The English High Court has once again had to visit the principles for interpretation of contracts under English law, in Canary Wharf v Deutsche Trustee Company Limitedand others. The particular issue in dispute concerned whether the terms of the relevant notes applied a “Spens” make-whole provision on the redemption of the notes in the circumstances that occurred.
The Court’s judgment was a clear application of the principles referred to in several cases in the Supreme Court and the Court of Appeal in 2015 such as Arnold v Brittonand the earlier (2011) Rainy Sky case. In essence, the correct approach to questions of contract interpretation is that the words in the contract are the starting point and the clearer their natural meaning the more difficult it is to justify departing from them.
Having decided the case on the language of the documents (which the Court considered to be clear and unambiguous in respect of the issue in dispute), the Court then turned to the commercial sense of the relevant provisions and of the transaction as a whole. It did this “for the sake of completeness and by way of a cross-check” of its conclusion as to the meaning of the relevant provisions. The Court concluded that its reading of the terms of the documents was consistent with the commercial sense of the documents.
Importantly, the judgment does not reveal what position the Court would have taken if its view of the language of the documents and of their commercial sense had diverged.
Also, this case is unlikely to be the end of the story. The principles of interpretation so clearly enunciated by the Court in the Canary Wharf case are often easier to describe than to apply, as the judgment itself at times shows.