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Summary LAWS10078 Contract Semester 2 Seminar 2-Attorney General of Belize v Belize Telecom Ltd.

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LAWS10078

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The University Of Edinburgh (ED)

LAWS10078 Contract Semester 2 Seminar 2-Attorney General of Belize v Belize Telecom Ltd.

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laws10078 contract semester 2 seminar 2 attorney general of belize v belize telecom ltd

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Semester 2 Seminar 2

Attorney General of Belize v Belize Telecom Ltd

This appeal raises a question on the construction of the articles of association of Belize Telecommunications
Ltd (“the company”), about which there has been a difference of opinion in the courts below. The company
was formed to take over the undertaking of the Belize Telecommunications Authority, a public body which had
been the monopoly provider of telecommunication services in Belize. The purpose of the transfer was to
enable the Government of Belize to sell all or part of its financial interest in the undertaking to private
investors while retaining a degree of control. This purpose was reflected in the share structure and the rights
conferred upon different classes of shareholders by the articles of association. Since the judgment of the Court
of Appeal in this case, the Telecommunications Undertaking (Belize Telecommunications Ltd Operations)
Vesting Act 2007 has vested the company's undertaking in a new company, Belize Telemedia Ltd, and dissolved
the company. However, since the questions in dispute remain relevant to the rights of the parties, the Board
will deal with the case as it stood before the Court of Appeal.

The facts which have given rise to the present dispute may be shortly stated. In 2004 the first respondent,
Belize Telecom Ltd (“BT”), acquired *1992 from the Government the special share and a majority of the issued
share capital, including majorities of both the B and C ordinary shares. It purported to appoint all eight
directors: two as special shareholder tout court, two as majority B shareholder; two as special shareholder
holding more than 37.5% of the issued share capital and two as majority C shareholder. There appears to have
been some dispute about the validity of at least some of these appointments, but these questions have not
been raised before the Board. It will therefore be assumed that the directors were validly appointed and, in
particular, the two special C directors were properly appointed by BT under article 90(D)(ii).

BT pledged the ordinary shares to the Government to secure borrowings which had financed the purchase.
Within less than a year, however, it defaulted on its obligations. On 9 February 2005, pursuant to the pledge
agreement, the Government took back a substantial number of the ordinary shares. The result was that BT was
left with the special share and C shares amounting to less than 37.5% of the issued share capital.

The question which then arose was whether the two special C directors appointed by BT remained members of
the board. Under the articles, the only person who has power to remove them is the person who would have
had power to appoint them, namely, a special shareholder holding C shares amounting to 37.5% of the issued
share capital. But the result of the default and seizure was that no such person existed. Nor is there any
express provision in the articles that in such circumstances a special C director vacates office.

The consequence, say the defendants, is that the directors are irremovable. Until they choose to resign, or fall
foul of article 112, or die, they remain directors. The claimants say that this would be an absurd result and the
articles should be construed as providing by implication that a director appointed by virtue of a specified
shareholding vacates his office if there is no longer any holder of such a shareholding.

In the Supreme Court, Conteh CJ thought that such a term should be implied. But the Court of Appeal
disagreed. Carey JA said that there was no room for reading words into the articles and no necessity to do so.
Morrison JA pointed out, correctly, that article 90(D)(ii) made provision for the appointment and removal of
special C directors but not for their tenure of office. The construction favoured by Conteh CJ could not be
“derived from the language of the articles”.

The court has no power to improve upon the instrument which it is called upon to construe, whether it be a
contract, a statute or articles of association. It cannot introduce terms to make it fairer or more reasonable. It
is concerned only to discover what the instrument means. However, that meaning is not necessarily or always
what the authors or parties to the document would have intended. It is the meaning which the instrument
would convey to a reasonable person having all the background knowledge which would reasonably be

, available to the audience to whom the instrument is addressed: see Investors Compensation Scheme Ltd v
West Bromwich Building Society [1998] 1 WLR 896 , 912–913. It is this objective meaning which is
conventionally called the intention of the parties, or the intention of Parliament, or the intention of whatever
person or body was or is deemed to have been the author of the instrument.

The question of implication arises when the instrument does not expressly provide for what is to happen when
some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had
intended something to happen, the instrument would have said so. Otherwise, the express provisions of the
instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties,
the loss lies where it falls.

In some cases, however, the reasonable addressee would understand the instrument to mean something else.
He would consider that the only meaning consistent with the other provisions of the instrument, read against
the relevant background, is that something is to happen. The event in question is to affect the rights of the
parties. The instrument may not have expressly said so, but this is what it must mean. In such a case, it is said
that the court implies a term as to what will happen if the event in question occurs. But the implication of the
term is not an addition to the instrument. It only spells out what the instrument means.

The proposition that the implication of a term is an exercise in the construction of the instrument as a whole is
not only a matter of logic (since a court has no power to alter what the instrument means) but also well
supported by authority. In Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1
WLR 601 , 609 Lord Pearson, with whom Lord Guest and Lord Diplock agreed, said:

The court's function is to interpret and apply the contract which the parties have made for themselves. If the
express terms are perfectly clear and free from ambiguity, there is no choice to be made between different
possible meanings: the clear terms must be applied even if the court thinks some other terms would have
been more suitable. An unexpressed term can be implied if and only if the court finds that the parties must
have intended that term to form part of their contract: it is not enough for the court to find that such a term
would have been adopted by the parties as reasonable men if it had been suggested to them: it must have
been a term that went without saying, a term necessary to give business efficacy to the *1994 contract, a term
which, though tacit, formed part of the contract which the parties made for themselves

There is only one question: is that what the instrument, read as a whole against the relevant background,
would reasonably be understood to mean?

the requirement that the implied term must “go without saying” is no more than another way of saying that,
although the instrument does not expressly say so, that is what a reasonable person would *1995 understand
it to mean. Any attempt to make more of this requirement runs the risk of diverting attention from the
objectivity which informs the whole process of construction into speculation about what the actual parties to
the contract or authors (or supposed authors) of the instrument would have thought about the proposed
implication. The imaginary conversation with an officious bystander in Shirlaw v Southern Foundries (1926) Ltd
[1939] 2 KB 206 , 227 is celebrated throughout the common law world. Like the phrase “necessary to give
business efficacy”, it vividly emphasises the need for the court to be satisfied that the proposed implication
spells out what the contact would reasonably be understood to mean. But it carries the danger of barren
argument over how the actual parties would have reacted to the proposed amendment. That, in the Board's
opinion, is irrelevant. Likewise, it is not necessary that the need for the implied term should be obvious in the
sense of being immediately apparent, even upon a superficial consideration of the terms of the contract and
the relevant background. The need for an implied term not infrequently arises when the draftsman of a
complicated instrument has omitted to make express provision for some event because he has not fully
thought through the contingencies which might arise, even though it is obvious after a careful consideration of
the express terms and the background that only one answer would be consistent with the rest of the

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