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Published online by Cambridge University Press: 28 January 2019
It is now well recognised that contractual purposes play an important role in the construction of contracts. The methods by which purposes are taken into account have not, however, been systematically explored. This paper considers three central issues in the purposive construction of contracts: first, the reasons contractual purposes are relevant to the interpretation of express terms and the identification of implied terms; secondly, the way in which contractual purposes are identified and distinguished from individual party interests; and, thirdly, the different ways in which contractual purposes inform the processes of interpretation and implication. It is argued that reference to contractual purposes can both raise and resolve interpretive choices, and that purposive construction plays a significant and under-recognised role in the identification of implied terms.
The author thanks Professor David McLauchlan and the anonymous referees for their helpful comments.
1 Eg Arnold v Britton [2015] UKSC 36, [2015] AC 1619 at [15] (Lord Neuberger, with whom Lord Sumption and Lord Hodge agreed); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12, (2017) 261 CLR 544 at [16] (Kiefel, Bell and Gordon JJ).
2 See eg Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900 at [45]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd, above n 1, at [17].
3 On the relationship between interpretation and implication, see Robertson, A ‘The foundations of implied terms: logic, efficacy and purpose’ in Degeling, S, Edleman, J and Goudkamp, J (eds) Contract in Commercial Law (Sydney: Law Book Co, 2016) pp 148–151Google Scholar.
4 Leggatt, G ‘Making sense of contracts: the rational choice theory’ (2015) 131 LQ Rev 454 at 454–455Google Scholar, citing the example of BCCI v Ali [2001] UKHL 8, [2002] 1 AC 251 at [8] (Lord Bingham); Lewison, K The Interpretation of Contracts (London: Sweet & Maxwell, 6th edn, 2015) p 30Google Scholar, citing the example of Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 1011.
5 Deutsche Genossenschaftsbank v Burnhope [1995] 1 WLR 1580 at 1587 (Lord Steyn).
6 Above n 2, at [14] (emphasis added).
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9 See eg Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352–353 (Mason J, with whom Stephen and Wilson JJ agreed); cf McMeel, G The Construction of Contracts: Interpretation, Implication and Rectification (Oxford: Oxford University Press, 3rd edn, 2017) p 161Google Scholar.
10 [1998] 1 WLR 896.
11 Ibid, at 912.
12 McMeel, above n 9, pp 32–33 and 42–44 and Lewison, above n 4, pp 29–33.
13 See eg Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173 at [10] (Lord Hodge, with whom Lord Neuberger, Lord Mance, Lord Clarke and Lord Sumption agreed); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd, above n 1, at [16] (Kiefel, Bell and Gordon JJ) and [73] (Nettle J).
14 Eg Multi-Link Leisure Developments Ltd v North Lanarkshire Council [2010] UKSC 47, [2011] 1 All ER 175 at [20]; Barts and the London NHS Trust v Verma [2013] UKSC 20, [2013] WLR (D) 152 at [26]; Marley v Rawlings [2014] UKSC 2, [2015] AC 129 at [19]; Arnold v Britton, above n 1, at [15]; Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396 at [56]; Calnan, R Principles of Contract Interpretation (Oxford: Oxford University Press, 2013) p 11Google Scholar.
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16 Sirius International Insurance Co v FAI General Insurance Ltd [2004] 1 WLR 3251 at [18] (Lord Steyn, with whom Lord Nicholls and Lord Walker agreed).
17 Barak, A Purposive Interpretation in Law (Princeton: Princeton University Press, 2005) pp 33–34Google Scholar.
18 Lewison, above n 4, pp 10 and 30–31. On the latter question, see Leggatt, above n 4, at 460–465.
19 See Summit Investment Inc v British Steel Corporation (‘The Sounion’) [1987] 1 Lloyd's Rep 230 (CA) at 233.
20 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 996 (Lord Wilberforce). See also Hoffmann, Lord ‘The intolerable wrestle with words and meanings’ [1997] 114 S African LJ 656 at 661–665Google Scholar.
21 Deutsche Genossenschaftsbank v Burnhope, above n 5, at 1587 (Lord Steyn).
22 Reardon Smith Line Ltd v Hansen-Tangen, above n 20, at 996 (Lord Wilberforce).
23 Eg Prenn v Simmonds [1971] 1 WLR 1381 at 1385 (Lord Wilberforce, citing in support Cardozo J in Utica City National Bank v Gunn (1918) 118 NE 607). A recent case in which the purpose of a particular provision was identified by extrinsic evidence was Cherry v Steele-Park [2017] NSWCA 295 (although, as discussed below, the identified purpose did not ultimately influence its interpretation).
