In our latest alert, we consider the Court of Appeal decision in Narandas-Girdhar v Bradstock [2016] which confirms the correct approach to referring to deleted text in the interpretation of contracts.

When can recourse to deleted text properly be made?

In summary, the Court of Appeal found that if the fact of the deletion shows what the parties agreed that they did not agree, and the words that remain are ambiguous, the deleted text can be used as an aid to the interpretation of the remaining words, albeit they must be referred to with caution.

The facts

Mr Parekh (Mr P) entered into an individual voluntary arrangement (the Contract) with his creditors. He later tried to set it aside on the basis that it was conditional upon the acceptance of his wife's arrangement by her creditors, and in fact, her creditors had rejected her proposed arrangement. Mr P based his claim on clause 4.3 of the Contract which read (in part):

"The acceptance of my Individual Involuntary Arrangement is conditional upon the acceptance of the Arrangement for my wife/husband, following acceptance the estates shall be combined for dividend purposes and treated as one… the Supervisor will be paid a combined contribution for the benefit of the creditors…"

Various modifications to the Contract were drafted and set out in a separate document. The original clause 4.3 was not struck through or removed from the Contract but remained visible in the Contract. However, the relevant modification effectively deleted clause 4.3 - it read:

"Clause 4.3 is to be substituted with "I agree to pay the Supervisor for the benefit of the creditors not less than £230 per month for the duration of the Voluntary Arrangement".

Key area of dispute

Mr P argued it was clear from other provisions of the Contract (which referred to a contribution being made by his wife in accordance with her arrangement and to their joint creditors receiving a dividend from Mr P and his wife) that the Contract remained conditional upon the approval of Mrs P's arrangement, despite the modification, as the other provisions could not be effective without the Contract being conditional. He also argued that the court should not have had regard to deleted text for the purposes of interpretation, as it has been deleted for all purposes.

The decision

The Court of Appeal disagreed with Mr P and upheld the reasoning in the case of Mopani Copper Mines Plc v Millenium Underwriting Ltd [2008] which held that, in general, recourse to deleted words is illegitimate, except in two circumstances:

  1. where the deleted words in a printed form may resolve the ambiguity of a neighbouring paragraph that remains; or
  2. where the fact of the deletion in a contractual document shows what it is the parties agreed that they did not agree and there is ambiguity in the words that remain.

Here, the second exception applied. The Court of Appeal held that the modification did not state beyond ambiguity that the Contract was conditional on Mrs P's arrangement. Due to the ambiguity of the remaining provisions, the deleted words could be used as an aid to their construction. By looking at the deleted text, it was clear that conditionality was not agreed, as the words of conditionality were removed entirely by the modification.

Analysis

While this decision does not change the law in this area, it is an opportune reminder to those in the construction industry where standard form contracts are regularly used (e.g. JCT, NEC, RIBA) with separate amendments appended to the back to be read alongside the standard wording. The clauses removed or revised by the amendments often therefore remain in the standard form "unamended" and even if they are struck through or amended, the deleted words usually remain visible. The ruling equally applies where text is amended by hand and still visible.

The recent case of J Murphy & Sons Ltd and Beckton Energy Ltd [2016] puts this point into a construction context. The standard form contract (FIDIC) provided for the engineer to determine the amount of any payments the employer thought it was entitled to from the contractor. The employer claimed liquidated damages and then called on its bond when the contractor failed to pay. The contractor argued that the employer was not entitled to either recourse as the claims had not been submitted to the engineer for determination.

In the unamended standard form, the employer's rights to liquidated damages and to call on the bond were linked to the clause which specified that payments were to be determined by the engineer. Those standard clauses had been amended, however, and all reference to a requirement for determination by the engineer in this context had been removed.

Although keen to stress that deletion (which here equated to deviation from the standard wording) only provided context, and was not determinative of the issue, the judge stated that it was relevant background at least, in that it reflected the parties' intention that neither the right to claim liquidated damages nor the right to call on the bond should be subject to the engineer's determination. The parties had chosen to agree a wholly different clause.

So, recourse to deleted text can be a helpful aid to construing the parties' intentions if they are not clear from the wording that remains. However, as emphasised by the judge in Narandas-Girdhar, caution must be taken as to what inferences can properly be drawn from deleted words.The Narandas-Girdhar case was quite clear cut - a clause making the contract conditional had been replaced by a clause not referring to conditionality. Further, the court was not sympathetic to Mr P's case - it was found he had approved the modifications, had gained a large advantage from the Contract and had only sought to challenge it more than 10 years later. In other circumstances, it may be less obvious what the parties intended or the parties may no longer be able to confirm their intentions e.g. where a company has become insolvent or the individual who negotiated the contract has retired or passed away.

Deletions are commonplace, and it may not always be the case (as was found in Narandas-Girdhar) that the parties intended the opposite of what they had deleted. There are many examples where amendments are made not to say the opposite of what is already there, but to enhance or qualify it, or to say it in a more favourable way to improve one party's position over another.

Practical steps

The courts will only look to deleted text if the remaining provisions of the contract are unclear, and best practice of course is to draft contracts clearly. If text is deleted, the rest of the contract and its cross referencing should be reviewed and revised as necessary to ensure it makes sense and is consistent in light of the deletion. Where the intentions of the parties are clear from the remaining words, consideration of the deleted text will not be necessary or appropriate.

However, this may not always be the case and we need to think carefully about whether deleted text should remain on the face of the finalised contract. By leaving it in, a court will be able to look at the deletion and use it if the rest of the contract is unclear. This may not cause an issue most of the time, (and may in fact assist the parties) but if there is a reason why you would want the court to construe only the final wording of the contract (and not what was previously in the draft, thereby bringing an element of pre-contract negotiations to bear on its final interpretation), you should err on the side of caution and physically remove deleted text from the final form.

Also watch out for track changes and last minute manuscript amendments - the same considerations will apply.

In summary, if you're leaving deleted text visible on the final form of your contract, make sure you're doing that deliberately, in the full knowledge that it may be taken into account if a dispute arises. If in doubt, get rid of it; certainty is invaluable.