THE “UNITARY EXERCISE” OF CONTRACTUAL INTERPRETATION

Abstract

LORD Hoffmann's famous “restatement” of the principles of contractual interpretation in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 W.L.R. 896, 912–13, was heralded as a “quiet revolution” (McLauchlan (2000) 19 N.Z.U.L.R. 147, at 148) in that it appeared to overthrow the legalistic approach of the past. That approach, often associated with the “plain meaning rule” (Bank of New Zealand v Simpson [1990] A.C. 182 (PC), 189) involved giving effect to the expressed meaning of the text, which (limited exceptions aside) could not be contradicted by the relevant background (or matrix of fact). By contrast, the approach in ICS mandated the Court to search for the apparently intended meaning by consulting the relevant and admissible background in all cases. The ICS approach rapidly became dominant, and indeed orthodox, across multiple jurisdictions. However, in a series of judgments commencing with Re Sigma Finance Corporation [2009] UKSC 2; [2010] 1 All E.R. 571, the Supreme Court of the United Kingdom has gradually moved away from the approach in ICS (albeit without expressly overruling it) and emphasised the importance of giving effect to the natural and ordinary meaning of the words used, in combination with other factors (see especially Marley v Rawlings [2014] UKSC 2; [2014] 2 W.L.R. 213, at [18]–[19]; Arnold v Britton [2015] UKSC 36; [2015] A.C. 1619, at [14]–[23]). This return to a more traditional approach to interpretation vindicates sustained criticism of the validity of the ICS approach in principle and practice (see e.g. Staughton [1999] C.L.J. 303; Berg (2006) 122 L.Q.R. 354; Buxton [2010] C.L.J. 253).