24 Deutsche Genossenschaftsbank v Burnhope, above n 5, at 1587 (Lord Steyn).
25 Jones, O Bennion on Statutory Interpretation: A Code (London: LexisNexis, 6th edn, 2013) pp 848–849Google Scholar (identifying the different levels of purposes in statutes).
26 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 258Google Scholar (Priestley JA, justifying the implication of a term controlling a discretionary power to terminate).
27 SA Maritime et Commerciale [1953] 1 WLR 1379 at 1382 (emphasis added).
28 [1893] AC 351 at 355.
29 [1997] AC 749.
30 Mannai Investment, above n 29, at 768 (Lord Steyn).
31 See eg British Gas Corporation v Universities Superannuation Scheme [1986] 1 WLR 398 (Ch D) at 401–402Google Scholar; The Law Land Company Ltd v Consumers' Association Ltd (1980) 255 EG 617 (CA)Google Scholar.
32 [1903] 2 KB 740 at 751 (Vaughan Williams LJ).
33 [1990] 1 QB 818 at 870.
34 Ibid, at 870.
35 [1985] AC 191 at 201, echoed by Lord Steyn in Mannai Investment Ltd v Eagle Star Assurance Co Ltd, above n 29, at 770.
36 Jones, above n 23, pp 846–847, on the latter point quoting Carter v Bradbeer [1975] 1 WLR 1204 at 1206–1207 (Lord Diplock).
37 Jones, above n 23, p 847.
38 Rainy Sky SA v Kookmin Bank, above n 2, at [43], drawing on Co-operative Wholesale Society Ltd v National Westminster Bank plc [1995] 1 EGLR 97 at [23] (Lord Hoffmann) and Barclays Bank plc v HHY Luxembourg SARL [2011] 1 BCLC 336 at [26] (Longmore LJ).
39 Above n 1.
40 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd, above n 1, at [17]–[19].
41 Above n 1, at [27].
42 The Sounion, above n 19.
43 Ibid, at 235.
44 Ibid.
45 Ibid (Lloyd LJ, with whom Nicholls LJ agreed).
46 Fallon, RH Jr ‘Three symmetries between textualist and purposivist theories of dtatutory interpretation – and the irreducible roles of values and judgment within both’ (2014) 99 Cornell L Rev 685, esp at 689Google Scholar.
47 Arnold v Britton, above n 1, at [18].
48 See eg Leader v Duffey (1888) 13 App Cas 294 at 301; Glynn v Margetson & Co, above n 28, at 357; Wood v Capita Insurance Services Ltd, above n 13, at [10]; Lewison, above n 4, pp 363–370.
49 On the need to consider context, including commercial purpose, before it can be concluded that the meaning of a provision is plain or unambiguous, see Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184, (2014) 89 NSWLR 633 at [71]–[79].
50 See eg Mitsui Construction Co v Attorney-General of Hong Kong (1986) 33 BLR 1 at 14Google Scholar, quoted with approval in Rainy Sky SA v Kookmin Bank, above n 2, at [26] and Multi-Link Leisure Developments Ltd v North Lanarkshire Council, above n 14, at [20], HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 at [141]–[147] and Jones, above n 23, p 781. This is linked to the first point in the paragraph above: see Arnold v Britton, above n 1, at [18].
51 Wood v Capita Insurance Services Ltd, above n 13, at [10] and [13] (Lord Hodge, with whom Lord Neuberger, Lord Mance, Lord Clarke and Lord Sumption agreed).
52 In addition to the cases discussed below, see The Law Land Company Ltd v Consumers' Association Ltd (1980) 255 EG 617Google Scholar, discussed in Lewison, above n 4, p 525.
53 Glynn v Margetson & Co, above n 28, at 357.
54 Lewison, above n 4, p 377 takes the view that Lord Halsbury's dictum should be understood to be confined to ‘cases involving printed forms or other standard form contracts’.
55 Glynn v Margetson & Co, above n 28, at 355 (Lord Herschell LC).
56 Ibid, at 357 (Lord Halsbury).
57 [2015] EWCA Civ 19.
58 Ibid, at [27].
59 McLauchlan, D ‘The ICS principles: a failed “revolution” in contract interpretation’ (2016) 27 NZ Universities LR 263 at 292Google Scholar.
60 Thorney Park Golf Club, above n 57, at [23].
61 Ibid, at [27].
62 Ibid, at [24].
63 Jones v Wrotham Park Settled Estates [1980] AC 74 at 105.
64 [1959] AC 576.
65 Ibid, at 587.
66 (1989) 167 CLR 219 at 227.
