Quantum Advisory Limited v Quantum Actuarial LLP

Contractual construction remains an objective, language-led exercise. The court must read the agreement as a whole and assess commercial consequences, but commercial common sense cannot be used to reject clear natural language or rewrite an imprudent bargain. A contract described as relational does not attract a special rule of interpretation. Nor can good faith be used to add substantive obligations which the contract does not contain.

Where a professionally drafted agreement defines the services to be supplied, an obligation to undertake business development work such as tendering will not be inferred merely because that work may be necessary to maintain or develop the business. Such work must fall within the contractual language or be agreed as an additional service in writing.

Quantum Advisory Limited appealed against the decision of HHJ Jarman QC, sitting as a Deputy High Court judge, on a Part 8 claim concerning the construction of a 99-year Services Agreement with Quantum Actuarial LLP. The agreement required the LLP to provide specified pensions, actuarial, administrative and investment services for defined categories of clients, together with certain internal functions.

The appellant argued that the agreement required the LLP to undertake tenders and re-tenders necessary to obtain or retain work for it, relying on the agreement’s overall purpose, clause 7.3 and its alleged relational character. The High Court construed the agreement as not extending to tendering. The central issue on appeal was whether that construction was correct.

1. Appeal dismissed. The Services Agreement did not require Quantum Actuarial LLP to undertake tenders or re-tenders.
2. The court applied the orthodox approach to contractual construction stated in Network Rail Infrastructure Ltd v ABC Electrification Ltd [2020] EWCA Civ 1645. The objective meaning of the language had to be identified from the agreement read as a whole, with commercial consequences and background given appropriate weight. The agreement was relatively short and professionally drafted, making its language a reliable guide. Commercial common sense could not displace natural meaning or justify rewriting the bargain.
3. The defined Services comprised a hybrid of client-facing and internal functions. The client-facing services were confined to existing clients and specified pipeline business. They concerned services supplied to clients, rather than work undertaken to obtain or retain clients. Tendering was business development, and was not aptly described as administrative support under Schedule 7. The fact that a substantial tender for a listed prospect had recently been undertaken supported the conclusion that tendering was deliberately omitted, since it could readily have been included.
4. Clause 7.3 concerned the standard of performance and the time and effort the LLP deemed reasonably necessary for the efficient operation of Quad’s business. It did not require the LLP to do whatever might be needed to operate or develop that business.
5. A relational contract attracts no special rule of interpretation. The discussion in Amey Birmingham Highways v Birmingham City Council [2018] EWCA Civ 264 concerned infelicities in a very lengthy contract and did not apply where the contractual boundaries were clear. Even if a duty of good faith could be implied, it could regulate conduct within those boundaries, but could not expand the Services. The court relied on Globe Motors v TRW Lucas Varity Electric Steering [2016] EWCA Civ 396 and Candey v Bosheh [2022] EWCA Civ 1103, and on Faulkner v Vollin Holdings (Re Compound Photonics) [2022] EWCA Civ 1371 concerning the limits of the spirit of the contract.
6. Clause 2.1 permitted further services to be added by written agreement, allowing the parties to agree separate remuneration for substantial and occasional tendering work. If no agreement was reached, Quad could undertake the work itself or arrange for another person to do so.

1. Court of Appeal (Civil Division) — Appeal dismissed. The court upheld the construction of the Services Agreement in [2022] EWHC 1423 (Ch).
2. High Court of Justice, Business and Property Courts in Wales, Business List (ChD) — HHJ Jarman QC determined on a Part 8 claim that the Services Agreement did not require the LLP to undertake tendering.