UKSC 24
I imagine the Supremes sitting in their kitchenette idly flipping through the appeal petitions and bickering about which ones are going to be allowed. All the judges will have their own hobby horses and bêtes noires. Baroness Hale is unlikely to get fired up over a dodgy tax scheme, whilst Lord Sumption is not even going to read petitions that originated in the Family Division. Horse trading and tactical voting will take place, with Lord Neuberger being grand and statesmanlike, and Lady Hale being smiley and steely and softly, softly, catchy monkey
So whose itch was this case scratching? The most likely is the Supreme who gave the only judgment: with Lord Hodge. Lord Hodge is the Scottish Judge, who tends to the commercial end of the spectrum. Either that, or he’d won a game of rock-paper-scissors, with Lord Carnwath, who was still sulking over losing in Arnold v Britton.
What had riled Lord Hodge, was the apparent suggestion that there was some kind of “rowing back” from Rainy Skies orthodoxy in the majority decision in that aforementioned ghastly case Arnold v Britton.
Capita’s ground of appeal had been on this very point. The Appeal Court had dismissed the idea that there was any dissonance between the two cases. Capita had therefore claimed that excessive reliance on the textual purity approach in Arnold had meant that the contextulism advocated by Rainy Skies was occluded. If the Appeal Court had taken a more contextual approach, then they would have put greater reliance on the matrix of fact, and Capital would have won.
The facts of the case are dull and predictable. Some company of which Mr Wood was the 93% shareholder, and one of three directors was sold to Capita Insurance. The business of the company was selling insurance to owner of classic cars. The business model was slightly more dodgy: a classic car owner would input their details into an aggregator on the internet, and would be given a quote. Funnily enough, when the punter was subsequently rung by the salesman to take credit card details, the premia had increased from the website quote, even though the risk profile hadn’t changed.
Capita reported themselves to the FSA, and had to compensate punters who had been diddled under l’ancien regime. They therefore tried to claim on the warranties that Mr Wood et al had given them under the SPA. The argument developed around the wording of the indemnity. At first instance, the insurance company had won in front of Popplewell. A strong appeal court had held for Mr Wood, and if you read the clause, you’ll see for yourself, that it’s ambiguous. In a nutshell, the draftsperson hadn’t considered a situation where loss might arise from the Capita whistleblowing on itself to the FSA as it was bound to do, under FSMA 2000.
The panel agreed with Popplewell, and the appeal allowed Lord Hodge a platform to reformulate the orthodoxy. First of all, he said, he was not going to reformulate the Rainy Sky and Arnold guidance. However, he thought he’d like to explain why Arnold was not a recalibration of Rainy Sky.
A court’s job was not to use a slavish, literalist approach, parsing each word like a GCSE English paper. Rather, the contract was to be seen as a whole, depending on its nature, formality and quality of the drafting. Greater or lesser consideration to these elements should be given, depending on the wider context.
Lord Hoffmann’s bid for judicial immortality in ICS v West Bromwich, where contextualisation was hailed as a novelty, should be put in its historical context. The factual background known to the parties at or before the date of the contract had been considered far earlier in Prenn v Simmonds and Reardon-Smith v Yngar Hansen-Tangen by one of the pantheon, Lord Wilberforce. Further, the sainted Lord Bingham had written a sound piece in the Edinburgh Law Review, which had said Hoffmann, was, as per usual, bigging himself up and pretending to be original.
Reprising Lord Clarke in Rainy Sky, Lord Hodge said that construction is a unitary exercise. Where rival meanings exist, then it is appropriate to view them through the prism of commercial common sense. The unitary process is also an iterative process:
“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”.
And feeling the need for a good sound bite for undergraduates and GDL-ers he says:
“Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation.”
Finishing off, with a rousing and patriotic chorus (all together, now):
- On the approach to contractual interpretation, Rainy Skyand Arnold were saying the same thing.
- The recent history of the common law of contractual interpretation is one of continuity rather than change. One of the attractions of English law as a legal system of choice in commercial matters is its stability and continuity, particularly in contractual interpretation.
So now we all know where we are, and Lord Hodge would be ever so grateful if this could be the last word on the subject for a while.