Implied term? Don’t bet your bottom dollar

De Boinville had an account with an execution-only spread betting provider, IG Index. After placing bets, De Boinville’s account was identified as being in default. Following market movements, IG Index exercised its express “absolute” discretion under the customer agreement to close out all of De Boinville’s bets.

De Boinville pursued multiple claims against IG Index, essentially complaining that it should not have closed out when it did. These included breach of fiduciary duty, misrepresentation and a statutory claim under section 138D of the Financial Services and Markets Act 2000. I will focus on De Boinville’s contractual claim.

De Boinville argued that in order to give business efficacy to the agreement there was an implied obligation that IG Index would exercise any discretion fairly and in his best interests and that it would not transfer or deal with his money without authorisation. The court noted that this was not the same as a standard of rationality (sometimes referred to as the Braganza duty). De Boinville’s term required that the court substitute its own view. That is not what a court would do when faced with a Braganza duty.

The court found that the agreement adequately set out how IG Index would exercise any discretion or otherwise transfer or deal with his money so that it was not necessary to imply any term.

The agreement conferred an entitlement (not an obligation) within the exercise of IG Index’s absolute discretion to close any bet where there had been a failure by De Boinville to provide margin. It contained an express acknowledgement by De Boinville that if a bet had been allowed to remain open this might result in further losses. This, the court held, was not for the benefit of De Boinville but for the protection of IG Index.

By way of reminder, the court noted that the exercise of an “absolute” discretion is, still, subject to an implied term that it will not be exercised in an “irrational, perverse, capricious or arbitrary” manner (ie the Braganza duty).

Judgment: De Boinville v I G Index