There is a useful discussion of the Stewart Milne case by Laura Macgregor on the European Centre for Commercial Law blog on the Edinburgh Uni law school website:

 

 

Ross Macdonald

 

 

>>> James Lee <j.s.f.lee@bham.ac.uk> 12/8/2011 3:04 am >>>
Dear Members,

In the light of last month's discussion on contract interpretation, a couple of recent cases might be worth reading. First, yesterday's short decision of the UK Supreme Court in Aberdeen City Council v Stewart Milne Group Limited (Scotland) [2011] UKSC 56 (http://www.supremecourt.gov.uk/docs/UKSC_2010_0229_Judgment.pdf). The case concerned a property development, under which the appellants were required to pay an uplift, subject to allowable deductions, to the respondents if they sold the land. The appellants sold the land to a company within the same group, for an amount which was less than the open market value and less than the allowable costs, and therefore declined to pay the uplift to the respondents. The contract made reference in other clauses to the open market value of the land, but not in the specific provision relating to the uplift. The Supreme Court unanimously takes the view that the calculation should be by reference to the open market value, notwithstanding that that approach is not expressly stated anywhere in the contract, and pointing to awkward drafting of the agreement. Lord Hope (mentioning fellow ODGer Martin Hogg) and concludes


"[22]... It seems to me that the position here is quite straightforward. The context shows that the intention of the parties must be taken to have been that the base figure for the calculation of the uplift was to be the open market value of the subjects at the date of the event that triggered the obligation. In other words, it can be assumed that this is what the parties would have said if they had been asked about it at the time when the missives were entered into. The fact that this makes good commercial sense is simply a makeweight. The words of the contract itself tell us that this must be taken to have been what they had in mind when they entered into it. The only question is whether effect can be given to this unspoken intention without undue violence to the words they actually used in their agreement. For the reasons I have given, I would hold that the words which they used do not prevent its being given effect in the way I have indicated."



So there is some reference to the commercial good sense approach, although it is not viewed as crucial. Lord Clarke gives a brief concurring opinion, preferring a slightly different view on to reach the same outcome:



"If the officious bystander had been asked whether such a term should be implied, he or she would have said “of course”. Put another way, such a term is necessary to make the contract work or to give it business efficacy. I would prefer to resolve this appeal by holding that such a term should be implied rather than by a process of interpretation. The result is of course the same."


Lady Hale, Lord Mance and Lord Kerr record that they agree with both judgments.


The other case is from Western Australia: The City of Subiaco v Local Government Advisory Board [2011] <http://www.austlii.edu.au/au/cases/wa/WASC/2011/322.html> WASC 322<http://www.austlii.edu.au/au/cases/wa/WASC/2011/322.html>. It contains a valuable survey of the present state of Australian law on interpretation/construction (not limited to contract) and extrinsic evidence, and considers the 'vexed question':

[116]... whether extrinsic evidence can be relied upon where the evidence was not known to one of the parties but was reasonably available to him or her. .. [with the answer that on] the state of the law at the moment, reasonably available evidence which is unknown to one party would not be admissible for the construction of a contract.

Another reason why the case is of particular note is that we have the benefit of careful analysis from the judge, Edelman J.

Best wishes,

James


--
James Lee
Lecturer and Director of Careers
Academic Fellow of the Inner Temple
Birmingham Law School
University of Birmingham
Edgbaston
Birmingham
B15 2TT, United Kingdom

Tel: +44 (0)121 414 3629
E-mail: j.s.f.lee@bham.ac.uk<mailto:j.s.f.lee@bham.ac.uk>



Web: http://www.birmingham.ac.uk/staff/profiles/law/lee-james.aspx