The case report
1、Facts of case：
The claimants had entered into a shipbuilding contract with a Korean shipbuilder,who was a customer of the defendant bank.The claimants had to pay the shipbuilder in advance by instalments.Under the terms of the contracts the shipbuilder was required to repay these instalments in certain circumstances, including the insolvency of the shipbuilder prior to delivery of the ships.To guarantee repayment of the pre-delivery instalments the shipbuilder was required to provide the claimants with bonds iued by a reputable bank.
The shipbuilder arranged for the defendant bank to iue the bonds.Before finishing the ships it ran into financial difficulties and entered an insolvency procedure under Korean law.The claimants requested refunds of the payments made by them, as they were contractually entitled to.When payment was not forthcoming they called on the bank pursuant to the bonds.The bank refused to pay, arguing that the wording of the bonds did not cover the shipbuilder‟s insolvency.The claimants disagreed and sued.Then, the bank‟s argument succeed in the Court of Appeal, after that the claimants appealed succefully to the Supreme Court.
“In this case, the facts are from para.1 to para.6.”
2、Legal iues：
The resolution of the iue between the parties depends upon the true construction of para.3.
The iue between the claimants and shipbuilder in this appeal is the role to be played by considerations of busine common sense in determining what the parties meant.
“In this case, the legal iues are from para.15.”
3、Arguments of both paties：
The dispute centred on the meaning of the words “all such sums” in paragraph [3] of the bonds.
The bank argued that the phrase referred back to the pre-delivery instalments listed in paragraph [2], which crucially omitted insolvency of the shipbuilder.
Whereas the claimants said that it referred to the “pre-delivery instalments” in the first line of paragraph [3].They said that the purpose of the bonds was to guarantee the refund of the pre-delivery instalments in all circumstances, including the insolvency of the shipbuilder.
Neither of these interpretation was free from difficulty.The bank‟s interpretation was, arguably, commercially implausible, whereas on the claimants‟ interpretation the whole of paragraph [2] could be said to be redundant.
“In this case, the arguments of both parties are from para.9.”
4、The decisions and comments made by the judge：
Simon J:
Simon J preferred the claimants‟s interpretation.He held that para.[3] of the bonds determined the substance of the parties‟ rights and that the phrase“all such sums” related to the wider reference to pre-delivery instalments earlier in that paragraph, rather than to paragraph 2, which he treated as a mere preamble.He placed great weight on the fact that the bank‟s interpretation would effectively deprive the claimants of the benefit of the bonds in the very circumstances in which they were most likely to require it, i.e.the insolvency of the shipbuilder.This he regard as uncommercial.(para.4)
Patten LJ(with whom Thorpe LJ agreed) :
By a majority the Court of Appeal reversed Simon J‟s decision.Patten LJ(with whom Thorpe LJ agreed) could not accept that para.2 served no useful purpose.He considered that its obvious purpose was to give the addreee of the bond a clear statement of the builder‟s obligations under the contract to be covered by the guarantee, which was consistent with the shipbuilder‟s obligations under the contracts to provide the bonds.In his view the bank‟s interpretation was clearly to be preferred.
Patten LJ took a much more restrictive view of the circumstances in which a court could confidently declare that one or other poible meaning of words used in a contract was uncommercial.He conclued that it was impermiible for the court to speculate as to the reasons for omitting refunds in the event of insolvency from the bond.Although it might have been desirable for the bonds to have covered such refunds, this was not sufficient to justify a departure from what would otherwise be the natural and obvious construction of the bonds.This was not a case in which the construction contended for would produce an absurd or irrational result.There was real danger, in saying that no credible commercial reason had been advanced for the limited scope of the bond, of substituting the court‟s view of the commerciality of the transaction for that of those who were actually party to it.(para.17 and para.18)
Sir Simon Tuckey:
The third judge in the Court of Appeal, Sir Simon Tuckey, diented.He accepted that a court should proceed with caution before concluding that a particular term in a contract was „uncommercial‟.However, he considered that the trial judge(who was an experienced commercial judge) had been right to reach this conclusion.He said taht it defied commercial common sense to think that the parties intended that the obligation to refund the pre-delivery payments in the event of the shipbuilder‟s insolvency, alone amongst all other such obligations under the contracts, should not be secured.(para.30)
Lord Clarke (with whom Lord Phillips, Lord Mance,Lord Keer and Lord Wilson agree):
The claimants appealed succefully to the Supureme Court.Lord Clarke gave the Court‟s(admirably clear and concise) unanimous judgement.
The parties in Rainy Sky agreed with the basic approach to construction as set out in ICS,i.e.that the ultimate aim of interpreting a contractual provision is to determine what the parties meant by the language used.Where they differed was in the role played by considerations of busine common sense in determining the meaning that the bonds‟ wording would convey to a reasonable person.
Lord Clarke disagreed with the Patten LJ‟s approach, stating at paragraph 21.
This view of the role of busine common sense in the interpretation of contracts was supported by a considerable body of case law.In particular, he exprely approved Longmore LJ‟s dicyum in Barclays Bank plc v HHY Luxembourg SARL (para.29[26])
On the facts, Lord Clarke did not agree that the construction advanced by the bank was the natural and ordinary meaning of the bonds.In this view the competing arguments were much more finely balanced.Since the words “any such sums” in para.3 were capable of two meanings, the court was entitled to have regard to considerations of commercial common sense in resolving the question what a reasonable person would have understood the parties to have meant(para.40).
Lord Clarke was in no doubt that commercial common sense favoured the interpretation advanced by the claimants, eentially for the reasons given by the trial judge and Sir Simon Tuckey in the Court of Appeal.Indeed, Lord Clarke indicated that, had it been neceary, he would have been prepared to say that omitting the shipbuilder‟s obligation to make repayments in the event of insolvency from the bonds would flout common sense (para.45).He appears to have attached significant weight to the fact that the bank had not advanced any credible commercial reasons for the limited scope of the bonds (para.44).
5、My comments：
From a practical point of view, Rainy Sky underlines the paramount need to avoid ambiguity in the drafting of commercial contracts.In particular, Sir Simon Tuckey‟s judgment in the Court of Appeal offers a valuable leon: he made the point that, had the parties intended the surprising result that repayments on insolvency should be omitted from the bonds, they would have spelt this out clearly.Those drafting commercial contracts should bear in mind that any judge looking at the fruit of their labours in the future will not have the benefit of knowing what paed between the parties during their negotiations.Consequently, if anything even vaguely unusual has been agreed that might, in the abstract, strike d third party as uncommercial, extra care needs to be taken to ensure that it is spelt out clearly in the contract.
The number of the words : 1359
孙英妮，经济法学
201330910058
