Wood (Respondent) v Capita Insurance Services Limited (Appellant) [2017] UKCS 24

30 March 2017

Judgment has been handed down in a Supreme Court appeal (Wood v Capita Insurance Services): a unanimous decision in favour of our client, Mr Wood.

The Supreme Court has handed down judgment in this case with a unanimous decision in favour of our client Mr Wood.

The case concerns a claim by Capita to recover from Mr Wood some £2.5m in respect of the cost of an insurance remediation scheme that it undertook in 2012. The claim was made under the terms of an indemnity given by Mr Wood in a contract made with Capita in 2010 by which the share capital of Sureterm Direct Limited, a specialist insurance broker, was sold to Capita. 

The issue was whether, on the agreed facts, the indemnity had been triggered. 

Capita claimed that the poorly drafted clause could be construed so as to cover the voluntary remediation scheme it had undertaken. Mr Wood's case was that the indemnity was only intended to cover the cost of dealing with customer claims, or complaints to the FSA or other regulatory authority. 

Birketts acted for Mr Wood throughout the proceedings. We strongly advised him to appeal the first instance decision which found in favour of Capita; albeit for reasons which appeared very unsatisfactory. The Court of Appeal in 2015 agreed, in a unanimous judgment, that Mr Wood's construction of the clause was to be preferred. 

Capita was given permission to appeal to the Supreme Court. This rather unexpected permission appears to have been based on the Supreme Court's concern over the way in which the Court of Appeal may have applied the SC’s judgment in Arnold v Britton [2015] AC 1619, which had been promulgated shortly before the Court of Appeal heard Mr Wood’s appeal. In fact, the Court of Appeal’s judgment made no improper reference to Arnold v Britton and the SC refused to hear argument from Capita to the contrary.

In a short judgment delivered by Lord Hodge, the Court roundly dismissed Capita’s appeal and took the opportunity to lay to rest any argument that the Court’s approach to contractual interpretation had changed between its judgments in Rainy Sky SA v Kookmin Bank [2011] 1 WLR and Arnold v Britton. Rather, the point was made that there the Court's approach to interpretation will be determined by the issues before it. There was no contradiction between cases which required a detailed textual analysis to find objective meaning and those in which the Court was entitled to rely on the factual context and commercial objective of the contract.

As succinctly put by Lord Hodge at paragraph 13 of his judgment:
‘Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement.’

Paul Matthews, a Partner in Birketts’ Dispute Resolution Team, said: "I am delighted with the Court’s decision, which not only provides some very helpful commentary on what has become a vexed area for contract lawyers, but was also an outcome which my client thoroughly deserved. Our appellate courts can be a challenging arena for a private individual, given the costs incurred and risked, so Mr Wood deserves great credit for holding his nerve and having faith in the wisdom and insight of our appellate judges.”