Sirius International Insurance Company (Publ) v FAI General Insurance Limited and others: HL 2 Dec 2004

The appellant had taken certain insurance risks on behalf of the respondents, subject to banking indemnities. Disputes arose and were settled under a Tomlin order, which was now itself subject to challenge.
Held: The appeal was allowed. The agreement was intended to put the arbitration behind the parties. A commercial contract should be interpreted in a way which reflected its commercial purpose, and a literal approach to interpretation was no longer appropriate.
Lord Steyn said: ‘The settlement contained in the Tomlin Order must be construed as a commercial instrument.’
. . And ‘The aim of the inquiry was not to probe the real intentions of the parties but to ascertain the contextual meaning of the relevant contractual language.
The inquiry was objective; the question being what a reasonable person in the parties’ position would have understood the parties to have meant by the use of the specific language’
. . and ‘There has been a shift from literal methods of interpretation towards a more commercial approach.’ A settlement contained in a Tomlin Order must be construed as a commercial instrument.’
Lord Steyn: ‘The aim of the enquiry is not to probe the real intentions of the parties but to ascertain the contextual meaning of the relevant contractual language. The enquiry is objective: the question is what a reasonable person, circumstanced as the parties were, would have understood the parties to have meant by use of specific language. The answer to that question is to be gathered from the text under consideration and its relevant contextual scene.’


Lord Bingham of Cornhill, Lord Nicholls of Birkenhead, Lord Steyn, Lord Walker of Gestingthorpe, Lord Brown of Eaton-under-Heywood


[2004] UKHL 54, Times 03-Dec-2004, [2004] 1 WLR 3251, [2005] 1 All ER 191


House of Lords, Bailii


England and Wales


CitedAntaios Compania Naviera SA v Salen Rederierna AB (‘the Antaios’) HL 1984
A ship charterer discovered that the bills of lading were incorrect, but delayed withdrawal from the charter for 13 days. They now sought leave to appeal the arbitration award against them.
Held: Though he deprecated extending the use of the . .
CitedMannai Investment Co Ltd v Eagle Star Assurance HL 21-May-1997
Minor Irregularity in Break Notice Not Fatal
Leases contained clauses allowing the tenant to break the lease by serving not less than six months notice to expire on the third anniversary of the commencement date of the term of the lease. The tenant gave notice to determine the leases on 12th . .
Appeal fromSirius International Insurance Company v FAI General Insurance Ltd and others CA 4-Apr-2003
An insurance and banking dispute with regard to the benefit of a letter of credit had been settled between the companies, but the parties then disagreed as to the meaning of the settlement.
Held: Counsel for Sirius ‘accepted that the second . .
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 . .
CitedOn Demand Information Plc and others v Michael Gerson (Finance) Plc and others HL 18-Apr-2002
The claimant took equipment under leases. After the initial period the rentals would be renewed without substantial further rental payments. The company went into administration after or toward the end of the initial period, and the lessors sought . .
CitedMichael Gerson (Leasing) Limited v Michael Wilkinson and State Securities Limited CA 31-Jul-2000
Where goods were subject to a financing arrangement involving a sale and leaseback with a finance company, the goods were to be treated as constructively delivered to the finance company on the sale. Delivery required a voluntary act by the person . .
CitedBolivinter Oil SA v Chase Manhattan Bank NA 1984
The court emphasised ‘the great and fundamentally important separation’ between bankers and re-insurers. . .
CitedBank of Credit and Commerce International SA v Ali, Khan and others (No 1); BCCI v Ali HL 1-Mar-2001
Cere Needed Releasing Future Claims
A compromise agreement which appeared to claim to settle all outstanding claims between the employee and employer, did not prevent the employee later claiming for stigma losses where, at the time of the agreement, the circumstances which might lead . .
At first instanceSirius International Insurance Co (Publ) v FAI General Insurance Ltd ChD 23-Jul-2002
The beneficiary sought to claim under a letter of credit. The bank resisted saying that the conditions in a letter accompanying the letter of credit had not been satisfied.
Held: The conditions set out in the letter of credit were satisfied . .

Cited by:

CitedBrunt and others v Southampton International Airport Ltd CA 7-Feb-2005
The claimants lived near Southampton Airport. The airport was altered to allow larger aircraft to use it, and they claimed damages for the increased noise and disturbance. Land had been acquired for additional parking. The number of aircraft flying . .
CitedWiltshire County Council v Crest Estates Ltd. and others CA 5-Aug-2005
The builders had agreed as part of the planning process to indemnify the council against all claims incidental to the carrying out of the works for which permission was given. The council had to compulsorily purchase land, and sought repayment from . .
CitedBushell and Others, Regina (on the Application of) v Newcastle Upon Tyne Licensing Justices and Another HL 15-Feb-2006
Licensees appealed against the grant of judicial review of decisions granting special removal of old on-licences for premises. The grant had been challenged on the basis that the magistrates had had no jurisdiction to make the award because the . .
CitedPratt v Aigaion Insurance Company SA (‘the Resolute’) CA 27-Nov-2008
The court considered the interpretation of a term in a contract of insurance to the effect that ‘Warranted Owner and/or Owner’s experienced skipper on board and in charge at all times and one experienced crew member.’, asking whether ‘at all times’ . .
CitedCommunity Care North East (A Partnership) v Durham County Council QBD 29-Apr-2010
The parties had settled their dispute and sealed it in a Tomlin Order. The court now asked as to its power to vary such an order. The order required the defendant to reopen a tendering process, but other tenderers now objected, and the council felt . .
Lists of cited by and citing cases may be incomplete.

Banking, Contract, Insurance

Updated: 27 June 2022; Ref: scu.219902