BL-2025-000377 - [2025] EWHC 2976 (Ch)

The principles to be applied by the courts in the interpretation or construction of a contract have been definitively established by the trio of Supreme Court cases on the subject, namely Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900, Arnold v Britton and others [2015] UKSC 36; [2015] AC 1619 and Wood v Capita Insurance Services Ltd [2017] UKSC 24; [2017] AC 1173.

By way of summary of the relevant principles, Mr Greenhill KC and Mr Goodwin rely upon the summary provided by Popplewell J (as he then was) in Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd (The “Ocean Neptune”) [2018] EWHC 163 (Comm), [2018] 1 Lloyd’s Rep. 654 at [8]:

“The court’s task is to ascertain the objective meaning of the language which the parties have chosen in which to express their agreement. The court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. The court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to the objective meaning of the language used. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other. Interpretation is a unitary exercise; in striking a balance between the indications given by the language and the implications of the competing constructions, the court must consider the quality of drafting of the clause and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest; similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated. It does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each”.

It was not suggested on behalf of Mr Dekel that this was anything other than an accurate summary of the relevant principles.