QUANTUM ADVISORY LIMITED v QUANTUM ACTUARIAL LLP

Contractual interpretation requires the court to identify what a reasonable person, with the parties’ relevant background knowledge, would understand the contractual language to mean. The court must consider the words used, the agreement as a whole, its purpose, known circumstances and commercial common sense, while disregarding subjective intentions.

Clear language should not readily be displaced by commercial considerations. A professionally drafted relational contract does not permit the court to rewrite the parties’ bargain. Where an agreement lists specific administrative services and adds general administrative support, that wording may not extend to an occasional, important and separately identifiable business activity, particularly where the parties could have specified it expressly.

The claimant and defendant entered into a long-term service agreement under which the defendant was to provide defined services for the claimant’s pension-related business. The claimant contended that those services included preparing tenders and retenders for existing and prospective clients. The defendant argued that tendering was outside the agreement.

The court considered the agreement, its commercial context, the parties’ dealings and the authorities on contractual interpretation. It also noted earlier judgments between the parties on different issues, including [2020] EWHC 1072 (Comm), upheld on appeal at [2021] EWCA Civ 277. The central issue was whether the contractual references to administrative services and other administrative support extended to tendering.

1. The claim was dismissed. On the proper construction of the service agreement, the defendant was not obliged to provide tendering or retendering services.
2. The court applied the principles summarised in Network Rail Infrastructure Ltd v ABC Electrification Ltd [2020] EWCA Civ 1645; (2020) 193 ConLR 66. The relevant considerations were the natural and ordinary meaning of the words, other contractual provisions, the agreement’s overall purpose, facts and circumstances known at the date of contracting, and commercial common sense. Subjective intentions were inadmissible.
3. The agreement was a professionally drafted, bespoke, long-term relational contract. The parties could therefore be expected to adopt a reasonable approach consistent with its long-term purpose, as discussed in Amey Birmingham Highways Ltd v Birmingham City Council [2016] EWHC 2191 (TCC). That did not authorise the court to depart from the language used or rewrite the bargain.
4. The expressions “administrative services” and “such other administrative support as Quad may reasonably require from time to time” did not naturally extend to tendering. Tendering was an occasional, specific and important activity. The agreement gave specific examples of administrative services, such as preparing accounts and statutory returns, but did not identify tendering.
5. The commercial context and the agreement’s purpose provided some support for the claimant’s interpretation. The claimant’s business required tendering, and successful tenders benefited both parties. Those matters did not overcome the natural meaning of the relevant wording. The costs of tendering were also likely to be reflected in fees generated by successful tenders.
6. Consequential matters not agreed were left to be determined on written submissions. The parties were directed to file submissions and an agreed draft order within 14 days of hand-down.

This was a first-instance decision. The judgment records earlier decisions between the same parties on different issues, including [2020] EWHC 1072 (Comm), upheld by the Court of Appeal at [2021] EWCA Civ 277.