  Paragraph 144.
   MR JUSTICE FRASER:  Thank you.
   MR GREEN:  So that is the short point on
       Bristol Groundschool.  Could I take your Lordship now
       forward to Al Nehyan.  I think it's probably convenient
       to do that next.
   MR JUSTICE FRASER:  That is in the opening authorities.
   MR GREEN:  It's in the opening authorities at tab 8.
       {A1.1/72/1} and {A1.1/72/48} is the page we want to go
       to.  That is paragraph 175.  This is the specific point
       your Lordship I think asked about.  It is at the top
       hole-punch.  I will put this in context in the case in
       a moment, but I will just show your Lordship the
       specific point.  At the top hole-punch:
           "In my view ..."
           Half way across.
   MR JUSTICE FRASER:  "This summary is also consistent ..." is
       that the bit?
   MR GREEN:  Exactly.  That part:
           "This summary is also consistent with the English
       law as it has so far developed with the caveat that
       the obligation of fair dealing is not a demanding one
       and does no more than require a party to refrain from
       conduct which, in the relevant context, would be
       regarded as commercially unacceptable by reasonable and
       honest people."
           So this is Lord Justice Leggatt in
       the Court of Appeal.  He is referring --
   MR CAVENDER:  No, it's not, it's at first instance when he
       had been promoted.
   MR JUSTICE FRASER:  It is Lord Justice Leggatt in the at
       first instance --
   MR GREEN:  Sorry, at first instance after he has been
       promoted.
   MR JUSTICE FRASER:  After he has been promoted.
   MR GREEN:  Indeed.  In the Commercial Court --
   MR JUSTICE FRASER:  An interesting case in terms of legal
       precedence.  It is persuasive not binding.
   MR GREEN:  It is not binding on your Lordship.
   MR JUSTICE FRASER:  It is persuasive.  But is it more
       persuasive than it would have been if he had still been
       Mr Justice Leggatt?
   MR GREEN:  Legally maybe not.
   MR JUSTICE FRASER:  It might not matter.  It's persuasive
       anyway.
   MR GREEN:  It's persuasive anyway.  My Lord, what --
   MR JUSTICE FRASER:  I don't think Willis v Joyce deals with
       the situation where somebody has been promoted but they
       are still dealing with outstanding business at first
       instance.  But it doesn't matter.
   MR GREEN:  The key point is that he is referring back to
       Bristol Groundschool, which of course was referring back
       in turn to Yam Seng.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  And also to Astor Management, which is yet
       another case in this line of cases.  We haven't taken
       your Lordship to that case as well.
   MR JUSTICE FRASER:  To which one?
   MR GREEN:  To Astor Management.
   MR JUSTICE FRASER:  No, I don't think you need to.
   MR GREEN:  Then there is referred back to Chief Justice
       Allsop's --
   MR JUSTICE FRASER:  That is the Australian one --
   MR GREEN:  The Australian case about those standards.  We
       respectfully say there really is no room given the
       consistent decisions which rely on prior authorities and
       consider them carefully as to the nature of this
       obligation.  There really is no room for regarding good
       faith as identical to honesty in all cases.  We
       respectfully say the defendants are wrong about that
       and, if that is what Chitty is saying, it is clearly
       wrong.
           My Lord, can I quickly put this part of the judgment
       in context, because it starts at paragraph 167.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  Which will be three pages earlier.  {A1.1/72/45}.
   MR JUSTICE FRASER:  It sort of starts, doesn't it, at
       paragraph 165?
   MR GREEN:  It does.  That is probably right.  In fact
       possibly at 164 arguably.  {A1.1/72/44}.  Because if we
       go back a page, it says:
           "It is also necessary to identify more precisely the
       nature of the trust and confidence which is a feature of
       fiduciary relationship."
           There is a sort of preface.
   MR JUSTICE FRASER:  But in that case there was a fiduciary
       relationship.  Here there is also alleged to be
       a fiduciary relationship.
   MR GREEN:  At least one.
   MR JUSTICE FRASER:  At least one.
   MR GREEN:  Yes, because the Post Office says we are an agent
       and from that spring various fiduciary obligations.
   MR JUSTICE FRASER:  But they also put it more starkly, not
       just as agent.
   MR GREEN:  But as fiduciaries for their cash and stock.
   MR JUSTICE FRASER:  Yes, which is undoubtedly correct.
   MR GREEN:  Undoubtedly right.  No quarrel from us on that.
       There is obviously a point about precision of fiduciary
       obligations.  Your Lordship will probably know about
       the -- we haven't put it in the bundle, but we can
       produce it.  In the Fishel case and University of
       Manchester, Mr Fishel, or maybe it was Professor Fishel,
       owed a general obligation of fidelity.  This related to
       what relief was available for breach.  What he had done
       was he had done tests in the university's labs for
       commercial parties whilst at the university.  The
       university could recover damages for common law breach
       of duty of fidelity for what he had done, but he had
       also used the students and the staff below him, who he
       was managing for and on behalf of the university, to do
       work as well, and on that they could recover an account
       of profits because there was a precise fiduciary duty
       that he owed in that respect but not in relation to use
       of his own time, because he was managing them for and on
       behalf of the university.
   MR JUSTICE FRASER:  And that duty included one not to profit
       from their activities.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  Hence the relief that was available for
       the account of profits.  But here there are no real
       nuances about -- no similar nuances here about
       the nature of the fiduciary relationship.
   MR GREEN:  Only to be careful to identify what the precise
       agency was.  Because we have alleged -- I was going to
       get to this later but it has come up --
   MR JUSTICE FRASER:  I was assuming agency would be tomorrow,
       but I might be wrong.
   MR GREEN:  Your Lordship is right but just to foreshadow the
       point.  We have assumed a very precise sort of point
       four in Bowstead type of agency which is wholly
       consistent with Angela Van Den Bogerd's own evidence
       that this feature of reconciling accounts and so forth
       is something that Post Office was doing on our behalf.
       And, as soon as you say, this is an arm's length
       business-to-business relationship and this is something
       we are doing on your behalf, you are absolutely front
       and centre in that agency relationship, whether you
       disclaim it or allege a different agency for a different
       purpose going the other way.
           So all I would say, my Lord, is at the bare minimum
       this is a relationship that this contract created where
       there are fiduciary obligations which, uncontroversial,
       are on subpostmasters in relation to cash and stock.
           So that is not an irrelevant fact to the
       characterisation of the relationship as a whole.  That
       it is one in which there are at least certain fiduciary
       obligations owed by subpostmasters to Post Office in
       relation to cash and stock.  We say, in addition, there
       are some coming back our way as obligations to give us
       proper information about those transactions, which we
       say powerfully reinforce the submissions that we have
       made about it being a relational contract.  For reasons
       which will be obvious, because we looked at the false
       dichotomy and the relevance of that.
           But, my Lord, we were looking at 164 as a sort of
       preface to the --
   MR JUSTICE FRASER:  The best place to start really,
       I suppose.  It is either 164 or 165.
   MR GREEN:  Yes, precisely.  At 164 in the second line:
           "There are plainly many situations in which a party
       to a commercial transaction may legitimately repose
       trust and confidence in another without the other party
       owing any fiduciary duties."
           Totally true:
           "Thus In re Goldcorp Exchange ..."
   MR JUSTICE FRASER:  They weren't fiduciary --
   MR GREEN:  They were not fiduciaries.
   MR JUSTICE FRASER:  Not fiduciaries just because they were
       looking after the bullion.
   MR GREEN:  Precisely.  And Lord Mustill's -- that is
       a well-known passage.  Mere reliance on another party is
       just not enough to establish a fiduciary relationship.
       {A1.1/72/45}.  Then at 165:
           "Mutual trust and confidence between the parties
       dealing with one another can be of different kinds.  At
       a basic level any contracting party is entitled to rely
       on the other party to perform its contractual
       obligations without having to monitor performance or
       even if (as In re Goldcorp) it is unable to monitor
       performance the kind of trust and confidence
       characteristic of a fiduciary relationship is different.
       As discussed above, it is founded on the acceptance by
       one party of a role which requires exercising judgment
       and making discretionary decisions on behalf of another
       and constitutes trust and confidence in the loyalty of
       the decision-maker to put aside his or her own interests
       and act solely in the interests of the principal."
           My Lord, that is the mutual trust and confidence
       characteristic of the particular fiduciary relationship
       identified there.  Then at 166:
           "The nature of the relationship between Mr Kent and
       Sheikh Tahnoon in the present case did not give rise to
       any legitimate expectation on the part of Mr Kent that
       Sheikh Tahnoon would put aside his own self-interest and
       consider only what was in the best interests of the
       companies or Mr Kent in making decisions about whether
       to increase or liquidate his investment."
           So although they are participants in the joint
       venture, he didn't owe fiduciary duty at that stage.
           My Lord, pausing there, your Lordship will know of
       the authorities about fiduciary duties in a joint
       venture prior to any agreement, as a sort of separate
       category.  So this is not addressing that --
   MR JUSTICE FRASER:  But the analysis of the duty of good
       faith in this case proceeds on the basis that the Sheikh
       did not owe Mr Kent fiduciary duties.
   MR GREEN:  Precisely.  Your Lordship has the point already
       essentially.  Your Lordship is probably familiar with
       this passage at 167.
   MR JUSTICE FRASER:  I think we spent quite a long time
       looking at it this morning.  Well, the origin of it.
       Because it comes from Yam Seng.
   MR GREEN:  Precisely.  He refers at 168 to:
           "... the growing recognition that such duty may
       readily be implied in a relational contract."
           And refers to Bristol Groundschool.  {A1.1/72/46}.
   MR JUSTICE FRASER:  Actually really the first sentence means
       that, if it is a relational contract, the duty will be
       implied, doesn't it?  {A1.1/72/45}.  That is what
       a relational contract is.
   MR GREEN:  My Lord, I think that is right.  I think the
       effect of the words "may readily" in the third line on
       the right-hand side -- I think what that means is that
       they are very likely to be implied but, if you look
       carefully at a contract that might otherwise seem like
       a relational contract and the parties have made
       absolutely minute and clear negotiated provision for
       what is going to happen in every circumstance, in those
       cases which might otherwise -- there might otherwise be
       an implied term of good faith, there may not be.
       I think that is the significance of "may readily".  But
       I think your Lordship is right that the general position
       is clear and there seems to be a general recognition of
       that.
           Then D&G Cars is dealt with.  {A1.1/72/46}.
   MR JUSTICE FRASER:  Which always amuses me.  Instead of
       sending the car to the crusher, it was rebuilt and given
       different plates.
   MR GREEN:  My Lord, yes.  Essentially what they were looking
       at there was whether there was anything to prevent that.
       And it was a relational contract par excellence --
   MR JUSTICE FRASER:  But there wasn't anything in the terms
       which prevented them doing that.
   MR GREEN:  Nothing at all.
   MR JUSTICE FRASER:  No.
