This case concerns the interpretation of a sale and purchase agreement (and, in particular, a clause whereby the seller agreed to indemnify the purchaser for losses relating to the mis-selling of insurance products prior to the sale). In Rainy Sky v Kookmin (Weekly Update 39/11), the Supreme Court held that "where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense". In this case, the Court of Appeal cautioned that care should be taken in using "business common sense" as a determinant of construction because " What may appear, at least from one side's point of view, as lacking in business common sense, may be the product of a compromise which was the only means of reaching agreement". It is not the function of the court to improve the bargain struck by the parties as there are a number of reasons why a party might make a bad or poor bargain (eg weak negotiating position, poor negotiating or drafting skills, or inadequate advice).
The Court of Appeal concluded that " In effect a balance has to be struck between the indications given by the language and the implications of rival constructions. The clearer the language the less appropriate it may be to construe or confine it so as to avoid a result which could be characterised as unbusinesslike. The more unbusinesslike or unreasonable the result of any given interpretation the more the court may favour a possible interpretation which does not produce such a result and the clearer the words must be to lead to that result. Thus if what is prima facie the natural reading produces a wholly unbusinesslike result, the court may favour another, even if less obvious, reading. But, as Lord Neuberger observed in Arnold v Britton "commercial common sense and surrounding circumstances …should not be invoked to under value the importance of the language of the provision which is to be construed"".