Wood v Capita Insurance Services Ltd [2017] UKSC 24

Facts

• The case concerned the interpretation of contractual terms between parties, focusing on whether courts should prioritize the contract's text or also take into account facts known to both sides when the agreement was made.
• The dispute arose over the intended meaning of particular words within the contract.
• The context included previous leading cases such as Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 and Arnold v Britton [2015] UKSC 36.
• The parties’ negotiation history and the practical objectives of the contract were considered relevant to ascertaining intent, especially where ambiguity existed.
• Not detailed in the provided draft: specific facts regarding the parties’ dealings or events giving rise to the dispute beyond issues of contract interpretation.

Issues

1. Whether contract interpretation should be based primarily on the natural and ordinary meaning of the contractual wording, or whether surrounding circumstances should also be considered to determine the parties’ intent.
2. How courts should approach ambiguity in contractual terms, especially when clear wording may lead to commercially unreasonable outcomes.
3. The correct balance between respecting the text of the contract and taking external facts or industry standards into account during interpretation.

Decision

• The Supreme Court held that textual analysis and examination of the surrounding circumstances are not opposing approaches, but related.
• When contract wording is clear, courts should apply its ordinary meaning.
• If the wording is ambiguous or produces unreasonable outcomes, courts may examine surrounding circumstances known to both parties at the time of contracting.
• The case reaffirmed and clarified the principles from Investors Compensation Scheme and was influenced by subsequent cases such as Arnold v Britton, emphasizing respect for written terms and caution against rewriting contracts.

Legal Principles

• The primary aim of contract interpretation is to determine the parties’ intentions as expressed by the contract.
• Courts begin with the contract's text; clear and exact wording takes precedence.
• Surrounding circumstances may be considered when the language is ambiguous or unclear.
• Use of factual matrix supports interpretation, but cannot override clear wording or add to the contract.
• Industry standards may resolve ambiguity in technical or financial terms.
• Consistency in drafting and defined terms reduce interpretive disputes.

Conclusion

The Supreme Court in Wood v Capita Insurance Services Ltd established that courts must start with the contract’s wording, turning to surrounding circumstances only if ambiguity exists, thus balancing textual clarity with context to determine contractual intent.