   MR GREEN:  No.  My Lord, part of what the court we
       respectfully submit is required to do is this exercise
       of standing back and not just looking at the literalist
       words in a contract, but looking at the nature of the
       relationship which the parties by the contract have
       created.  We respectfully say that is an important
       aspect of the analysis.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  And is a unifying theme when one looks at all of
       these cases where a relational contract has been held to
       be one in which those duties are implied.
           Then obviously an absolutely obvious
       contradistinction to the National Private Air Transport
       case, which was an extravagant attempt in a not
       obviously relational contract to try and leverage in
       a term that the party -- that really was winging it, no
       pun intended, to try and get that there, and it was
       unsuccessful.
           But what is significant in the observation there of
       Mr Justice Leggatt that:
           "The judge also rejected an attempt to cast general
       doubt on the approach suggested in Yam Seng ..."
           Which is halfway down 170.
           My Lord, there are a couple more cases I want to
       deal with briefly.  Probably I will be able to deal with
       them more briefly after lunch --
   MR JUSTICE FRASER:  That is fine.
   MR GREEN:  Is that a convenient moment?
   MR JUSTICE FRASER:  Whatever the timetabling issues or
       concerns that I had because there were 20 witnesses, you
       each have two days.  It seems a reasonable amount
       of time.
   MR GREEN:  I am grateful.
   MR JUSTICE FRASER:  We will come back at 2 o'clock.
   (1.00 pm)
                     (The short adjournment)
   (2.00 pm)
   MR JUSTICE FRASER:  Mr Green.
   MR GREEN:  May it please your Lordship, the next case
       I would like to take your Lordship to if I may is
       Carewatch which we have at ...
   MR JUSTICE FRASER:  Tab 3 of the opening bundle.
   MR GREEN:  At tab 3 of the opening bundle.  The only point
       briefly passing through Carewatch is the ... If
       your Lordship could turn to paragraph 109, which is ...
   MR JUSTICE FRASER:  No lacuna in the agreement.
   MR GREEN:  Exactly.  {A1.1/53/34}  And then just above it
       your Lordship will see there the reference by --
   MR JUSTICE FRASER:  As he then was.
   MR GREEN:  -- Mr Justice Henderson, as he then was, to the
       consideration having been given to Yam Seng.
           There he says:
           "I readily accept there will generally be an implied
       term --"
   MR JUSTICE FRASER:  Where are you looking?
   MR GREEN:  This is in the quote from Mr Justice Norris.
   MR JUSTICE FRASER:  In Hamsard.
   MR GREEN:  Precisely.  He says there:
           "'I readily accept that there will generally be
       an implied term not to do anything to frustrate the
       purpose of the contract.  But I do not accept there is
       to be routinely implied some positive obligation upon
       contracting party to subordinate its own commercial
       interests to those of the other contracting party.
       Boots was not obliged as a matter of 'good faith' to
       order from Hamsard goods that it did not want ... simply
       because if it had done so, the nascent joint venture
       would have been more profitable.'
           "Again, I respectfully agree."
           I think this is just a straw man but just to deal
       with it in passing.  There is no suggestion in Carewatch
       that the overall approach in Yam Seng is not right.
       What is said is you can't build in totally ridiculous
       consequences for an obligation of good faith.  So that
       is what we say is the effect of that decision.
   MR JUSTICE FRASER:  The effect of which decision?  The
       Norris one?
   MR GREEN:  The Norris decision with which
       Mr Justice Henderson, as he then was, is agreeing.
   MR JUSTICE FRASER:  The requirement is expressed at the top
       of the page, isn't it?
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  It was the part:
           "... so as to ensure they maximised the net profits
       generated under the agreement."
   MR GREEN:  And it put a rider on good faith which is
       actually all about outcome and not about -- that was the
       distinction I made earlier about the fair dealing point,
       so it's wholly consistent with that analysis that we get
       to that point.
           My Lord, then --
   MR JUSTICE FRASER:  Are we still on Carewatch?
   MR GREEN:  No.
   MR JUSTICE FRASER:  Because the paragraph at 110 is relevant
       as well, isn't it {A1.1/53/34}, inconsistency with
       express terms.
   MR GREEN:  The reason I wasn't going to take your Lordship
       to that in any detail is because we have done obviously
       a compare between my learned friend's opening and his
       closing, and the suggestion that it was contrary to
       express provisions has now gone.  So on that footing
       I wasn't going to take undue time over the point.  But
       it is obviously right, if one can identify express
       provisions with which such implied provisions are
       inconsistent, it is obviously a bar to their
       incorporation.
           I think that is uncontroversial but I'm not sure it
       is a point still taken against me.
           So then --
   MR JUSTICE FRASER:  You say it would be not inconsistent
       with express terms.
   MR GREEN:  Plainly not.
   MR JUSTICE FRASER:  Where are we going now?
   MR GREEN:  Then --
   MR JUSTICE FRASER:  Are we going to go and crush some cars,
       or not yet?
   MR GREEN:  I was going to not take your Lordship to it
       unless there is anything beyond --
   MR JUSTICE FRASER:  It's just next on your list in your
       appendix of authorities.  Are we going to go to
       Globe Motors then?
   MR GREEN:  We are going to go to Globe Motors next which is
       at {A1.1/1/56} and is in tab 7 of the original
       authorities.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  I would invite the court to look at page 619 of
       that, which is {A1.1/62/19}, to get a fair view of what
       the decision included.  Reference back to the Arnold v
       Britton type point of not reinventing the bargain.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  Which is uncontroversial.  And then if we come
       down to paragraph 64:
           "The principled starting point in a system which
       despite statutory control and inequality of bargaining
       power rests on the assumption that parties to a contract
       are free to determine for themselves what obligations
       they will accept is that it is largely for the parties
       to a long-term contract to insert into it clauses which
       deal with the particular problems encountered by those
       who enter into such contracts."
           Pausing there, my Lord.  Just by way of observation
       of the contractual documents in this case, it would be
       wrong to say that the contractual -- that documents
       having contractual effect do not in some respects make
       detailed provision for what is to happen.
   MR JUSTICE FRASER:  It would be wrong to say that they do
       not.  In other words, they do.
   MR GREEN:  Yes.  In some respects they do.  Sorry for the
       double negative.  However, whilst arguably summer
       sizzlers are covered in contractual documentation, what
       investigation is to be done in relation to an alleged
       shortfall is not catered for.
   MR JUSTICE FRASER:  A summer sizzler being a seasonal offer.
   MR GREEN:  Yes.  Do you remember we went through and traced
       it through to the weekly Focus document which is said to
       be of contractual effect and --
   MR JUSTICE FRASER:  This is the one about the foreign
       currency.
   MR GREEN:  Yes, exactly, and the number of foreign visitors
       to foreign countries.  So it may be that the short point
       is very, very detailed long tails of reach in some
       respects are apparently contractually provided for, but
       there remain significant -- one can clearly identify
       significant lacunae which have not been dealt with.
           So it is not a case where the parties have carefully
       negotiated between them those aspects of the
       relationship which are in issue and which these implied
       terms are said to relate to.  So it's into that lacuna
       that the implied terms which the court is now concerned
       with fall.
   MR JUSTICE FRASER:  Into what lacuna, sorry?
   MR GREEN:  The extent to which there isn't express provision
       for, for example, how shortfalls are to be investigated,
       if at all.  Those more detailed matters.  There is no
       provision whatsoever for them.  So putting this contract
       in contradistinction to the detailed situation where two
       parties have in fact made detailed provision for
       everything and there is no room for any implication.
   MR JUSTICE FRASER:  Yes, but this can't be that case because
       there are at least two implied terms --
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  -- that are admitted.  But the approach
       in this case to relational contracts is a slightly
       different one, isn't it, because it deals with --
       because it is a long-term contract, a degree of
       flexibility that might be required by definition, or by
       virtue of it being long-term --
   MR GREEN:  Of the length.  Precisely.
   MR JUSTICE FRASER:  So we haven't got there yet but I dare
       say we will in a minute, Total Gas v Arco, it is partly
       because it is a 14-year term --
   MR GREEN:  Exactly.  Exactly.
   MR JUSTICE FRASER:  -- and you can't legislate or agree in
       advance everything that might happen in such a lengthy
       relationship.
   MR GREEN:  Precisely.  My Lord is absolutely right.
           So the court is looking at a slightly different
       aspect of these long-term relationships in Globe Motors,
       and it is in that context that there is reference to
       what Lord Steyn said in paragraph 65 albeit to -- that's
       the flexible approach reference there.  But the second
       half of what he says at letter H:
           "But, as in the case of all contracts, loyalty to
       the contractual text viewed against its relevant
       contextual background is the first principle of
       construction."
           So it doesn't take us much further, save that at 67
       {A1.1/62/20} we are told that an aspect of the flexible
       approach is in fact the Yam Seng approach.  So they are
       not -- your Lordship is right to identify that there is
       a temporal flexibility which obviously looms large in
       the context of that case, but it is quite clear that
       the flexibility that Lord Justice Beatson has in mind is
       one that in the usual common law way, by analogy,
       includes the -- at least as a manifestation of the
       flexible approach, is the implication in appropriate
       contracts of a duty to co-operate or, in Yam Seng,
       a duty of good faith.
   MR JUSTICE FRASER:  There are two important points, aren't
       there?  The first is in paragraph 65, just underneath
       letter G {A1.1/62/19}, he uses the expression:
           "... contracts of a type that are sometimes called
       relational contracts."
           So as a concept at Court of Appeal level that
       description has been approved.
   MR GREEN:  Repeatedly.
   MR JUSTICE FRASER:  However, in the middle -- well, whether
       it is repeatedly or not, it is approved, and that is
       binding on me.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  If you go to paragraph 67 {A1.1/62/20},
       between letters D and E, after the reference to Yam Seng
       with the citation and the words "a duty of good faith"
       full stop, Lord Justice Beatson says:
           "Leggatt J had in mind contracts between those whose
       relationship is characterised as a fiduciary one and
       those involving a longer term relationship ..."
   MR GREEN:  Those are two separate categories.
   MR JUSTICE FRASER:  Well, I was going to say that sentence
       is capable of being read in two ways --
   MR GREEN:  Not if you look at Yam Seng --
   MR JUSTICE FRASER:  No, that is correct.  But if it is taken
       on its face as a summary of what Yam Seng is about, it
       could potentially be relational contracts are a subset
       of fiduciary contracts, because that is what the judge
       was talking about, if you look at that sentence.
   MR GREEN:  Yes.
   MR JUSTICE FRASER:  Or it could mean both fiduciary
       contracts and relational contracts.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  Now, it has to be, if you read Yam Seng,
       the second --
   MR GREEN:  The latter --
   MR JUSTICE FRASER:  Because the judge makes it clear it is
       not fiduciary contracts he is talking about.
   MR GREEN:  And that is the false dichotomy point.  So it has
       to be the latter.
   MR JUSTICE FRASER:  But you then get at letter F:
           "... the position will depend on the terms of the
       particular contract."
