The Court of Appeal was again faced with a question of contractual interpretation where a close textual analysis appeared to provide an unusual commercial outcome.
Despite this, the parties were held to their, professionally drafted, agreement.
The case concerned the funding of a loan obtained by the GP practice by an NHS trust. The practice had obtained the loan in order to build new premises. In an earlier agreement, the NHS trust provided financial assistance that corresponded to the interest payable under the loan. In a new agreement, however, it appeared from the literal reading of the contract that a fixed sum was payable by the NHS, even if the interest payable had gone down.
The NHS Commissioning Board brought a claim for repayment of what it claimed it had overpaid. At first instance, Leggatt J upheld the literal textual analysis, and his decision was upheld by the Court of Appeal.
Gross LJ confirmed that Lord Hodge’s speech in Wood v Capita Insurance Services Ltd  UKSC 24 at - is the most apt summary of the position of the law at the moment. It was also noted that the purpose and limits of contractual interpretation ‘must be underlined’ (). It was not open to the court to make some different bargain because it thinks that the parties or a party would have bene wiser to do so. Further, commercial common sense is not to be invoked retrospectively.
The natural language showed that the parties had clearly intended to stipulate a fixed amount. It was intended to be different to the earlier agreement. Commercial common sense did not assist; the agreement gave certainty and capped the Trust’s liability. This was given considerable weight by the Court of Appeal. Further, other clauses had variation mechanisms; the absence of such a mechanism made it more likely that the fixed sum was what the parties intended.
David Sawtell / 13th Oct 2017
The information and any commentary on the law contained on this web site is provided free of charge for information purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by any member of Chambers. The information and commentary does not, and is not intended to, amount to legal advice to any person on a specific case or matter. You are strongly advised to obtain specific, personal advice from a lawyer about your case or matter and not to rely on the information or comments on this site. No responsibility is accepted for the content or accuracy of linked sites.
If you like what you've read but want to know more about how we can help you, simply call us:
Alternatively you can send us an email and a member of our team will contact you as soon as possible.