Following our previous article on a victory for strict interpretation of contract, we take a look at another recent case involving contractual interpretation and the different approach taken to contractual interpretation by the English Courts in the context of misnomers (the wrong or inaccurate use of a name or term in a contract). We also consider the impact this may have in Scotland.
In Chartbrook Limited v Persimmon Homes Ltd, the House of Lords laid out two key principles of contractual construction when considering misnomers:
The key effect of Chartbrook was the decision that extrinsic evidence (evidence of matters outside the contract, such as the background and context of the contract) can be taken into account when interpreting misnomers in contractual provisions. This went generally against earlier authority which held that the common law should be slow to call on other evidence to contradict the provisions of a contract contained in a written document – the idea of the "bargain being the document".
Despite being decided after ChartbrookDumford Trading AG v Oao AtlantrybflotDumford the Court of Appeal in , a case from 2005, then held that a court should only allow extrinsic evidence where it is clear that there is only one possible entity that a misnomer could refer to. It is worth noting that, as the Court of Appeal recognised themselves, was only an appeal against a summary judgement so full legal arguments were not presented before the Court.
The Dumford Derek Hodd Limited v Climate Change Capital Ltd Liberty Mercian Limited v Cuddy Civil Engineering Limited decision, despite having been decided in the Court of Appeal, has come under fire recently in the High Court cases of and.
In Derek HoddDumfordChartbrook, the High Court found that in the doctrine of misnomer, there were no logical grounds for distinguishing the use of extrinsic evidence where there are two possible entities and cases where there is only one. The High Court also found that the decision was distinguishable partly on its facts but also because it was based on authority that long pre-dated the approach.
In Liberty MercianDumfordDumfordLiberty Mercian, the High Court distinguished on the basis that it relied on authorities related to mistakes in the names of companies in writs. The High Court therefore held that as writs are unilateral documents, separate issues may arise with them as compared to contracts. The High Court was, however, careful to observe that even if continued to be good law then, on the facts before them, would still have had the same outcome.
Where then do we stand?
Currently, the law in this area is undecided. However, the High Court's willingness to take into account extrinsic evidence when considering misnomer cases and its clever distinguishing of DumfordLiberty Mercian in have made it clear the courts south of the border are increasingly likely to permit extrinsic or background evidence when considering misnomer cases.
The increasing willingness of the English Courts to take into account extrinsic evidence will bring their judgements more in to line with the current Scots law position and therefore the English Courts' decisions will have a more persuasive nature in Scots law. Organisations in Scotland with contracts governed by English law as well as legal observers would therefore do well to take note.