           He then says Mr Justice Henderson in Carewatch,
       Elisabeth Laing in Acer, demonstrated two contracts that
       weren't relational, doesn't he?
   MR GREEN:  My Lord, the only thing just hesitantly there,
       one way of describing a result in Carewatch is that the
       implied term pleaded --
   MR JUSTICE FRASER:  That is a way of interpreting it.  But
       Lord Justice Beatson says it is an example of
       a long-term contract "which did not qualify".  That can
       only be "did not qualify" as a relational contract.
   MR GREEN:  On one view, reading this paragraph as a whole,
       it may be what he is saying is "did not qualify" as
       a relational contract into which the court would be more
       willing to imply the term.  So reading, including the
       words at the top of 67, as imported into what
       Lord Justice Leggatt had in mind in Yam Seng.
   MR JUSTICE FRASER:  But Mr Green, that is completely
       circular.  The beginning of 67 is saying that
       a relational contract has a duty to co-operate or, to
       use the Yam Seng language, a duty of good faith.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  And that is what we spent a lot of time
       before lunch exploring.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  Just because Carewatch at first instance
       didn't have one, or just because another first instance
       case doesn't have one, it is the principles that are
       important, and then you have to apply each particular --
   MR GREEN:  Precisely.  Precisely.
   MR JUSTICE FRASER:  -- to the principles.  But Lord Justice
       Beatson in this paragraph says:
           "Two examples of long-term contracts which did not
       qualify ..."
           Were, firstly, Carewatch.  I know you have shown me
       the implied term that was contended for in Carewatch and
       said that is what he decided didn't.  But certainly the
       Court of Appeal don't consider Carewatch to be
       an example of a contract that was a relational contract.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  That is correct, isn't it?
   MR GREEN:  That is what he is -- it does appear to be the
       case.
   MR JUSTICE FRASER:  That is the ratio of this case.
   MR GREEN:  It seems to be, yes.
   MR JUSTICE FRASER:  All right.
   MR GREEN:  So it is not that -- I think one can fairly say
       it won't be every contract that is a relational
       contract.
   MR JUSTICE FRASER:  No, but it cannot be --
   MR GREEN:  Every long term contract --
   MR JUSTICE FRASER:  It can't be because that's just one of
       the features.
   MR GREEN:  It plainly can't be.  Precisely.
   MR JUSTICE FRASER:  But then in paragraph 68, first
       sentence, we have the conclusion which is this case
       doesn't then go on to consider the potential for having
       such implied duties because in this case, namely,
       Globe Motors, it is about interpretation and
       construction and not implication.
   MR GREEN:  My Lord, yes, exactly.
   MR JUSTICE FRASER:  So what that case demonstrates is, yes,
       relational contracts exist, this is what they have in
       them.  Sometimes it has been argued that they exist but,
       because they are long-term, that isn't all there is to
       it, and here are two examples.  And we are not going to
       go much further because actually in this contract we are
       dealing with construction of terms, not implication of
       terms.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  But turning to this case, as in the
       instant Post Office case, you have got a range of
       features which you say are sufficient or necessary or
       their logical conclusion is it is a relational contract.
   MR GREEN:  Yes, no one of which is necessarily dispositive.
   MR JUSTICE FRASER:  And it is not just the fact it is
       long-term, it is all those other features.  Mr Cavender
       has a range of features which we will come on to on
       Wednesday which he says militate against, it but in all
       of that discussion, dispute, argument between
       the parties, relational contract is being used as
       a shorthand term for a duty of good faith and
       co-operation.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  That is really it, isn't it?
   MR GREEN:  It is.  My Lord, yes.  The only point I was going
       to deal with very briefly --
   MR JUSTICE FRASER:  I'm not saying don't go on with it --
   MR GREEN:  No, no, but --
   MR JUSTICE FRASER:  But Globe is appellate authority that
       says there is such a thing.  And it doesn't say what
       Chitty would have everyone believe it says --
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  Or not "believe it says".  It doesn't
       say what Chitty says which is a duty of good faith means
       you have to be honest.
   MR GREEN:  Yes.  My Lord, parenthetically on Chitty,
       your Lordship will notice that footnote 464 I think it
       is in Chitty has cases in which duties of good faith,
       implied duties of good faith have been found.  Then it
       has the ones that my learned friend relies on listed,
       exactly the ones, and then after that it says "but see
       F, Yam Seng".
   MR JUSTICE FRASER:  I know.  But in a way --
   MR GREEN:  It is unhelpful, perhaps.
   MR JUSTICE FRASER:  At the end of Birmingham v Amey there is
       reference to relational contracts as a concept but it is
       an undeveloped field.
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  It is not completely undeveloped but --
   MR GREEN:  It's not crystallised --
   MR JUSTICE FRASER:  It basically started with an article
       from Professor McKendrick, but so far as judicial
       authority is concerned Yam Seng is really the starting
       point of it, isn't it?
   MR GREEN:  Yes.  I think, my Lord, the academic commentaries
       go back to Durkheim, Marks, Cohen --
   MR JUSTICE FRASER:  It has been --
   MR GREEN:  -- in Harvard Law Review 1933.  A gestation of
       academic --
   MR JUSTICE FRASER:  But also across the jurisdictions,
       because some jurisdictions have such a concept and some
       jurisdictions are hostile to it.
   MR GREEN:  Precisely.  Your Lordship is right.
   MR JUSTICE FRASER:  But it is really where we are now, isn't
       it?  And it might be, I don't know how Chitty is
       written.  It might be that whichever editors are
       responsible for those particular passages or that
       particular chapter are from one particular school of
       thought.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  But it does doesn't have the same
       authority this has.
   MR GREEN:  Plainly not.  Plainly no.
   MR JUSTICE FRASER:  But then, and the same thing happened in
       Birmingham, the Court of Appeal then say, effectively,
       this isn't really the place for a detailed exposition of
       what does and doesn't qualify.  Which sort of takes you
       back not quite to square one but --
   MR GREEN:  The only thing --
   MR JUSTICE FRASER:  It's like playing snakes and ladders.
   MR GREEN:  It is slightly.  But I think a snake for me, and
       I'm not sure it really is a snake but my learned friend
       would say it is --
   MR JUSTICE FRASER:  Alright, let's go there.
   MR GREEN:  The very end of 68, over the page {A1.1/62/21}.
       It's prefaced by the sentence on {A1.1/62/20}:
           "The second is that, 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."
   MR JUSTICE FRASER:  Yes, but that is because of the
       preceding sentence.
   MR GREEN:  Precisely.  Exactly.  So all -- your Lordship has
       the point already.
   MR JUSTICE FRASER:  You can only imply a term, and this
       applies in all sorts of different cases, insurance
       cases, everything.  You can only imply a term if it
       doesn't conflict with an express term because the
       mechanism of implying a term requires there to be a gap.
       So if there is no gap or if it is contrary to something
       you can't imply the term, and that is plain.
   MR GREEN:  Indeed.  So in the end, my Lord, in terms of
       getting back to where we started, a lot of the facets of
       the analysis on this are absolutely uncontroversial
       aspects of contract law.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  Then, my Lord, I was going to take you very
       quickly back to Bristol Groundschool.
   MR JUSTICE FRASER:  Have we now finished with Globe?
   MR GREEN:  We have finished with Globe.
       Bristol Groundschool is at {A1.1/52/1} and is in --
   MR JUSTICE FRASER:  V1 at tab 34, I think.
   MR GREEN:  Exactly.
   MR JUSTICE FRASER:  I don't want this to be misinterpreted,
       but Bristol Groundschool is a decision of a Deputy
       High Court Judge dealing with a situation where the
       conduct complained of was if not completely criminal,
       was verging and on the borderline of being criminal.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  At one point I think he says, Deputy
       Judge Richard Spearman QC, he doesn't want to make
       findings as though it were a criminal matter, but then
       at one point he actually deals with the expression --
       well, he says:
           "I am loathe to decide even to the civil standard,
       and following a decision not to invoke a claim to
       privilege against self-incrimination, whether any crime
       has been committed, but ..."
           And then he goes on to deal with that sort of
       behaviour.  So in a way --
   MR GREEN:  It is fairly extreme --
   MR JUSTICE FRASER:  It is an extreme case.
   MR GREEN:  It is.  The only observation I was going to make,
       I think from memory it's at 156 on page {A1.1/52/58}.
       It's a very short point.
   MR JUSTICE FRASER:  There is a period of notice and that is
       not antithetical to it being --
   MR GREEN:  Precisely.
   MR JUSTICE FRASER:  But some of the other cases have notice
       provisions in them as well.
   MR GREEN:  Precisely.  So all I was going to say is we
       respectfully submit it is wrong, which we think is
       an error into which my learned friend may have fallen,
       to conflate "term", the expectation of the relationship,
       with "termination provisions".
   MR JUSTICE FRASER:  That is an arguable point in both
       directions.  That is one I will have to decide because
       I know Mr Cavender relies on that.
   MR GREEN:  Indeed.  We respectfully say the fact that one
       finds these examples of relational contracts where the
       parties expect it to be a long-term relationship but
       they nonetheless have a potentially short-term duration
       if the termination provisions are operated.  It is no
       bar, it is one of the factors.  That is that.
           Then, my Lord, the next point is simply to go back
       to --
   MR JUSTICE FRASER:  I don't really need a Deputy District
       Judge's view on whether notice is or isn't given and
       degree of other factors.
   MR GREEN:  My Lord, yes.
           Then simply to take your Lordship back, if I may, to
       Al Nehyan for one further point, because it is the
       departure point for --
   MR JUSTICE FRASER:  And the reason that is an interesting
       case is that comes after some of the other authorities
       which have debated and considered what Yam Seng did or
       didn't say and it is by the same judge.
   MR GREEN:  Precisely.  So --
   MR JUSTICE FRASER:  We are going back into that, yes?
   MR GREEN:  Indeed.  The short point is this is
       post-Marks & Spencer, and if your Lordship looks at
       paragraph 174 {A1.1/72/47}:
           "In the circumstances the contract made between
       these parties seems to me to be a classic instance of
       a relational contract.  In my view, the implication of
       a duty of good faith in the contract is essential to
       give effect to the parties' reasonable expectations and
       satisfies the business necessity test which
       Lord Neuberger in Marks & Spencer ... at paragraphs 16
       to 31 reiterated as the relevant standard for the
       implication of a term into a contract."
           Just unpacking what is happening in that quite
       important section, the phrase "to give effect to the
       parties' reasonable expectations" -- your Lordship will
       remember that I highlighted that phrase in Yam Seng --
       was from Lord Justice Steyn and his LQR article, and
       there are areas where it is suggested that -- there are
       cases in which it is suggested that you try and make the
       expectations reasonable in results in the contract, and
       that is plainly wrong.
           What Lord Justice Steyn was saying is that you don't
       give effect to the parties' personal expectations.
