Sigma Finance Corporation, Re; (in administrative receivership): SC 29 Oct 2009

The court considered how the losses of the insolvent company were to be distributed as between secured creditors and preferential creditors, given the terms of the applicable trust deed.
Held: The court considered the interpretations of the deed, looking at the ‘landscape of the instrument as a whole’ and interpretations given. The Court emphasised the need, when looking at a complex series of agreements, to construe an agreement which was part of a series of agreements by taking into account the overall scheme of the agreements and reading sentences and phrases in the context of that overall scheme.’ The appeal was allowed (Lord Walker dissenting).
Lord Mance said: ‘In my opinion, the conclusion reached below attaches too much weight to what the courts perceived as the natural meaning of the words of the third sentence of cl 7.6, and too little weight to the context in which that sentence appears and to the scheme of the STD as a whole. Lord Neuberger was right to observe that the resolution of an issue of interpretation in a case like the present is an iterative process, involving ‘checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences’ . . Like him, I also think that caution is appropriate about the weight capable of being placed on the consideration that this was a long and carefully drafted document, containing sentences or phrases which it can, with hindsight, be seen could have been made clearer, had the meaning now sought to be attached to them been specifically in mind . . Even the most skilled drafters sometimes fail to see the wood for the trees, and the present document on any view contains certain infelicities, as those in the majority below acknowledged (see Sales J ([2009] All ER (D) 204 (Apr) at [37]-[40]), Lloyd LJ ([2008] EWCA Civ 1303 at [44], [49]-[52], [53]), and Rimer LJ (at [90])). Of much greater importance in my view, in the ascertainment of the meaning that the STD would convey to a reasonable person with the relevant background knowledge, is an understanding of its overall scheme and a reading of its individual sentences and phrases which places them in the context of that overall scheme. Ultimately, that is where I differ from the conclusion reached by the courts below. In my opinion, their conclusion elevates a subsidiary provision for the interim discharge of debts ‘so far as possible’ to a level of pre-dominance which it was not designed to have in a context where, if given that pre-dominance, it conflicts with the basic scheme of the STD’.
Lord Collins pointed out that the trust deed in that case concerned ‘debt securities’ issued to ‘a variety of creditors, who hold different instruments, issued at different times, and in different circumstances’ and said: ‘Where a security document secures a number of creditors who have advanced funds over a long period it would be quite wrong to take account of circumstances which are not known to all of them. In this type of case it is the wording of the instrument which is paramount. The instrument must be interpreted as a whole in the light of the commercial intention which may be inferred from the face of the instrument and from the nature of the debtor’s business’.


Lord Hope Deputy President, Lord Scott, Lord Walker, Lord Mance, Lord Collins


[2010] 1 All ER 571, [2010] BCC 40, UKSC 2009/0143, [2009] UKSC 2


Bailii Summary, SC Summary, SC, Bailii


Insolvency Act 1986


England and Wales


At First InstanceSigma Finance Corporation, Re Insolvency Act 1986 ChD 7-Nov-2008
. .
Appeal FromRe Sigma Finance Corp CA 25-Nov-2008
. .
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 . .
CitedMiramar Maritime Corporation v Holborn Oil Trading Limited (‘The Miramar’) HL 1984
A bill of lading incorporated a charterparty. The question was whether clauses in the charterparty or bill of lading prevailed. The charter clause incorporated a demurrage clause making the charterer’s laible for demurrage, and the owners asserted . .
CitedChartbrook Ltd v Persimmon Homes Ltd and Others HL 1-Jul-2009
Mutual Knowledge admissible to construe contract
The parties had entered into a development contract in respect of a site in Wandsworth, under which balancing compensation was to be paid. They disagreed as to its calculation. Persimmon sought rectification to reflect the negotiations.
Held: . .
CitedInvestors Compensation Scheme Ltd v West Bromwich Building Society HL 19-Jun-1997
Account taken of circumstances wihout ambiguity
The respondent gave advice on home income plans. The individual claimants had assigned their initial claims to the scheme, but later sought also to have their mortgages in favour of the respondent set aside.
Held: Investors having once . .
CitedWest Bromwich Building Society v Wilkinson HL 30-Jun-2005
The Society had taken possession of a property in 1989. It located the defendants many years later and sought payment of the excess after deduction of the proceeds of sale, and for interest. The borrowers claimed the debt was expired by limitation . .

Cited by:

CitedRainy Sky Sa and Others v Kookmin Bank SC 2-Nov-2011
Commercial Sense Used to Interpret Contract
The Court was asked as to the role of commercial good sense in the construction of a term in a contract which was open to alternative interpretations.
Held: The appeal succeeded. In such a case the court should adopt the more, rather than the . .
CitedLBG Capital No 1 Plc and Another v BNY Mellon Corporate Trustee Services Ltd CA 10-Dec-2015
The court was asked whether Issuers were entitled to redeem, pursuant to their terms, certain contingent convertible securities.
The reference to ‘the Consolidated Core Tier 1’ in para (2) of the Definition should, in the events . .
CitedBNY Mellon Corporate Trustee Services Ltd v LBG Capital No 1 Plc and Another SC 16-Jun-2016
The Court was asked whether Lloyds Banking Group was entitled to redeem 3.3 billion pounds of loan notes which would otherwise carry a relatively high rate of interest, namely over 10% per annum. The loan notes are contingent convertible securities . .
CitedWood v Capita Insurance Services Ltd SC 29-Mar-2017
Construction of term of contract for the sale and purchase of the entire issued share capital of a company.
Held: The appeal was dismissed: ‘the SPA may have become a poor bargain, as it appears that it did not notify the sellers of a warranty . .
CitedMT Hojgaard As v EON Climate and Renewables UK Robin Rigg East Ltd and Another SC 3-Aug-2017
The defendants had requested tenders for the design and construction of an offshore wind farm. The court now considered the situation arising because of inconsistencies between documents in the tender request. The successful tender was based upon an . .
CitedLehman Brothers International (Europe) v Exotix Partners Llp ChD 9-Sep-2019
The parties had contracted to trade global depository notes issued by the Peruvian government. Each made mistakes as to their true value, thinking them scraps worth a few thousand dollars, whereas their true value was over $8m. On the defendant . .
Lists of cited by and citing cases may be incomplete.

Insolvency, Contract

Updated: 13 September 2022; Ref: scu.377320