What is the correct approach to contractual interpretation?

In the recent case of Wood v Capita Insurance Services Ltd [2017] UKSC 24  in a commercial context, the Supreme Court has recently issued some helpful commentary on the relationship between two lead authorities – Arnold v Britton & Ors [2015] UKSC 36 and Rainy Sky SA & Orsd v Kookmin Bank [2011] UKSC 50.

Wood started life as a claim for loss arising from (alleged) mis-selling or suspected mis-selling of insurance products in the period before a sale under a SPA was completed. One of the points at issue in the appeal was whether the Court of Appeal had been unduly influenced by a submission that the Supreme Court in Arnold had “rowed back” from the approach set out in Rainy Sky. But, with unusual concision, the Supreme Court in Wood (per Lord Hodge) stated that:

14.              On the approach to contractual interpretation, Rainy Sky and Arnold were saying the same thing.

More detailed guidance is given at [11] and [12] of the judgement, which I’d recommend as a useful reference point for disputes over contractual interpretation – which remains, as in Rainy Sky, a “unitary exercise”, requiring the Court to balance the text and the context. The “iterative approach” set out in In re Sigma Finance Corpn [2010] 1 All ER 571 (at para 10, per Lord Mance) was endorsed: take each suggested interpretation and then check it against the provisions of the contract and its commercial consequences.

Author: Ezra Macdonald

I'm a barrister practising from Pump Court Chambers in London (although we have annexes in Wiltshire and Hampshire and I work throughout England & Wales). I mainly do a combination of employment, commercial, and property law (both residential and commercial). I also do some personal injury work, which these days consists mostly of fast track trials. I have a strong-to-moderate academic interest in the law, and I'm always happy to be contacted for discussion or advice.

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