       Because it is the notional, reasonable parties and their
       position, it is shorthand for the parties' reasonable
       expectations, ie what a reasonable person in the
       parties' situation is --
   MR JUSTICE FRASER:  In other words, it's objective, not
       subjective.  Just because someone expects it to be a
       relational contract doesn't mean it is.
   MR GREEN:  Exactly.  So that is what he is saying when he
       refers to giving effect to the parties' reasonable
       expectations.  Then he says:
           "... and satisfies the business necessity test which
       Lord Neuberger in Marks & Spencer reiterated."
           Then he goes on to say -- so he has done both
       prisms, he has done the expectations in fact and the
       implication post-Marks and Spencers.
           Then he goes on to say:
           "I would also reach the same conclusion by applying
       a test adumbrated by Lord Wilberforce in Liverpool City
       Council v Irwin for the implication of a term in law on
       that basis that the nature of the contract as
       a relational contract implicitly requires, in the
       absence of contrary indication, treating it as involving
       an obligation of good faith."
           So what Mr Justice Leggatt is saying there slightly
       crystallises the debate that has emerged from the cases
       so far in the sense that he puts it as: once you have
       identified a relational contract, in the absence of
       contraindication there is an implied term of good faith
       as a matter of law.
           So that is the third -- that is the Geys case which
       I am going to take your Lordship to now.  I said at the
       beginning there were the two prisms initially in
       Yam Seng, but whatever you look at you end up in
       the same all roads lead to Rome.
   MR JUSTICE FRASER:  I'm not sure that is the third one,
       though.  Because his second one, which you described as
       the second prism, was a traditional test for the
       implication of a term, namely, business efficacy.  And
       that is what he is doing here.
   MR GREEN:  Indeed.  My Lord, I think, with respect, when one
       looks at it in the context of the Geys case, which
       I will show you, I think he is doing all three.
   MR JUSTICE FRASER:  What, at the same time?
   MR GREEN:  Yes.  He does the first two together, and then
       the third one is the Liverpool City Council case.
       Because --
   MR JUSTICE FRASER:  So you are saying Marks & Spencer is
       presumed intention based on contractual expectation and
       the traditional test for an implication rolled up
       together.
   MR GREEN:  Marks & Spencer at paragraph 21, which I will
       show your Lordship, is actually the
       necessity/obviousness of giving the contract commercial
       and practical coherence.
   MR JUSTICE FRASER:  I know.  I am using your phrase from
       this morning when you were identifying what you said
       Yam Seng did and you said there were three different
       routes or prisms.
   MR GREEN:  Yes.  Precisely.
   MR JUSTICE FRASER:  And I was very careful to explore with
       you what your three were.
   MR GREEN:  Yes.  So the first one is the implication in fact
       based on the parties' presumed intentions.
   MR JUSTICE FRASER:  Well, you actually said contractual
       expectations.
   MR GREEN:  Precisely --
   MR JUSTICE FRASER:  Presumed intentions, yes.
   MR GREEN:  The second one is the obviousness or necessity
       test.
   MR JUSTICE FRASER:  Business efficacy.  Yes.
   MR GREEN:  Which is M&S at paragraph 21 in particular.
   MR JUSTICE FRASER:  Yes, but it wasn't at that point because
       there hadn't been an M&S.
   MR GREEN:  No, quite, but --
   MR JUSTICE FRASER:  And the third one is ...
   MR GREEN:  The third one is into certain types of legal
       relationship that the law recognises as a thing there
       will be an implied term as a matter of law.  And that is
       the second category -- there are two categories in Geys
       which I will show your Lordship now.
   MR JUSTICE FRASER:  Before we go there, though, I just want
       to be clear what you are saying about 174 here
       {A1.1/62/47} because I think you said that he rolled all
       three of them up together.
   MR GREEN:  No, he rolls the first two together in one
       sentence, and then --
   MR JUSTICE FRASER:  Okay, show me which sentence that is.
       You are saying --
   MR GREEN:  The second sentence --
   MR JUSTICE FRASER:  That's the one referring to
       Marks & Spencer.
   MR GREEN:  Yes, because what he says is the implication of
       a duty of good faith in the contract, one, is essential
       to give effect to the parties' reasonable expectations.
       That is their contractual expectations or presumed
       intention on the facts --
   MR JUSTICE FRASER:  Yes, that is the test of business
       necessity.
   MR GREEN:  Well, he -- on one view of the reading of
       Yam Seng, where he talks about shared norms as the basis
       for implication in fact, and then separately says:
           "I would reach the same conclusion if I looked at it
       through the traditional approach of necessity."
   MR JUSTICE FRASER:  No, I am talking about this paragraph.
       He says this satisfies the business necessity test in
       Marks & Spencer.
   MR GREEN:  My Lord, yes.  But I think --
   MR JUSTICE FRASER:  So I think what he is doing in that
       sentence is applying the business necessity test in
       Marks & Spencer.
   MR GREEN:  He is, but --
   MR JUSTICE FRASER:  I am glad we are agreed about that.  So
       then if you pause there, that is what he has done in
       the first sentence.  The next sentence he applies
       a different test which is Liverpool City Council v
       Irwin.
   MR GREEN:  That is absolutely true.
   MR JUSTICE FRASER:  And he says he'd reached the same
       conclusion applying that other test.
   MR GREEN:  Yes, that is the Geys --
   MR JUSTICE FRASER:  I know.  We will come on to Geys in
       a minute.  But so far as this is concerned, he at least
       believes -- you might think he doesn't think he is doing
       this but on the face of it he looks as if he is doing
       this -- he's applying two different tests and he's
       getting to the same result.
   MR GREEN:  He's definitely applying two.  I am respectfully
       submitting that he appears to be applying three.
   MR JUSTICE FRASER:  Let's concentrate on the two for the
       moment.
   MR GREEN:  Marks & Spencer, tick.  And implication because
       of the nature of the relationship in law, tick.  He's
       satisfied on both.
   MR JUSTICE FRASER:  So to use your prism numbering, which of
       those prisms is it?
   MR GREEN:  That is prism two and three, but I am
       respectfully submitting that actually what he is doing
       is -- can I show your Lordship where it is in Yam Seng?
   MR JUSTICE FRASER:  Just tell me where the third one is here
       and then we will go on to Yam Seng.
   MR GREEN:  If we look at paragraph 174, second line, he says
       {A1.1/62/47}:
           "... the implication of a duty of good faith in
       the contract ..."
           Can we put colon (a) --
   MR JUSTICE FRASER:  No, we can't, because that is not what
       he is doing.  Are you saying that is the beginning of
       a list which he completes partly in that sentence, and
       then when he says he is doing another test he is doing
       the same list?
   MR GREEN:  No.  Because in Yam Seng he says -- sorry,
       my Lord, I'm not explaining it very well --
   MR JUSTICE FRASER:  Let's go to Yam Seng.  It is really
       a minor point.  But when you said he had rolled them all
       up together, it did not appear to me that he had rolled
       them all up together because he says he is doing two
       separate things.  Let's look at Yam Seng.
   MR GREEN:  If your Lordship looks at 131 which is
       {A1.1/43/30}.
   MR JUSTICE FRASER:  Which paragraph of Yam Seng?
   MR GREEN:  Paragraph 131.
   MR JUSTICE FRASER:  Paragraph 131.
   MR GREEN:  It is the last sentence of paragraph 131 by
       letter G:
           "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."
   MR JUSTICE FRASER:  Pause there and just tell me this: are
       you interpreting that as an exposition of the
       Marks & Spencer test, the Liverpool City Council test or
       some other test?
   MR GREEN:  Some other test.  That is prism one.
   MR JUSTICE FRASER:  Can we not go into your rather
       confusingly numbered prisms just yet.  Some other test.
       So not Liverpool City Council and not Marks & Spencer.
   MR GREEN:  It is -- it is a -- yes, not the main thrust of
       Marks & Spencer.  I will show your Lordship how it fits
       in when we look at Marks & Spencer.
           The reason I say that, my Lord, is because what he
       has carefully done in the run-up to 131 is to trace the
       presumed intention of the parties as a matter of fact,
       which is for the trial judge to assess, as a basis from
       which the court is entitled to conclude there are
       implied terms in a contract.
           When we then go to paragraph 137, {A1.1/43/31},
       third line down, he says:
           "The same conclusion is reached if the traditional
       tests for the implication of a term are used.  In
       particular, the requirement that parties will behave
       honestly is so obvious that it goes without saying."
           So what is new and not traditional, or is being
       regarded as not absolutely traditional although he has
       looked at previous instances of it, is identifying
       shared norms of behaviour as falling within the broad
       background that the court is entitled to have regard to
       in implying terms as a matter of fact.  And then he
       says -- so that is the run up to 137.  Then he very
       carefully says that he would reach the same conclusion
       if it was obvious or necessary as the test.
           So they may be 1(a) and 1(b), my Lord, but --
   MR JUSTICE FRASER:  Mr Green, you are the one who told me
       there are three of them.
   MR GREEN:  There are three.  I am coming --
   MR JUSTICE FRASER:  I know you say there are three.
   MR GREEN:  I am agnostic about whether it is 1(a) and 1(b)
       and 2, but it does seem that they are being treated at
       least for the purposes of clarity by Mr Justice Leggatt
       as different approaches and different tests, because he
       says the words:
           "The same conclusion is reached if the traditional
       tests for the implication of a term are used."
           So that is obvious and necessary, rather than these
       shared factual norms as a matter of evidence.  There may
       be a distinction at least in terms of the course of
       reasoning by which those results are reached, even if
       not in results.
           Then if we can go back to 174 in Al Nehyan
       {A1.1/72/47}.  Given the distinction he appeared to draw
       very clearly in 137 and 131, when one reads his
       paragraph, the second line of the paragraph, it appears
       he is saying:
           "In my view, the implication of a duty of good faith
       in the contract is essential to give effect to the
       parties' reasonable expectations ..."
           Which he has made findings about as a fact, so
       implied in fact as he says at 131:
           "... and satisfies the business necessity test ..."
           As he says in 137 in Yam Seng, which is precisely
       what that test is.
           And then the last five lines:
           "I would also reach the same conclusion by applying
       the test adumbrated by Lord Wilberforce in Liverpool
       City Council v Irwin."
           So on the face of it he seems to be saying,
       whichever of those three ways, or 1(a), 1(b) and 2,
       however you like to characterise it, whichever way you
       look at it you reach the same result.  Which goes back I
       think to your Lordship's point that it would be odd if
       you reached a different answer by a different test.
           So my Lord, I think I have already taken
       your Lordship to 175 in Al Nehyan {A1.1/72/48}, because
       that was the bit about refraining from conduct which
       would be regarded as commercially unacceptable by
       reasonable honest people.
           Can I take your Lordship now to the Geys case, to
       look at the origin of the third category -- not the
       origin but the most recent exposition at Supreme Court
       level.
   MR JUSTICE FRASER:  Where are we going now?
       Marks & Spencer?
   MR GREEN:  No, Geys v SocGen {A1.1/42/1}.  Which is V1/31.
