Scottish Widows Fund and Life Assurance Society v BGC International – Case Summary

Scottish Widows Fund and Life Assurance Society v BGC International (Formerly Cantor Fitzgerald International)

Court of Appeal

Citations: [2012] EWCA Civ 607.


The respondent granted a sub-lease to the appellant. This lease was designed to relieve the respondent of their own obligations under the head lease. The agreement provided for various kinds of rent which were ultimately supposed to achieve parity with the amount that the respondent was paying the head lessor. However, it failed to do so due to a ‘double dip’ in the rent market in 2001 and 2006.

The respondent contended that there had been an error in the rent-calculation clause. They argued that the contract should be interpreted or rectified to bear a different meaning.

  1. Could the contract be interpreted to correct any error in the rent-calculation clause?
  2. Should the contract be rectified in the manner the respondent envisaged?

The Court of Appeal held that the contract could not be interpreted to give the contract the meaning sought by the respondent. The parties had merely failed to account for a particular market scenario. This was not a case where the parties had made a mistake of language or syntax. Rectification was also impossible, because the parties did not ever reach any common accord on what should happen in the case of a market double dip.

This Case is Authority For…

Lord Hoffman in ICS Ltd v West Bromwich BS [1998] 1 WLR 896 stated that the court is not required to assign to the parties an intention which they plainly could not have had, where it is apparent that ‘something has gone wrong with the language’ of the contract. This principle is part of the interpretation process, as opposed to rectification.

This case held that the principle of interpretation set out in ICS Ltd v West Bromwich BS [1998] 1 WLR 896 only applies in cases where something must have gone wrong with the language or syntax used in the written. In those cases, it cannot be used unless three criteria are met:

  1. ‘It must be clear from the document interpreted with the admissible background that the parties have made a mistake and what that mistake is;
  2. It must be clear, from the rest of the agreement interpreted with the admissible background what the parties intended to agree; and
  3. The mistake must be one of language or syntax.’

It is insufficient that the parties have failed to provide for a particular situation.

Rectification is only possible if three requirements are met:

  1. The parties had a common and continuing intention regarding a particular matter in the contract which continued until the document was executed;
  2. There was an outward expression of that accord;
  3. By mistake, the document did not reflect that common intention.

Pre-contractual negotiations are usually not relevant evidence when interpreting a contract. However, they may be relevant evidence when dealing with the issue of rectification.