Lloyd's Maritime and Commercial Law Quarterly
INTERPRETING COMMERCIAL CONTRACTS: A CASE OF AMBIGUITY?
Rainy Sky v Kookmin Bank
In Rainy Sky SA and others v Kookmin Bank,1 the Supreme Court overturned the decision of the Court of Appeal2 regarding the correct interpretation of a term in a commercial contract. This is not the first occasion in recent times that the highest court of the land has felt compelled to disagree with the interpretation of the court below: in Mannai Investments v Eagle Star Assurance,3 Investors Compensation Scheme Ltd v West Bromwich Building Soc,4 The Starsin,5 Chartbrook Ltd v Persimmon Homes Ltd
6 and Re Sigma Finance Corp
7 the decisions of the Court of Appeal were similarly overturned. Yet in all these cases, including Kookmin, their Lordships have emphasised that the interpretation of a contract is simply a matter of “common sense”.8 What seems to be “common” to those at the apex of the judiciary does not seem to be equally “common” to those below.
The facts of Kookmin have already been considered in a note in this Quarterly on the decision of the Court of Appeal.9 To recap briefly, the claimants entered into contracts for the purchase of ships, under which they paid pre-delivery instalments. Kookmin Bank guaranteed these payments by issuing “advance payment bonds”, under which Kookmin undertook to pay “all such sums due to [the claimants] under the Contract”. When the builder of the ships became insolvent, the claimants sought to enforce the advance payment bonds. The dispute concerned the meaning of “all such sums” and whether the refund guarantee was triggered by the builder’s insolvency. Did “all such sums” refer back to the previous clause, which made no mention of insolvency, or did “all such sums” simply refer to the pre-delivery instalments mentioned earlier in the same clause, without being restricted by earlier provisions of the contract?
Simon J, at first instance, and Sir Simon Tuckey, dissenting in the Court of Appeal, favoured the latter interpretation, as it made better commercial sense: the purpose of the
* Professor in Private International Law, University of Sydney; Solicitor, England and Wales; Consultant, Clifford Chance LLP.
1.[2011] UKSC 50; [2011] 1 WLR 2900.
2.[2010] EWCA Civ 582; [2011] 1 Lloyd’s Rep 233.
3.[1997] AC 749.
4.[1998] 1 WLR 896 (HL).
5.Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12; [2004] 1 AC 715; [2003] 1 Lloyd’s Rep 571.
6.[2009] UKHL 38, [2009] 1 AC 1101, [25].
7.[2009] UKSC 2; [2010] 1 All ER 571.
8.Eg Investors Compensation Scheme Ltd v West Bromwich Building Soc [1998] 1 WLR 896, 912 (Lord Hoffmann).
9.A Stevens, “Protecting the life-blood of international commerce: parties beware” [2010] LMCLQ 548.
CASE AND COMMENT
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