       Thank you very much.
           I don't think it is controversial ... it's
       paragraph 55 on page 25 {A1.1/42/25}:
           "In this connection, it is important to distinguish
       between two different kinds of implied terms.  First,
       there are those terms which are implied into a
       particular contract because, on its proper construction,
       the parties must have intended to include them ..."
           I respectfully say 1(a) and 1(b).  And then:
           "Such terms are only implied where it is necessary
       to give business efficacy to the particular contract in
       question."
           Which is the 1(b) test.
           "Second, there are those terms which are implied
       into a class of contractual relationship such as that
       between landlord and tenant or between employer and
       employee, where the parties may have left a good deal
       unsaid, but the courts have implied the term as
       a necessary incident of the relationship concerned
       unless the parties have expressly excluded it."
           So, my Lord, that is Supreme Court authority
       supporting at least the framework within an implied term
       will be imposed as a matter of law on a relationship
       unless the parties have excluded it.  And that is
       exactly consonant with what Mr Justice Leggatt says
       where his approach starts to crystallise in Al Nehyan,
       which we were just looking at, where he puts in
       brackets -- he says "in a relational contract" and then
       make the proviso in the brackets thereafter.
           So two points emerge from that.  Firstly, that there
       is nothing -- there is nothing controversial about
       the idea of particular type of relationship having
       an implied term in law, nor that the developing law may
       recognise a relationship for those purposes.
           The second point is for the court to then look at
       what is the nature of the relationship itself.  If it is
       right whichever test you -- it's like cutting an onion
       vertically, that although the tests start off pointing
       out in different ways, the onion always comes back to
       the top at the end.  If it is right that all roads lead
       to Rome in that sense and you reach the same answer, it
       is plainly relevant to look at the nature of the
       relationship that is created by the contract.
           As to that, my Lord, that will form part of the
       background against which the contract is construed.  And
       just to foreshadow what the submission will be in
       relation to that, the closeness of this contractual
       relationship to employment is directly relevant to the
       way the contract is construed.
   MR JUSTICE FRASER:  There was some reference to an EAT
       decision in the 80s, was it, that you put to one of the
       witnesses?
   MR GREEN:  The decision was actually Autoclenz in
       the Supreme Court, the one I put on the screen and then
       couldn't quite find the place --
   MR JUSTICE FRASER:  What, the one you put to the witness?
   MR GREEN:  Yes -- no, Gogay.
   MR JUSTICE FRASER:  Yes, it wasn't Autoclenz.
   MR GREEN:  No, the Gogay point is that suspension is not
       a neutral act.
   MR JUSTICE FRASER:  No, it wasn't that.  I will track
       through it.
           I had understood you to put to one of the witnesses
       that there had been a decision of the EAT in relation to
       the employment status of subpostmasters but I might have
       misunderstood the way you put the question.
   MR GREEN:  No, my Lord, you are absolutely right.
   MR JUSTICE FRASER:  And that wasn't Autoclenz.
   MR GREEN:  No.  What had in fact happened was one of
       the witnesses had himself been involved in an employment
       tribunal, himself, about the employment status.
   MR JUSTICE FRASER:  That is what -- that is what my
       understanding was.  But I thought you said it was an EAT
       decision, not an employment tribunal decision.
   MR GREEN:  If I did I was mistaken.
   MR JUSTICE FRASER:  It is an employment tribunal.
   MR GREEN:  It was then called an industrial tribunal, I
       think, probably at that time.
   MR JUSTICE FRASER:  But it was in the 80s.
   MR GREEN:  I think it was in the 90s.  It might have been an
       employment tribunal rather than an industrial tribunal.
       But the short point --
   MR JUSTICE FRASER:  And that was a decision -- as
       I interpreted it, and I might be wrong, an individual
       subpostmaster or postmistress brought a claim in
       the tribunal seeking -- or part of which at least must
       have included seeking the same rights as though they
       were an employee.
   MR GREEN:  Exactly.
   MR JUSTICE FRASER:  Of what would have been Post Office
       Counters Limited at that point.
   MR GREEN:  My Lord, yes.
   MR JUSTICE FRASER:  And lost.
   MR GREEN:  And lost.
   MR JUSTICE FRASER:  But because of the particular features
       of an employment contract or an employment relationship,
       it led to a degree of sensitivity which the witness
       accepted.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  In this purpose in respect of personal
       service.  Is that right?
   MR GREEN:  That is absolutely correct.
   MR JUSTICE FRASER:  But that decision isn't in any of the
       authorities, I don't think.
   MR GREEN:  My Lord, no.
   MR JUSTICE FRASER:  Not that it binds me, and not that
       anyone is arguing they are an employee, but it is the
       background, isn't it, to at least part of the
       relationship discussion.
   MR GREEN:  Absolutely.  My Lord, in Carewatch at 107, which
       I possibly should have taken your Lordship to while we
       were in Carewatch.
   MR JUSTICE FRASER:  Remind me where that is again.
   MR GREEN:  Carewatch is {A1.1/53/1} which is in tab 3.
   MR JUSTICE FRASER:  Which paragraph are we going to now?
   MR GREEN:  Paragraph 107.  {A1.1/53/33}
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  This is referring to Jani-King:
           "The term which it was sought to imply into the
       franchise agreement in that case was that the franchisor
       would not act so as to destroy or seriously damage the
       relationship of trust and confidence between the
       parties.  The judge held that no analogy could be drawn
       with the implied term of trust and confidence in
       contracts of employment, saying:
           "'I am in no doubt that, as a matter of common
       sense, and on the authorities, the relationship is much
       closer to an ordinary commercial relationship, than one
       between employer and employee.'
           "I respectfully agree."
           And the significance of that is that that is
       an example of the court having regard to where on the
       spectrum the relationship is between employment at one
       end and ruthless international commercial contract at
       the other.  And we respectfully say it is obviously as
       a matter of common sense relevant, it sets the relevant
       context which is the point your Lordship put to me, but
       it is also clearly accepted as a relevant factor in this
       decision.  And we say that the degree of sensitivity to
       personal service and the rather unusual way in which it
       was handled, and all the other indicia of control and so
       forth, agreements procedure and contractual appeals
       procedure, holiday substitution allowance, if you work
       for 18 hours or more.  But there aren't many
       international commercial contracts where one party gives
       somebody working for the other party a holiday
       substitution allowance.
           So the proximity and the nature of the relationship
       being so close to an employment relationship is
       a significant factor informing the nature of the
       relationship for your Lordship's purposes.  And that is
       what chimes with --
   MR JUSTICE FRASER:  So that is one of the features upon
       which you rely.
   MR GREEN:  Exactly.
   MR JUSTICE FRASER:  What are the others?
   MR GREEN:  We set them out in our closing extensively.
       Obviously long-term, requiring a high degree of
       co-operation.  All of those features, which we have
       listed I think fairly carefully in our closing, all of
       those are features which, taken even some of them or
       certainly all together, put it beyond doubt that this is
       a relational contract par excellence.
   MR JUSTICE FRASER:  As Mr Justice Dove might say.
   MR GREEN:  Precisely.  So whether you look at it from
       a relationship in law perspective and what the law would
       imply, you still arrive at the same answer on the Geys
       approach for which there is Supreme Court authority.
           My Lord, can I now take your Lordship to
       Marks & Spencer, which has been sort of looming in the
       background, just to look at precisely what we say the
       relevant test is.  We summarise the points at page 19 of
       our appendix {A/7/23}.  And it's paragraph 21 on
       page 754 of Marks & Spencer {A1.1/61/1}.  At page 754 of
       the authority --
   MR JUSTICE FRASER:  This is tab 5, isn't it?
   MR GREEN:  It's tab 5 of the authorities bundle.  Page 13 on
       Opus {A1.1/61/13}.  This is the paragraph that sets out
       the six propositions which we have identified in our
       appendix.
           The first, Lord Steyn rightly observed that
       the implication of a term is not critically dependent on
       proof of an actual intention.  That is uncontroversial.
           Second, which is above H:
           "... a term should not be implied into a detailed
       commercial contract merely because it appears fair or
       merely because one considers that the parties would have
       agreed it if it had been suggested to them.  Those are
       necessary but not sufficient grounds for including
       a term."
           And then third:
           "It is questionable whether Lord Simon's first
       requirement, reasonableness and equitableness, will
       usually, if ever, add anything.  If a term satisfies the
       other requirements it is hard to think that it would not
       be reasonable or equitable."
           Then {A1.1/61/14}:
           "Fourthly, as Lord Hoffmann suggested in Belize
       although Lord Simon's requirements are otherwise
       cumulative, I would accept that business necessity and
       obviousness ... can be alternatives in the sense that
       only one of them needs to be satisfied ..."
           So, my Lord, that is case where an aspect of the
       test may be satisfied where another aspect might not be
       but there will still be an implied term.  So it may be
       that you will have cases where you would not get home on
       all ways of framing the test but there is still
       an implied term.  That is quite important.
           Then:
           "Fifthly, if one approaches the issue by reference
       to the officious bystander, it is vital to formulate the
       question to be posed by him with the utmost care."
           I think that is uncontroversial.
           "Sixthly ...
           And this is the one we particularly rely on, this is
       what the meaning of necessity actually is when a court
       is charged with considering whether to imply a term or
       not, and my learned friend's submissions could be
       capable of slightly overstating the extremity of that
       test.
           "Sixthly, necessity for business efficacy involves
       a value judgment."
           That is a value judgment for your Lordship.
   MR JUSTICE FRASER:  Where are you reading?
   MR GREEN:  This is sixthly, just above letter C:
           "... necessity for business efficacy involves
       a value judgment.  It is rightly common ground on this
       appeal that the test is not one of 'absolute
       necessity' ..."
           You can't sit back and go, "Well, it could work".
       That is not the test.
   MR JUSTICE FRASER:  The test is business efficacy.
   MR GREEN:  Precisely, and that is exactly what --
   MR JUSTICE FRASER:  It has always been that.
   MR GREEN:  Exactly, my Lord.  It may begin and end with
       business efficacy in reality, but:
           "It may well be that a more helpful way of putting
       [the] second requirement is ... that a term can only be
       implied if, without the term, the contract would lack
       commercial or practical coherence."
   MR JUSTICE FRASER:  Whatever that means.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  What does that mean?
   MR GREEN:  We respectfully say that commercial and practical
       coherence is the -- it relates to the fact that the
       provisions of the contract are coherent as a whole from
       both the commercial and practical perspective with the
       benefit of the implied term in a way they simply would
       not be without it.
   MR JUSTICE FRASER:  Coherence in the sense of
       understandable?
   MR GREEN:  Coherence in the sense of practical operation.
       It may be understandable if that is what is necessary.
   MR JUSTICE FRASER:  What is practical coherence in the sense
       of considering a contract?  What does that actually
       mean?  And don't say coherent from a practical point of
       view.
   MR GREEN:  No, that is why I am pausing before responding,
       because I don't think --
   MR JUSTICE FRASER:  You were tempted.