67 Above n 13.
68 Ibid, at [40].
69 Ibid.
70 Above n 23.
71 Cherry v Steele-Park, above n 23, at [17].
72 N Andrews ‘Interpretation of contracts and “commercial common sense”: do not overplay this useful criterion’ [2016] Camb LJ 1 at 8–9.
73 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd, above n 1, at [17].
74 Electricity Generation Corporation (trading as Verve Energy) v Woodside Energy Ltd [2014] HCA 7, (2014) 251 CLR 640 at [35].
75 Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 at [20].
76 See McMeel, above n 9, p 55.
77 SA Maritime et Commerciale, above n 27, affirmed [1954] 1 WLR 492 (CA).
78 SA Maritime et Commerciale, above n 27, at 1380 (Devlin J); [1954] 1 WLR 492 at 496 (Romer LJ).
79 SA Maritime et Commerciale, above n 27, at 1382.
80 Ibid, at 1382–1383.
81 Rainy Sky SA v Kookmin Bank, above n 2.
82 Rainy Sky SA v Kookmin Bank, above n 2, at [44] (Lord Clarke, with whom Lord Phillips, Lord Mance, Lord Kerr and Lord Wilson agreed).
83 Rainy Sky SA v Kookmin Bank, above n 2, at [9].
84 Codelfa Construction Pty Ltd v State Rail Authority of NSW, above n 9, at 345; Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988 at [21]; Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd [2015] UKSC 72, [2016] AC 742 at [26].
85 Philips Electronique Grand Public SA v British Sky Broadcasting [1995] EMLR 472 (CA) at 481 (Lord Bingham MR), quoted with approval in Marks and Spencer v BNP Paribas, above n 84, at [29].
86 Marks and Spencer v BNP Paribas, above n 84, at [27]–[28].
87 See eg Carter, JW The Construction of Commercial Contracts (Oxford: Hart Publishing, 2013) para [3–23]Google Scholar; D McLauchlan ‘Construction and implication: in defence of Belize Telecom [2014] LMCLQ 203 at 208–209; Robertson, above n 4, pp 153–155.
88 Eg Nelson v Dahl (1879) 12 Ch D 568 (CA)Google Scholar; Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226Google Scholar (HCA).
89 Eg Liverpool City Council v Irwin [1977] CA 239 (HL).
90 Marks and Spencer v BNP Paribas, above n 84, at [14]–[32].
91 Ibid, at [21].
92 Marks and Spencer v BNP Paribas, above n 84, at [21] (adopting in the third point a suggestion made by Lord Sumption during argument).
93 Marks and Spencer v BNP Paribas, above n 84, at [21].
94 ‘Efficacy, OED Online, Oxford University Press, June 2017 (accessed 27 August 2017).
95 (1889) LR 14 PD 64.
96 (1889) LR 14 PD 64 at 69.
97 See Roberson, above n 4, pp 163–164. The most important of these is Mosvolds Rederi A/S v Food Corp of India (The ‘Damodar General TJ Park’ and ‘King Theras’) [1986] 2 Lloyd's Rep 68, discussed at length in Robertson, above n 4, pp 159–161.
98 Attorney General of Belize v Belize Telecom Ltd, above n 84.
99 Attorney General of Belize v Belize Telecom Ltd, above n 84, at [32].
100 Collins, H ‘Implied terms: the foundation in good faith and fair dealing’ (2014) 67 CLP 297 at 317Google Scholar.
101 [2002] 1 AC 408 at 459 (Lord Steyn, with whom Lord Slynn, Lord Hoffmann, Lord Cooke and Lord Hobhouse agreed). Cf QC, Lord Grabiner ‘The iterative process of contractual interpretation’ (2012) 128 LQ Rev 41 at 58Google Scholar (arguing that this was pure speculation, but not suggesting any alternative purpose for the annuity rate guarantee).
102 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (PC) at 283Google Scholar.
103 Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 (HL) at 609–610Google Scholar (Lord Pearson, with whom Lord Guest and Lord Diplock agreed), 614 (Lord Cross); Codelfa Construction Pty Ltd v State Rail Authority of NSW, above n 9, at 355–356 (Mason J, with whom Stephen and Wilson JJ agreed).
104 BP Refinery (Westernport) Pty Ltd v Shire of Hastings, above n 102, at 283.
105 Attorney General of Belize v Belize Telecom Ltd, above n 84, at [25] (Lord Hoffmann, giving the judgment of the Board).
106 Hoffmann, above n 18, at 662.
107 See further Robertson, above n 4, pp 161–164.
108 Marks and Spencer v BNP Paribas, above n 84, at [21].
109 See, eg Marks and Spencer v BNP Paribas, above n 84, at [21]; PS Davies ‘Recent developments in the law of implied terms’ [2010] LMCLQ 140.
