Bishops Wholesale Newsagency Ltd & Ors v Surridge Dawson Ltd

In construing a commercial contract, the court must start with the language chosen by the parties in its commercial context. A provision is not corrected merely because it appears generous, produces anomalies, or could operate more conveniently if different words were used. Construction may correct language only where it is clear that something has gone wrong and equally clear what reasonable parties would have intended. Minor anomalies and drafting imperfections do not satisfy that demanding threshold. The court should not investigate commercial advantage through extensive evidence where the contract’s language is clear and the alleged absurdity depends on uncertain assessments of the bargain.

The claimants sought summary judgment for a declaration concerning the meaning of a price-calculation clause in a 1995 Shareholders Agreement made as part of a merger. The clause provided an inflation-linked price and a profits-based price for shares sold under a put option. A separate provision reduced the price by reference to lost publisher contracts, but expressly referred only to the profits-based calculation.

The defendant argued that the reference should be read as extending to the inflation-linked calculation because the literal wording produced a commercially absurd result. The court was asked to determine the construction issue rather than apply the summary-judgment test of a real prospect of success.

1. Claim succeeded. The claimants were entitled to a declaration in terms to be agreed or determined by the court.
2. The disputed clause had to be construed in the context of the Agreement and the transaction as a whole. The reference in the reduction provision was expressly to clause 9.3.2(ii), not to clause 9.3.2 generally or clause 9.3.2(i). The natural meaning was therefore clear.
3. The guidance in Chartbrook v Persimmon Homes [2009] UK HL38 required a strong case before the court could correct contractual language. It had to be clear both that something had gone wrong with the language and what reasonable people in the position of the parties would objectively have intended.
4. Neither requirement was met. The difference between the two formulae was not an obvious drafting error. There were no competing natural meanings, wrong dates or numbers, or obvious omission. The fact that applying the reduction mechanism only to the profits formula might favour the claimants did not make the structure arbitrary or irrational.
5. The court preferred the shorter period in clause 9.3.3(i), namely the period associated with the three-month notice, rather than the period running from July 1995. That construction fitted the language and avoided the more serious anomalies produced by the longer period. Any remaining anomalies in the profits calculation were minor and could be addressed through purposive commercial construction if they later arose.
6. The court declined to replace the express reference to clause 9.3.2(ii) with a reference to clause 9.3.2(i). Determining whether the bargain was commercially good or bad would require substantial evidence about the merger, bargaining positions and commercial expectations, matters judges were not well equipped to evaluate in this context.

First-instance decision. No prior appellate decision is stated in the judgment.