Insight: Sigma Finance Corporation: Substituting a Commercial Bargain Through the Guise of Interpretation?

November 2009
John Higham QC, John Reynolds, Sona Ganatra

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The first appeal ruling from the newly formed UK Supreme Court concerned the construction of a clause setting out the distribution of assets in a collapsed structured investment vehicle ("SIV"). For the creditors attempting to salvage the remains of the SIV, and onlookers in similar situations, the judicial process has been a rollercoaster ride which has left them reeling.

The Court of Appeal warned in Megaro v Di Popolo Hotels Ltd [2007] EWCA Civ 309 that "it is not for the court, through the guise of interpretation to substitute for the bargain which the parties did make a different bargain which in its view they would have made if they had been better advised or had had better regard for their own interests." The case of Re Sigma Finance Corporation (in administrative receivership) [2009] UKSC 2, is yet another example of how the English Courts are crossing that boundary in increasing fashion, leaving contracting parties in a state of uncertainty when it comes to the question of contractual interpretation.