The 2017 decision in Wood v Capita Services Insurance LTD has reaffirmed that the approach which the courts will now take to contractual interpretation is one of fairly dogmatic literalism, as propounded in the Arnold v Britton decision in 2015. While commentators, and indeed the presiding judges in these two cases, do not uniformly agree on whether this has always been the correct approach or on whether Arnold v Britton actually really changed anything, it is clear that this will be the approach of the courts going forward.

As such, now may be an opportune time for in-house counsel to review their standard form contracts to ensure that they remain in line with the needs and requirements of the business. As the facts of Arnold v Britton demonstrate, sloppy or even, for some businesses, just out-of-date drafting may be extremely dangerous.

In Arnold v Britton, the Supreme Court considered the effect of a provision relating to the payment of service charges under a 99 year lease by lessees of holiday homes in a holiday park. The relevant clause was a covenant under which each lessee covenanted: “To pay to the lessors without any deduction in addition to the said rent a proportionate part of the expenses and outgoings incurred by the lessors in the repair maintenance renewal and the provision of services hereafter set out the yearly sum of £90 and VAT (if any) for the first three years of the term hereby granted increasing thereafter by ten pounds per hundred for every subsequent three year period or part thereof”.

Apr-Jun 2018 issue

Forsters LLP