In a world where negotiated points are increasingly tracked and preserved through the use of comparison technology, what are the implications of this ruling on contractual certainty for parties and their legal advisers?

In the recent case of Narandas-Girdhar and Another v Bradstock [2016] EWCA Civ 88, the Court of Appeal held that deleted words could be used as an aid to construction, if the fact of the deletion shows what it is that the parties did not agree, and there is ambiguity in the wording that remains.

The facts

In this case, the appellant, Mr Atulkumar Parekh, sought a declaration that his individual voluntary arrangement (IVA) should be set aside on a number of grounds.

A central strand of Mr Parekh's argument was that the IVA was conditional on the acceptance of a simultaneous IVA relating to his wife, Mrs Parekh (which was ultimately rejected by Mrs Parekh's creditors). The relevant clause of the proposal stated:

'the acceptance of my IVA is conditional upon the acceptance of the arrangement for my wife/husband, following acceptance the estates shall be combined for dividend purposes and treated as one.'

The key flaw in Mr Parekh's argument was that the proposal submitted for approval by his creditors actually contained a number of modifications, which were set out in a separate document. In that document, the above clause was expressly substituted as follows:

'clause 4.3 is to be substituted with 'I agree to pay the supervisor for the bnefit of the creditors not less than £230 per month for the duration of the IVA.'

Despite this, a number of the provisions in the proposal that remained unaffected by the modifications made reference to Mrs Parekh's IVA, leaving the question of the relationship between the two IVA's open to interpretation. The question for the Court was therefore whether recourse could be had to the deleted text and what inference, if any, could be drawn from it.

The ruling

The judge at first instance found that the fact that the proposal was drafted first, and the modifications drafted later, could not be ignored, and the interdependence of the two IVAs was therefore broken by the modification. However, LJ Briggs, in the Court of Appeal, clarified that the true test is that set out in Mopani Copper Mines plc v Millennium Underwriting Ltd [2008] EWHC 1331 (Comm), which held that:

  1. deleted words in a printed form may resolve the ambiguity of neighbouring paragraphs; and
  2. deletion of words in a contractual document may be taken into account if the fact of the deletion shows what it is that the parties did not agree and there is ambiguity in the words that remain'. In his judgement, LJ Briggs also cited Keating on Building Contracts:

'...where parties have made a contract in a document that contains deletions, to look at the deletions does not offend the principle discussed above which prevents reference to preliminary negotiations. [...] It is submitted that the Court should first construe the retained words. If they are ambiguous, reference to deletions from printed documents should be permitted to see whether objectively they throw light on the meaning of the retained words.'

On this basis, LJ Briggs concluded that there was sufficient ambiguity in the contract to justify looking at the deleted text and, in this instance, it was held that the requirement of conditionality had been removed and Mr Parekh's argument for having the IVA set aside failed. The appeal was dismissed.

Conclusion and practice points

Firstly, it is worth remembering that principles of construction can only be invoked where the meaning of the express terms are in doubt. In an ideal world, a well-drafted contract would not be open to such challenges.

In his judgement, LJ Briggs was keen to stress that care must be taken when drawing inferences from deleted text, as deletions can be made for a range of reasons and are not always indicative of an agreed stance between the parties. Equally, it was acknowledged that deletions come in a number of forms, and may not always be a case of one self-contained provision simply being deleted and replaced with another. There is therefore no 'one size fits all' rule.

In the references to earlier judgements, a distinction was made between preliminary negotiations (which are inadmissible) and deletions which are physically contained in a concluded contract. However, the line between the two is not always clear cut.

Particular caution should therefore be taken where concluded documents contain legible deletions. This may arise, for example,

  • in construction contracts, where standard form provisions are often replaced with bespoke terms, either on the face of, or in the schedules to the document
  • in amendment letters or amendment and restatement agreements, where the text being amended or deleted is expressly set out in the document; and
  • where manuscript amendments are used to document agreed amendments to final form documents.

In each case it would be preferable for deletions to be made directly in the body of the agreement, to avoid the risk of adverse inferences being drawn if construction challenges arise.

Finally, the case also acts as a timely reminder to always check that track changes are properly deleted in final form and executed documents.