The Court of Appeal has confirmed the existence of a ‘natural assumption' that an adjective or determiner at the start of a list qualifies the entirety of it.
In its recent decision, the Court of Appeal construed a letter of engagement which provided for a financial services firm to receive a commission on capital raised by an Indian bank. The relevant clause read:
"We have been advised by the Company that it contemplates one or more financing(s) through the private placement, offering or other sale of equity instruments in any form, including, without limitation, preferred or common equity, or instruments convertible into preferred or common equity or other related forms of interests or capital of the Company in one or a series of transactions (a "Financing")." (emphasis added)
A dispute arose as to the definition of a Financing and, in particular, whether a further public offering ("FPO") was covered by the definition. The Court of Appeal read "private" as qualifying the entirety of the list, and deemed that a public offering was excluded from the definition. Cantor's argument, that "private" was intended to apply only to "placement", was rejected.
In doing so, the Court of Appeal noted with respect to the ordinary meaning of the words used, that: "While [...] there is no firm grammatical rule to the effect that an adjective or determiner at the start of a list of nouns qualifies them all [...] unless something in the content of the list or another adjective or determiner within the list suggests otherwise, the reader will naturally tend to assume that an adjective or determiner at the start of a list qualifies the entirety of it." It went on to describe this as a "natural assumption".
As is always the case when interpreting contracts under English law, the Court of Appeal's decision did not rest solely on this assumption; it considered a number of other factors in order to determine the ordinary meaning of the words used in the context of the contract as a whole and the relevant factual and commercial background (excluding prior negotiations). The same words could, therefore, have a different interpretation in another contract. However, the Court of Appeal's support means that the assumption itself is likely to be adopted in future cases.
Practice point: When drafting a list, if the intention is to qualify only a part of it, it is sensible to move the adjective or determiner away from the start of the sentence. This can be easily achieved by reordering the list e.g. "offering, other sale of equity instruments, or private placement."