   MR GREEN:  What we would respectfully say it does invite the
       court to do -- it is consonant with the exercise to be
       done when one is construing a contract.  Although they
       are different exercises, the court -- in the exercise of
       construction, the court looks at the practical
       commercial impact of a particular construction of the
       contract and looks at what the commercial implications
       would in fact be of rival interpretations.  And that is
       one exercise distinct from this.
           But in this exercise the court is entitled to have
       regard to the commercial and practical realities of the
       relationship in reaching -- in making the value judgment
       that Lord Neuberger has specified just above letter C.
       We say that is the significance of those words, even if
       the definition of commercial practical coherence may be
       a bit protean.  We say the court is not just entitled
       to, but required to have regard to the commercial and
       practical realities of the relationship.
   MR JUSTICE FRASER:  Lord Neuberger is actually saying that
       that phrase might just be, as he puts it, a more helpful
       way of expressing the second requirement --
   MR GREEN:  Business efficacy.
   MR JUSTICE FRASER:  It is only more helpful if you
       understand what it means.  I don't mean you, I mean us.
       It is obviously expected to be the same as business
       efficacy.
   MR GREEN:  Yes.
   MR JUSTICE FRASER:  Which is a term that has been used for
       a long time --
   MR GREEN:  And is --
   MR JUSTICE FRASER:  -- everybody broadly thinks they
       understand what it means.
   MR GREEN:  To the extent there is a slightly -- to the
       extent it is helpful at all, we respectfully say it
       completely in parallel with the arguably increased focus
       on commercial -- reality of commercial implications in
       the construction exercise, there is a fair recognition
       in the use of that phrase by Lord Neuberger that the
       court is not just entitled to look at the commercial
       and practical consequences but actually probably
       required to.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  My Lord, probably as we have all understood
       business efficacy that may add little to the analysis,
       I think.  I think business efficacy has been understood
       commonly as including that.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  But we respectfully do say at the moment that is
       effectively the highest authority in relation to this
       point of necessity.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  And it is effectively making two points, really.
       One is it is a value judgment for your Lordship and,
       two, that has to be an informed value judgment in the
       light of effectively the commercial and practical
       consequences of implying or not implying the terms.
       That is really what Lord Neuberger is saying.  Whether
       that gives greater precision to the exercise than simply
       referring to business efficacy, I don't know, but he
       goes to some -- he takes some care to spell out that it
       is not absolute necessity and, rather in parallel with
       the approach to contractual construction which we now
       see, focuses on the commercial and practical
       implications.
   MR JUSTICE FRASER:  Yes.  Understood.
   MR GREEN:  My Lord at 755 at letter G on the same page --
       sorry, letter F {A1.1/61/14}, just below letter F, the
       second proviso is important because otherwise
       Lord Hoffmann's formulation may be interpreted as
       suggesting that reasonableness is a sufficient ground
       for implying a term.
   MR JUSTICE FRASER:  The second proviso being (ii) between
       letters E and F.
   MR GREEN:  Exactly.  In brackets:
           "For the same reason, it would be wrong to treat
       Lord Steyn's statement in Equitable Life ... that
       the term will be implied if it is 'essential to give
       effect to the reasonable expectations of the parties' as
       diluting the test of necessity."
           So, my Lord, that goes back to the point I made
       about what Mr Justice Leggatt meant in Yam Seng when he
       referred to Lord Justice Steyn and he made the reference
       to the -- it's at 145, for your Lordship's note, between
       F and G. {A1.1/43/33}
           In fact, Mr Justice Leggatt is referring to the
       First Energy case where Lord Justice Steyn said the same
       thing in the Court of Appeal as he then later said in
       the House of Lords, which is the reasonable expectations
       of the parties must be protected.
           But I think the better view is that all that
       Lord Justice Steyn, and then later Lord Steyn, in
       Equitable Life was saying was: you are giving effect to
       the presumed contractual expectations or intentions of
       the parties.  And "reasonable" introduces that
       objectivity that is present in the concept of the
       notional person in the situation of the parties.
           So we respectfully say that is the way in which it
       is properly to be understood, we say that is the way in
       which Mr Justice Leggatt, as he then was, understood it
       in Yam Seng, and that is the common thread that runs
       through this case.
           My Lord, then can I take your Lordship --
   MR JUSTICE FRASER:  Are we leaving Marks & Spencer?
   MR GREEN:  We are leaving Marks & Spencer unless I can help
       your Lordship further.
   MR JUSTICE FRASER:  All I would observe in Marks & Spencer
       is in paragraph 28 {A1.1/61/15}, it is made clear that
       before one can start setting about implication or
       considering implication of the term, first you have to
       construe the express terms.
   MR GREEN:  Absolutely.
   MR JUSTICE FRASER:  On the basis that whether something is a
       relational contract or not imports into it an implied
       term of a duty of co-operation, good faith, fair
       dealing, et cetera, is it the case that logically that
       has to happen at the end?
   MR GREEN:  My Lord, it happens -- so the sequencing that we
       identified in our opening, I think it is hopefully
       right, which is you have to construe the express terms
       first.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  And then at that stage broadly and in parallel
       consider the nature of the relationship --
   MR JUSTICE FRASER:  Broadly and in parallel.
   MR GREEN:  It's relational contract and implied terms next.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  To the extent they are distinct exercises which
       I think they are probably not.
   MR JUSTICE FRASER:  They might be.
   MR GREEN:  They can be seen to be, exactly.
   MR JUSTICE FRASER:  But they both come after express terms,
       obviously.
   MR GREEN:  They do.  And then my Lord, the things like
       onerous and unusual terms and Unfair Contract Terms Act
       will have to be looked at after the implication of terms
       because you can't judge the fairness of an express
       term --
   MR JUSTICE FRASER:  Until you know if it is --
   MR GREEN:  The whole picture.
   MR JUSTICE FRASER:  -- a relational contract.
   MR GREEN:  Precisely.  So that was what we sought to set out
       in the introduction to our opening at pages 4, 5 and 6.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  My Lord, I think your Lordship will understand
       why I started with relational contract in the sense that
       it looms large and, on our submission, the nature of the
       relationship and the other features are so clear that
       however you construe the express terms whose
       construction is in issue, you end up at the same place.
   MR JUSTICE FRASER:  Understood.  So are we done with
       relational contracts?
   MR GREEN:  We are done with relational contracts subject to
       two small points.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  One is the British Telecom case which is
       summarised in our appendix under ... (Pause)  It's in
       our appendix, my Lord, at page 23 {A/7/27}.  I actually
       had that page open but it said Telefonica.  I should
       have chosen BT.
   MR JUSTICE FRASER:  Yes, this is the exercise of discretion.
   MR GREEN:  Indeed.  Your Lordship will see it's a
       Supreme Court case.  The propositions there are not we
       think controversial:
           "... in the absence of very clear language to the
       contrary, contractual discretion must be exercised in
       good faith and not arbitrarily or capriciously."
           "Purpose: this will normally mean it must be
       exercised consistently with its contractual purpose."
           Those two -- I'm not minded to take your Lordship to
       the authority unless you particularly want to see it.
   MR JUSTICE FRASER:  No, I don't think you need to.
   MR GREEN:  Can I make one point on that, which is a point in
       relation to a question your Lordship asked me in
       relation to fashioning a remedy for unfairness this
       morning.  I responded by identifying, for example, the
       extent to which the contract was replete with provisions
       conferring discretion and control upon Post Office.
       Your Lordship will see that the fuller a contractual --
       the contractual architecture is with discretions of that
       sort, the more likely that more of the landscape of
       the contract will be governed by those sorts of implied
       terms, in any event, pre-Yam Seng.  Because these
       contractual -- these controls of discretions are broadly
       uncontroversial and unless -- in the absence of clear
       language to the contrary, are going to apply.  And that
       is Supreme Court authority.
           So, my Lord, we are not reaching for something in
       Yam Seng that is not going to be substantially catered
       for in any event across large parts of the contract.
           I just wanted to make that point by way of
       background.  Then if I can take your Lordship to the
       Hadley case.
   MR JUSTICE FRASER:  Is this the second of your two points?
   MR GREEN:  It is.
   MR JUSTICE FRASER:  We will do that and then have a short
       break.
   MR GREEN:  I am grateful.
   MR JUSTICE FRASER:  So Hadley.  Yes.
   MR GREEN:  Hadley is in the new bundle of authorities and it
       is at tab 3.  This is a decision of
       His Honour Judge Richard Seymour QC in the TCC in 2003.
       If your Lordship goes to paragraph 61 where the alleged
       implied terms section begins.  61 introduces that:
           "The alleged justifications of the implication of
       the terms pleaded was said to be implication was
       required as a matter of law or was necessary to give
       business efficacy."
           So two bases advanced.
           And then 63 --
   MR JUSTICE FRASER:  Is this where you got your phrase
       "incident" or is it coincidence?
   MR GREEN:  I think it is coincidence.  I think it is
       actually a phrase mentioned in another case I was
       looking at, and not this.  We found this later.
           But over the page -- at the foot of that page:
           "Rather, he seemed to rely upon an implication at
       common law --"
   MR JUSTICE FRASER:  Where are you looking?
   MR GREEN:  At the foot of 63:
           "In support of the submission the relevant terms
       fell to be implied at common law into the 1987 contract,
       he drew my attention to the decision of the
       Court of Appeal in Timeload v British Telecom 1995.  The
       circumstances are very particular.  At that time, BT was
       the sole provider of a directory enquiries service for
       telephone subscribers who wanted to access the service.
       The subscriber telephoned 192.  BT held a licence as
       a public telecommunications operator.  It was a term of
       that licence that it provide telephone services on
       request to anyone who sought them.  It was also a term
       of the licence that BT should not discriminate unduly
       against particular persons or classes of person.
       Claimant sought to operate a free telephone enquiry
       service ... It sought and was allocated the number
       0800192192 and entered into a contract on the standard
       terms of BT in relation to the use of a telephone line
       with that number.  Once the telephone service using that
       line had commenced operation, BT sought to terminate the
       contract by giving notice of one month which the
       contract provided."
           My Lord, we have relied on this in our appendix in
       relation to termination and in relation to relational
       contract.
   MR JUSTICE FRASER:  Whereabouts in your appendix?
   MR GREEN:  Page 57.  {A/7/61}
   MR JUSTICE FRASER:  Sorry, Timeload you have.  Not --
   MR GREEN:  No, Timeload.
   MR JUSTICE FRASER:  I see.  I thought you meant this case.
   MR GREEN:  No, I am sorry, in relation to Timeload.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  The history is briefly set out there.  Just below
       the top hole-punch:
           "The judge at first instance granted
       an interlocutory injunction.  The Court of Appeal
       dismissed the appeal against the grant of that
       injunction.  Mr Burr submitted the decision was
       authority for the proposition that it was to be implied
       as a matter of law in any contract, or at least any
       contract having the characteristics of the contract in
       Timeload, that it continued indefinitely until
       determined, which characteristic he intended shared with
       the 1987 contract, but notice of termination would not
       be given other than for good cause."
