Thanks to Glenn West, I now offer you for your delectation Gwynt Y Môr Ofto Plc v. Gwynt Y Mor Offshore Wind Farm Ltd & Ors [2020] EWHC 850 (Comm) (08 April 2020) (here), a decision of the England and Wales High Court (Commercial Court). It involves scary confusion over verb structures.
A contract for sale of a wind-farm off the coast of Wales was signed 11 February 2015; the deal was closed (“completed,” as the English say) on 17 February 2015. Later that year two undersea cables running from the wind farm failed. Expert evidence indicated it was likely the cables had been damaged during manufacture.
We’re interested in a sentence in section 8.2 of the contract for sale of the wind farm:
If any of the Assets are destroyed or damaged prior to Completion (Pre-Completion Damage), then, following Completion, the [defendants] shall indemnify the [claimant] against the full cost of reinstatement of any Assets affected by Pre-Completion Damage.
The defendants argued that under this sentence, the claimant was entitled to be indemnified only if the damage occurred between signing and completion. By contrast, the claimant argued that (to quote the court) “the phrase ‘prior to Completion’ in clause 8.2 was unqualified, contending that the natural and ordinary meaning of the Indemnity was, therefore, that it applied if any of the Assets were damaged at any time before Completion, including before the execution of the SPA.”
The court sided with the defendants:
First, whilst the claimant is correct that the phrase “prior to Completion” in clause 8.2 is not juxtaposed with an expressly identified “starting point”, it is necessary to consider the sentence in which it is used as a whole, and in particular the tense used, in determining the timeframe of the Indemnity. The SPA must be interpreted as at the date it comes into force, so the natural and ordinary meaning of the phrase “If any of the Assets are destroyed or damaged prior to Completion…” (emphasis added) is that it applies to destruction or damage which occurs thereafter, that is, after execution. Such wording, on its face, does not include damage which had already occurred at the date of the SPA. Had the intention been to include destruction or damage occurring before execution, the wording would have been “if any of the Assets have been destroyed or damaged …”. Even that wording might have been unclear and required express reference to “including before this Agreement”.
Glenn’s marching orders to me were “Are versus has been. Hmmmm.” Glenn, this one’s for you.
I disagree with the court on the implications of the verb structure. The provision is more complex than the court suggests: its meaning doesn’t depend on the verb structure.
To set the scene, consider the grammatical structure of If any of the Assets are destroyed or damaged prior to Completion. It’s a conditional clause. The words destroyed and damaged are past participles. Here, they’re combined with the verb to be to create passive forms. Here’s the equivalent in the active voice: If something destroys or damages any of the Assets prior to Completion.
To decide whether the contract sentence can reasonably be understood as referring to destruction or damage that occurred before the date of the contract, let’s consider conditional clauses addressing different scenarios.
The first scenario addresses what happens to a thing or group, the status of which can be ascertained:
If anyone eats these cupcakes before my birthday …
This could not reasonably be understood as including cupcakes eaten before the time of the utterance, because the utterance relates to a set of cupcakes, the status of which can be readily ascertained. (And one can only eat a cupcake once.)
But the status of a thing or group might not be so readily ascertained:
If anyone in this village contracts Covid-19 before the end of the year …
I make this utterance on 19 December. Limited testing done between 19 December and the end of the year yields no positive tests, but after 19 December analysis of tests done before 19 December, and autopsies of people who died before 19 December, uncover cases of Covid-19. I suggest that reasonable readers (or listeners) would take the pre-19 December cases into account and would conclude that the condition had been satisfied: if what’s at issue is spread of Covid-19 in the village, why ignore cases occurring before 19 December? It’s unrealistic to expect the speaker to have the semantic acuity to opt for has contracted instead of contracts; in interpreting this sentence, one may take context into account. And generally, instead of relying on the verb structure it would be preferable to be more explicit in expressing both the broader meaning and the narrower meaning.
In another scenario, what’s at issue is whether a group or thing exists:
If anyone discovers unobtanium in Nassau County before the end of 2021 …
I make this utterance on 1 March 2021, but on 1 April 2021 it is determined that unobtanium was in fact discovered in Nassau County on 1 February 2021, but on 1 March 2020 the group responsible hadn’t yet announced it. It would be bizarre to conclude that the condition had not been satisfied because unobtanium had been discovered before my utterance: what’s at issue is discovery of unobtanium, not the timing of discovery. It would be pedantic to ignore that and to insist that the speaker should have said has discovered.
