In doing so, the Supreme Court has changed direction from cases on contract interpretation over the last decade.
The contract law world has been in a bit of confusion lately regarding how contracts should be interpreted in a dispute. The age old rule set out in the ICS case was that context is always important when interpreting any part of the contract; however, the more recent cases of Rainy Sky v Krookmin Bank and Arnold v Britton cast doubt on this rule and seemed to suggest that there were now circumstances which not only allowed context to be side-lined, but potentially disregarded completely. The contract world was in disarray.
But do not be too concerned as we can breathe a sigh of relief, thanks to Lord Hodge and the case of Wood v Capita Insurance Services. This case concerned the interpretation of an indemnity given by Mr Wood to Capita in a share purchase agreement regarding claims and complaints to the Financial Services Authority for mis-selling. The question was how the indemnity was triggered. Mr Wood argued the trigger was a customer claim or complaint, whereas Capita argued self-reported findings of potential mis-selling also triggered the indemnity.
The Supreme Court concluded that Mr Wood's interpretation was correct and rejected Capita's appeal. In reaching its conclusion, Lord Hodge cited the ICS case as a "celebrated judgment" and reaffirmed its principles of contractual interpretation. In doing so, Lord Hodge has clarified the following definitive test for the interpretation of contracts:
Despite this clear guidance from Lord Hodge on contact interpretation, the confusion caused by the Rainy Sky and Arnold cases remains as the Supreme Court did not unambiguously overrule them in this case. The ghosts in the contract closet therefore continue to haunt us - albeit a bit more quietly than before.