           So that is what use I think Andrew Burr was making
       of Timeload in this case.  And the Timeload decision is
       considered -- the leading judgment, which is
       Sir Thomas Bingham, Master of the Rolls' judgment in
       Timeload.
   MR JUSTICE FRASER:  As he then was.
   MR GREEN:  As he then was.  And the short point in relation
       to that, as your Lordship will see from what has been
       quoted in this judgment, is that Lord Justice Bingham
       over the page in the quote there says:
           "For my part --"
   MR JUSTICE FRASER:  Where are you reading now?
   MR GREEN:  The first new paragraph over the page from 64.
       My Lord, perhaps I should start at 64.
   MR JUSTICE FRASER:  You can probably just go to 68 insofar
       as you need anything in this judgment.
   MR GREEN:  Yes, my Lord.  It possibly goes a little bit
       further.  If we just look quickly at 64.  Halfway down
       in the quote you will see on the right-hand side:
           "He argued that the factual matrix was irrelevant
       since the standard form contract was applicable to many
       millions of customers.  The meaning of the contract did
       not vary depending on the particular circumstances.  No
       room for implications since the terms are to be implied
       into the contract only if they are necessary, not
       because they were thought to be reasonable.  In other
       words, Mr Hobbs propounded with great skill what could
       fairly and not pejoratively be described as
       an old-fashioned classical argument based upon a literal
       approach to the text of the contract.  That may prove to
       be a good argument."
           So it's an interlocutory decision against me.
           "It is certainly a view of the matter which has been
       accepted by judges on other occasions, albeit in the
       absence of full argument.  For my part, however, I share
       the judge's reservations.  It is relevant to bear in
       mind that BT is a public telecommunications operator
       licensed by the Secretary of State under
       the Telecommunications Act 1984 to provide a public
       telecommunications service."
           Indeed your Lordship will realise that BT was
       originally Post Office Telecommunications, it came out
       of the GPO.
   MR JUSTICE FRASER:  Indeed.  And it was a monopoly, but was
       no longer shared, but shared some characteristics
       because it had a dominant position.
   MR GREEN:  Exactly.  Your Lordship has seen that.  It's at
       the bottom of the quote:
           "Thus pure necessity is not the only ground on which
       a term can be implied and I can see strong grounds for
       the view that in the circumstances of this contract, BT
       should not be permitted to exercise a potentially
       drastic power of termination without demonstrable reason
       or cause for doing so."
   MR JUSTICE FRASER:  What principle are you taking from this
       case that you don't get from anywhere else?
   MR GREEN:  I am only illustrating a facet of how the
       background to the relationship between the parties
       should inform the exercises implied terms.
   MR JUSTICE FRASER:  I understand.
   MR GREEN:  I am not relying on the factual point that BT
       used to be part of Post Office, but I am relying on the
       fact that Post Office is actually more in a -- in
       an earlier part of the journey to privatisation and
       competition than BT was by this stage.  And the
       Post Office itself relies on the context of it having to
       provide these services nationwide.
   MR JUSTICE FRASER:  Understood.
   MR GREEN:  In that way.
   MR JUSTICE FRASER:  Have we finished with Hadley?  I'm not
       really sure you get very much out of Hadley, to be
       honest, because everything that Hadley says can be taken
       from other cases.
   MR GREEN:  My Lord, that is probably right.  I am happy just
       to rely on the underlying authority of Timeload which we
       have in the bundle.
   MR JUSTICE FRASER:  I think that might be better, but it is
       interlocutory anyway.
   MR GREEN:  It is.
   MR JUSTICE FRASER:  Although I think there is some authority
       that says the fact it is interlocutory doesn't much
       matter.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  Because the test there is only --
       because it is interlocutory, the test that the
       Court of Appeal was considering was whether there was
       a serious issue to be tried.
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  So it is rather different, isn't it?
   MR GREEN:  Indeed.  It is different, because it is only
       whether there is a serious issue to be tried on the
       point.  But it is interesting the terms in which
       Lord Justice Bingham, the Master of the Rolls, expressed
       it --
   MR JUSTICE FRASER:  But I think I will get that from reading
       Timeload, not from reading what Mr Burr said it did or
       didn't do in front of His Honour Judge Seymour.
   MR GREEN:  Indeed.  At paragraph 75, I am at risk of
       compounding what I have just done, which is referring to
       a case cited in another case, because Timeload there
       refers in turn to Interfoto which I think I should take
       the court to.
   MR JUSTICE FRASER:  I am anxious that our shorthand writers
       get a short break.
   MR GREEN:  My Lord, can I deal with that after the break.
   MR JUSTICE FRASER:  I think that is a good idea because at
       about 3.05 pm you said you had two very short points.
   MR GREEN:  They weren't so short.
   MR JUSTICE FRASER:  No.  Certainly this one wasn't.
           We will come back at 3.32 pm.  Thank you very much.
   (3.23 pm)
                         (A short break)
   (3.34 pm)
   MR GREEN:  My Lord, can I just take your Lordship to two
       authorities quickly in V1.  At tab 6, which is
       Interfoto, and then just back again quickly to Timeload
       which is at tab 9.  It's a short point.
   MR JUSTICE FRASER:  Tab 6 of the new authorities?
   MR GREEN:  Tab 6 of V1, thank you, Interfoto {A1.1/7/1}
   MR JUSTICE FRASER:  Interfoto.
   MR GREEN:  If your Lordship looks at the familiar passage at
       the foot of 439, letter F to H. {A1.1/7/7}
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  So this is Lord Justice Bingham, as he then was,
       the passage to which we referred previously:
           "English law has, characteristically, committed
       itself to no such overriding principle but has developed
       piecemeal solutions in response to demonstrated problems
       of unfairness.  Many examples could be given.  Thus
       equity has intervened to strike down unconscionable
       bargains.  Parliament has stepped in to regulate the
       imposition of exemption clauses ..."
           And so forth.  Then he in the final paragraph says:
           "The well-known cases on sufficiency of notice are
       in my view properly to be read in this context."
           Then he identifies the two levels at which they are
       really being decided:
           "At one level they are concerned with a question of
       pure contractual analysis, whether one party has done
       enough to give the other notice of the incorporation of
       a term in the contract.  At another level they are
       concerned with a somewhat different question, whether it
       would in all the circumstances be fair (or reasonable)
       to hold a party bound by any conditions or by
       a particular condition of an unusual and stringent
       nature."
           So that is broadly as far as he takes it at that
       stage but he is adverting to the footing, the dual
       footing, upon which the common law develops these
       solutions.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  My Lord, if your Lordship can turn forward to
       tab 9.  This is back to Timeload.
   MR JUSTICE FRASER:  Is that it for Interfoto?
   MR GREEN:  That is it for Interfoto.
   MR JUSTICE FRASER:  Timeload at tab 9.
   MR GREEN:  Which is {A1.1/9/1}.  And if we look at 468
       {A1.1/9/10} which was the part in Hadley that was being
       referred to.  If your Lordship -- about halfway down the
       page, your Lordship will see the word "expected" on the
       left-hand margin.
   MR JUSTICE FRASER:  On ...
   MR GREEN:  Page 468.  Just after "expected":
           "If, however, section 3(2) does not in its precise
       terms cover this case, I do not myself regard that as
       the end of the matter.  As I ventured to observe in
       Interfoto, the law of England, while so far eschewing
       any broad principle of good faith in the field of
       contract, has responded to demonstrated problems of
       unfairness by developing a number of piecemeal solutions
       directed to the particular problem before it.  It seems
       to me at least arguable that the common law could, if
       the letter of the statute does not apply, treat the
       clear intention of the legislature expressed in the
       statute as a platform for invalidating or restricting
       the operation of an oppressive clause in a situation of
       the present very special kind.  I say no more than that
       there is, I think, a question here which has attracted
       much attention in Commonwealth jurisdictions and on the
       Continent and may well deserve to be further explored
       here."
           So, my Lord, two points.  Obviously what it says is
       the first point, the flexibility of the common law in
       matters adjacent to which Parliament has made express
       provision to respond to unfairness, which is not really
       taking things that much beyond what he said in
       Interfoto.  But also, my Lord, in at least the genesis
       of the decisions of Lord Justice Bingham, Master of the
       Rolls, Lord Bingham, over the period to 2003 where we
       get to the hospitals case.  Your Lordship will see
       arguably a move to recognition of at least honesty by
       the time we get to 2003 being accepted as base level.
       There is consistency in the ability of the common law to
       respond to particular unfairness even if the statutory
       provisions of UCTA don't necessarily preclude reliance
       on the particular term as falling precisely within the
       statute.
           My Lord, how the common law responds to that is
       a matter really for your Lordship.  It may be that there
       is an aspect of the operation of the contract,
       for example, the requirement to accept as a debt a sum
       you disagree with.  Whether or not that falls -- we will
       come to that tomorrow because I am going to deal with
       agency and accounts tomorrow on the facts and the law.
       The law is shorter.  But there may be aspects of the
       contract which might support any decision your Lordship
       might otherwise make in any event in relation to implied
       terms or might contribute to the decision your Lordship
       might make into implied terms.
           So whilst fairness itself from M&S is in a general
       sense not relevant, it is not for the court to strike
       a fair bargain, there may be levels of oppressiveness in
       relation to the operation or exercise of rights in
       a contract against which the common law does respond.
       And that is plain from what Sir Thomas Bingham as the
       Master of the Rolls, as he then was, says in this case
       in terms of explaining what he said in Interfoto.
           So although Interfoto is relied on generally in this
       field as antipathetic to this sort of approach, we
       respectfully say when you look at it in context as he
       recites it then subsequently in Timeload, it is a little
       bit more subtle than that.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  So, my Lord, that is the point in relation to
       Timeload.  I was then going to take your Lordship, if
       I may -- and I am going to have hopefully all the
       authorities done this afternoon apart from the agency
       points and a couple of minor points.  The next case is
       at tab 33, which is Mid Essex Hospital Services.
       {A1.1/44/1}.  If your Lordship has our appendix handy,
       it is on page 29 of the appendix.  Your Lordship will
       see from the appendix that we have referred to
       paragraphs 82 and 83 in particular.
   MR JUSTICE FRASER:  Which page in the appendix?
   MR GREEN:  My Lord, sorry, page 29 in the appendix is
       Mid Essex Hospital Services and page {A1.1/44/21} is the
       correct Opus reference for the page upon which
       paragraphs 82 and 83 appear.  There is a reference at 82
       to cases cited above where the implied term was
       intrinsic, and perhaps I can just show your Lordship
       those in a moment just to provide context perhaps
       afterwards.  But 82:
           "The contract would not make sense without it.  It
       would have been absurd in any of those cases to read the
       contract as permitting the party in question to exercise
       its discretion in an arbitrary, irrational or capricious
       manner.  By reference to Baroness Hale's classification
       in Geys v Societe Generale that implied term falls into
       the first category."