The second scenario is analogous to the sentence at issue in this case, in that it’s difficult to assess the state of undersea cables. So the court was wrong: the tense used isn’t enough to establish the natural meaning. That depends on the context. For example, use of the word destroyed would make sense only if the period being described were between signing and completion: at signing, the parties would have known if the cables had been destroyed. But considering the context in detail is beyond the scope of this post.
This case has four things to tell us. First, it shows, yet again, that judges can’t be counted on to have the semantic acuity required to sensibly interpret confusing text. In recent months, this blog has featured several posts highlighting instances of judges getting textual interpretation wrong (for example, this post and this post). I’m not suggesting this stuff is simple: I couldn’t find in The Cambridge Grammar of the English Language any discussion of the sort of confusion caused by the sentence at issue, and I spent hours pondering this case. But for justice to be served, judges have to know their limitations.
Second, anyone litigating disputes involving confusing text would be remiss if they didn’t figure out these sorts of nuances and, if appropriate, put them before the court. If you don’t have the required expertise, hire it.
Third, this case reminds us what’s at stake in contract drafting: your client’s fortunes might hinge on your choice of verb structure. That’s why MSCD goes into verb structures in such great detail. The fifth edition will mention this case, and it will recommend that if you’re dealing with a period before closing and it involves something the truth of which can’t be ascertained at signing, make it explicit whether the period includes or excludes the period before the date of the contract. [Update 10 May 2020: Or as Vance suggests in his comment, you could address this issue using a conventional deal structure, one that includes statements of fact regarding circumstances at signing.]
And fourth, helping judges and those who work with contracts become better equipped to handle such nuances requires more and better training.
great post Ken. Thanks!
What, was there no representation concerning the condition of the assets prior to completion (i.e. at signing but with a bringdown)? One would think a “unitary” analysis of the contract would include any such statement as part of the context, yet the court says nothing about this. The upshot of having such a representation would be that the the clause at issue in this case would be really talking not about whether there was a breach, but about the remedy, and the phrase “are destroyed or damaged” would more logically be interpreted as meaning “are in a destroyed or damaged condition,” which seems more likely to promote the claimant’s position. If there was no such representation, then, wow, somebody really didn’t know how to write a contract for the sale of a business. Your parting advice on drafting is sound, but I have a hard time resolving the confusion under any of the grammatical analyses you put forward.
Great point. My argument is a very narrow one that doesn’t attempt to consider context, including this broader context. I might supplement my post to refer to the role of *cough cough* statements of fact *cough*
My take is that the court ruling is indefensible and that the correct reading depends on seeing “prior to Completion” as creating a period with an ending point but no starting point.
The ‘verb structures’ are irrelevant, as Ken says.
(The arms-length quotes around ‘verb structures’ signify that ‘damaged’ can be a participial adjective meaning ‘in a damaged condition’, and not a verb at all.)
But even construing ‘are damaged’ as a passive verb, it can’t reasonably be understood to require that the indemnified damage take place anytime other than ‘prior to Completion’.
In this case, ‘prior to Completion’ means ‘before 17 February 2015’. How is that ‘confusing’? Why is it necessary, as the court suggests, to make that clear by saying in effect, ‘before 17 February 2015, including before 11 February 2015’?
I see no flaw in the drafting, any more than if a contract had said ‘anywhere on Earth’ and the court said the drafters should have said ‘anywhere on Earth, including South America’ to avoid confusion about whether South America was included.
It’s not a valid criticism of the losing side’s drafters that if they had said ‘anywhere on Earth, including South America’ the case would have gone the other way.
Judges are ignorant, stupid, both, or neither. Against stupidity the gods themselves struggle in vain. The drafter’s job is to be accurate, clear, and concise. The idea that one should be redundant or rhetorically emphatic or otherwise depart from accuracy, clarity, and concision ‘just to be safe’ is the road to madness. Drafters should assume reasonable readers, and parties should assume that some disputes will be wrongly decided against them. That’s what big boy pants are for.
Do not suspect that sheltering in place is making me cranky. Good health always to anyone who reads this. -Wright
“The drafter’s job is to be accurate, clear, and concise.” That is not how I see my job as a drafter.
I see my job as a drafter as to advance the jointly expressed interests of the parties. If expressing those interests requires me to “be redundant or rhetorically emphatic or otherwise depart from accuracy, clarity, and concision” then I am going to do so, even if it means that my writing style might be criticized by those who are interested in my writing style.
I read “are destroyed” and the implied “are damaged” as being stative constructions. In other words reporting the present state of a past action. This is a possible usage, in British English at least. It would mean that the assets must have been destroyed or damaged prior to completion and continue to be in that state at the time of completion.
That just emphasises your point about the need to be clear in drafting of course.