Arbuthnott v Fagan: CA 30 Jul 1993

The court considered the proper approach to construction of the terms in a contract. Sir Thomas Bingham MR said: ‘Courts will never construe words in a vacuum. To a greater or lesser extent, depending on the subject matter, they will wish to be informed of what may variously be described as the context, the background, the factual matrix or the mischief. To seek to construe any instrument in ignorance or disregard of the circumstances which give rise to it or the situation in which it is expected to take effect is in my view pedantic, sterile and productive of error. But that is not to say that an initial judgment of what an instrument was or should reasonably have been intended to achieve should be permitted to override the clear language of the instrument, since what an author says is usually the surest guide to what he means. To my mind construction is a composite exercise, neither uncompromisingly literal nor unswervingly purposive: the instrument must speak for itself, but it must do so in situ and not be transported to the laboratory for microscopic analysis.’
Steyn LJ: ‘I readily accept Mr Eder’s submission that the starting point of the process of interpretation must be the language of the contract. But Mr Eder went further and said that, if the meaning of the words is clear, as he submitted it is, the purpose of the contractual provisions cannot be allowed to influence the court’s interpretation. That involves the process of interpretation in the fashion of a black-letter man. The argument assumes that interpretation is a purely linguistic or semantic process until an ambiguity is revealed. That is wrong. Dictionaries never solve concrete problems of construction. The meaning of words cannot be ascertained divorced from their context. And part of the contextual scene is the purpose of the provision. In the field of statutory interpretation the speeches of the House of Lords in Attorney-General v. Prince Ernest of Hanover . . showed that the purpose of a statute, or part of a statute, is something to be taken into account in ascertaining the ordinary meaning of words in the statute: . . it is important to bear in mind that the purpose of the statute is a permissible aid at all stages in the process of interpretation. In this respect a similar approach is applicable to the interpretation of a contractual text. That is why in Reardon Smith Line Ltd v. Yngvar Hansen-Tangen . . Lord Wilberforce, speaking for the majority of their Lordships, made plain that in construing a commercial contract it is always right that the court should take into account the purpose of a contract and that presupposes an appreciation of the contextual scene of the contract.’


Sir Thomas Bingham MR, Steyn LJ


[1995] CLC 1396, [1996] 1 Lloyd’s Re Insurance Law Reports 135


England and Wales


See alsoArbuthnott v Fagan CA 11-Jul-1994
Evidence given to Lloyds loss review committee is discoverable despite rule. . .

Cited by:

See alsoArbuthnott v Fagan CA 11-Jul-1994
Evidence given to Lloyds loss review committee is discoverable despite rule. . .
CitedCharter Reinsurance Co Ltd v Fagan and Others HL 24-May-1996
The re-insurers appealed against a finding that they were liable to make payment under a contract which required them to pay ‘sums actually paid.’ They said that the company having become insolvent, no payment would in fact be made.
Held: The . .
CitedYorkshire Water Services Ltd v Taylor Woodrow Construction Northern Ltd TCC 8-Jul-2004
The claim arose from works at a sewage plant carried out by the defendants and their sub-contractors. The plant failed to meet performance standards. It was suggested that the form of standard contract restricted the claimant’s ability to pursue a . .
CitedMarley v Rawlings and Another SC 22-Jan-2014
A husband and wife had each executed the will which had been prepared for the other, owing to an oversight on the part of their solicitor; the question which arose was whether the will of the husband, who died after his wife, was valid. The parties . .
Lists of cited by and citing cases may be incomplete.


Updated: 05 November 2022; Ref: scu.211364