           So this is Lord Justice Jackson, Lord Justice
       Lewison and Lord Justice Beatson referring to those
       categories we saw in the Geys case in Baroness Hale's
       judgment, and effectively not the -- it is not the
       characterisation of the relationship but it's the
       intrinsic requirement for implication there.
           So that is at least distinguishing between
       category one and category two again and not in any
       employment case, in a commercial case.  Albeit referring
       back to the cases, if we can just go back one page to
       {A1.1/44/20} just so your Lordship sees what the cases
       referred to were: Abu Dhabi v Product Star, Horkulak v
       Cantor Fitzgerald, Socimer International v Standard Bank
       and JML Direct v Freestat:
           "I must therefore review these and any other
       relevant authorities."
           Then there is a review of them.  Obviously the
       Product Star case is -- this is Lord Justice Leggatt
       with whom the other two members of the court agreed.
       The relevant principles are set out:
           "... proper consideration of the matter after making
       the necessary enquiries."
           Your Lordship will see there.  As well as:
           "... not exercising arbitrarily, capriciously or
       unreasonably."
           That is obviously shipping case, a charterparty
       case.  Then Horkulak is an employment case.  Four lines
       down:
           "It was an implied term, based on the common
       intention of the parties, that there would be a genuine
       and rational exercise of the discretion by the employer.
           "In Socimer a contract for sale of assets between
       banks entrusted the task of valuation to one party.  The
       Court of Appeal noted that the contract conferred on one
       party a power to make decisions which would have
       an effect on both parties.  Accordingly the contract was
       subject to an implied term. Rix LJ (with whom Lloyd and
       Laws LJJ agreed) noted that the decision-maker's
       discretion was limited as a matter of necessary
       implication.  He was obliged to act honestly.  Also
       there was a 'need for the absence of arbitrariness,
       capriciousness, perversity and irrationality'."
           And JML you have seen.  So what is interesting there
       is that, in this review of those authorities, there is
       no distinction being drawn between those commercial
       cases and Horkulak as an employment case for the purpose
       of what we respectfully would submit are totally
       uncontroversial implied terms which have the effect of
       governing the exercise of discretions and the exercise
       of those discretions and the terms which they govern
       becomes much more acutely in focus where a party is
       making a decision which may be in its own interests or
       against its own interests ie a distributive decision as
       between the two parties.
           And just looking at the Product Star at
       paragraph 78, we respectfully rely on the fact that
       Lord Justice Leggatt, that quote from
       Lord Justice Leggatt in Product Star, is not limited
       purely to "must not be exercised arbitrarily,
       capriciously or unreasonably" but notes that the content
       of that duty or an instant of it is that that entails
       a proper consideration of the matter after making any
       necessary inquiries.  So we respectfully rely on that in
       relation to what we say is the relevant content of these
       duties that either fall under Yam Seng or implied terms.
       So, my Lord, that was the point I wished to make in
       relation to Mid Essex.
           Then if I can take your Lordship to tab 16 in the
       same volume, which is Paragon Finance.  {A1.1/19/1}.
       This is Lord Justice Dyson in the Court of Appeal.  If
       we look at page {A1.1/19/26} of that report, please.
       This is where the Court of Appeal gives consideration to
       the -- in the context of an unfair contract terms
       analysis which I should rightly point out to
       your Lordship is the heading of this section.  At
       paragraph 73 just below the letter D:
           "The first question is whether the fixing of rates
       of interest under a discretion given by the contract was
       'contractual performance' within the meaning of
       section 3(2)(b).  Mr Broatch submits that it is.  He
       relies on two authorities.  The first is Timeload ..."
           Then it recites the facts, and at letter F:
           "But the licence agreement imposed clear performance
       obligations on BT.  Thus clause 1.1 obliged BT to
       provide various services ..."
           There set out:
           "In these circumstances it is not difficult to see
       why the court thought that it was at least arguable that
       a clause authorising termination of the obligation to
       provide those services for no good reason purported to
       permit a contractual performance different from that
       which the customer might reasonably expect."
           Pausing there, my Lord, it is right that I should
       just highlight to your Lordship that the only difference
       in an UCTA analysis is it is the subjective reasonable
       expectation of those parties that is in issue.  One
       slight difference to the contractual analysis generally.
       Then if your Lordship goes over the page to page
       {A1.1/19/27} at paragraph 75:
           "In my judgment, neither of these authorities
       assists Mr Broatch's submission.  In both cases the
       defendant telecommunications provider was contractually
       bound to provide a service.  The question was whether
       the withdrawal of the service in the particular
       circumstances of the case was such as to render the
       contract performance (ie the provision of that
       service) substantially different from that which it was
       reasonable for the other contracting party to expect."
           So that is the basis upon which those decisions were
       distinguished by Lord Justice Dyson in Paragon Finance.
           The outcome at -- if we look at paragraph 42 of
       Paragon Finance {A1.1/19/19} at page 703.  After
       a review of various other cases leading up to this
       conclusion, which I won't take your Lordship to, but the
       conclusion reached by Lord Justice Dyson there is:
           "I conclude that there was an implied term of both
       agreements that the claimant would not set rates of
       interest unreasonably in the limited sense that I have
       described.  Such an implied term is necessary in order
       to give effect to the reasonable expectations of the
       parties."
           My Lord, that is a question on implied terms rather
       than the UCTA analysis, and "the reasonable expectations
       of the parties", actually the same phrase means
       something different depending on whether you are in
       construction where it is shorthand for the test that
       your Lordship is well aware of, because I have mentioned
       it lots of times, and the slightly more subjective test
       of the actual subjective intentions of the parties for
       UCTA purposes insofar as those were reasonable.
           The limited sense in which Lord Justice Dyson found
       that they could not set rates unreasonably again is
       totally consonant, my Lord, with this distinction
       between fairness of outcome and fairness of dealing or
       decision-making.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  So there was no prohibition on setting a rate
       which was in itself capable of being criticised as
       unreasonable, it's the decision-making process by which
       the rate would be set which had to be reasonable.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  So that is the point in relation to
       Paragon Finance.  Then, my Lord, the next authority in
       relation to implied terms is Gogay at tab 17 in the same
       bundle, V1.  {A1.1/16/1}.  We have summarised the Gogay
       case in the annex on page 33.
   MR JUSTICE FRASER:  On page?
   MR GREEN:  Page 33 of the appendix.
   MR JUSTICE FRASER:  Of the appendix.
   MR GREEN:  Can I take your Lordship first to page
       {A1.1/16/7}.  At 53, having cleared a little bit of
       undergrowth from how it had been presented before in
       the paragraphs that precede it, this is
       Lady Justice Hale as she then was:
           "The implied term of confidence and trust.
           "It is now well settled there is a mutual obligation
       implied in every contract of employment, not without
       reasonable and proper cause, to conduct oneself in
       a manner likely to destroy or seriously damage the
       relationship of confidence and trust between employer
       and employee.  This requires an employer, in the words
       of Lord Nicholls of Birkenhead in Malik v BCCI:
           "'... not to engage in conduct likely to undermine
       the trust and confidence required if the employment
       relationship is to continue in the manner the employment
       contract implicitly envisages ... The conduct must
       of course impinge on the relationship in the sense that,
       looked at objectively, it is likely to destroy or
       seriously damage the degree of trust and confidence the
       employee is reasonably entitled to have in his employer.
           "Lord Steyn emphasised at page 471 that the
       obligation applies 'only where there is "no reasonable
       or proper cause" for the employer's conduct and then
       only if the conduct is calculated to destroy or
       seriously damage the relationship ...'"
           Your Lordship will have seen the facts; basically
       the knee-jerk suspension of a care assistant in
       a children's home who was suspended immediately after
       a child made comments that could have been construed as
       allegations of abuse, and there was a knee-jerk
       suspension.  And it is on the footing that that
       knee-jerk reaction without considering alternatives was
       in fact a breach of the implied term of trust and
       confidence that Ms Gogay recovered her damages for the
       psychiatric injury she suffered as a result.  That is
       found at paragraph 59, as your Lordship has probably
       seen already.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  My Lord, I have time, if your Lordship doesn't
       mind sitting for a few more minutes.
   MR JUSTICE FRASER:  No.  Where are we going next?
   MR GREEN:  But it may be more sensible to try to refine the
       introduction of the agency cases, because I am dealing
       with the agency facts tomorrow, overnight.  I am happy
       to do that.  I think I have time to cover -- tomorrow is
       essentially agency and accounts, a small amount of law,
       quite a lot of fact, much of which we have actually
       addressed, hopefully carefully and precisely, in our
       written closing submissions on what the evidence showed
       in relation to that.  So agency and accounts and the
       significance of those points, and then a response to the
       defendant's written closing submissions in relation to
       the relevance of evidence that the court has heard.
           My Lord, I will try to avoid remaking points
       that I made on 10 October as far as possible in
       responding to that.
   MR JUSTICE FRASER:  Was 10 October the strike-out?
   MR GREEN:  Indeed.  A response to those points, and then
       there are some particular points in relation to the lead
       claimants' evidence and some of the other Common Issues,
       which are very short points that I will make briefly
       orally over and above what we put in our written
       closing.
   MR JUSTICE FRASER:  Yes.
   MR GREEN:  So if that is a convenient moment, I think I can
       do that all tomorrow in good time.
   MR JUSTICE FRASER:  That is fine.  So nothing more now?
   MR GREEN:  Nothing more now.
   MR JUSTICE FRASER:  All right.  Thank you very much.
   MR GREEN:  My Lord, there was a housekeeping point I had
       forgotten.
   MR JUSTICE FRASER:  Let's deal with the housekeeping.
   MR GREEN:  It is only that accidentally two incorrect
       authorities found their way into the bundle.
   MR JUSTICE FRASER:  Only two?
   MR GREEN:  We have replacements but we wanted to check with
       your Lordship that we could provide those for --
   MR JUSTICE FRASER:  Why don't you hand them up now and tell
       me what they are.
   MR GREEN:  They are tabs 22 and 28 of volume 1.  They are
       Prudential and the AXA Sun Life case.
   MR JUSTICE FRASER:  So Prudential v Ayres which is in here
       now.
   MR GREEN:  Yes, the wrong decision I think.
   MR JUSTICE FRASER:  A single sheet, which is a note.  I can
       take that out?
   MR GREEN:  Indeed.
   MR JUSTICE FRASER:  Just a second.  Which tab is AXA under?
   MR GREEN:  22 and 26 are the two tabs.
   MR JUSTICE FRASER:  All right.
           So would you like a 10.30 am start, Mr Green?
   MR GREEN:  My Lord, yes.
   MR JUSTICE FRASER:  Thank you very much for that.  Actually
       my clerk will come and sort the papers out later.  There
       is no point in keeping you all waiting.  Thank you very
       much.  10.30 am tomorrow.
   (4.00 pm)
         The court adjourned until 10.30 am on Tuesday,
                         4 December 2018