The Court of Appeal has dismissed an appeal against a High Court decision which went against the unambiguous literal meaning of the clause: MonSolar IQ Ltd v Woden Park Ltd [2021] EWCA Civ 961.

This is an application of what the court referred to as the Chartbrook principle, by which clear mistakes in the drafting of a document can be corrected as a matter of construction (as exemplified by Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1011). For this principle to apply, the court said, it must be clear both that the drafting contains a mistake and how it should be corrected. If either of these requirements is not satisfied, the contract can only be corrected by a claim for rectification, which was not pleaded in this case.

This decision will be of interest to financial institutions faced with claims relating to contractual construction as it is a relatively rare example of a court finding that a contract should be interpreted against its clear literal meaning. Perhaps surprisingly, the judgment does not refer to what is now the leading Supreme Court authority on contractual interpretation, Wood v Capita Insurance Services Limited [2017] UKSC 24 (considered here). The suggestion in the present judgment that the court cannot depart from the clear literal meaning of the words used, unless that interpretation produces an absurd or irrational result, may be thought to sit uncomfortably with the message in Wood v Capita that interpretation is a unitary exercise, in which the court must strike a balance between considering the language used (textualism) and its commercial implications (contextualism) – and that it does not matter which tool is deployed first, so long as the court balances the indications given by each.

For a more detailed discussion of the decision, please see our litigation blog post.