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New Hampshire Insurance v MGN The Times (28 July 1995)

Court of Appeal considers rules on admissibility of evidence in interpretation of contracts

Facts

The dispute concerned a number of fidelity insurance contracts. The defendants were all insured companies within the Maxwell Group of companies.

Issue

The dispute required the interpretation of the written insurance contracts. The issues included whether the insurance was for the Maxwell Group as a whole or whether it was for a number of individual companies. At first instance, the judge held that the evidence called by the insurers to support their interpretation, including witness statements, was largely irrelevant.

Held

The insurer’s appeal was partially granted. The Court set out various rules concerning what evidence may be considered when interpreting written contracts. Firstly, nothing is relevant to the interpretation of a written contract unless it was known to, or was reasonably capable of being known to, both parties when the contract was made. Secondly, the Court will first look at the written document in isolation and determine the ordinary meaning of the language used. Should there be a gap then the Court may look at evidence, such as witness statements, to fill that gap. Thirdly, the “surrounding circumstances” may be considered by the Court in order to establish why the contract was formed and the intentions of the parties. Fourthly, it is not permissible to go as far as to consider negotiations prior to the concluded contract. Applying these principles to the present case, the evidence that the insurers had determined that it would be more economical to extend the cover to the Maxwell Group as a whole was admissible albeit at the boundary of acceptable surrounding circumstances to be considered.

275 words


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