LB RE Financing No. 3 Ltd v Excalibur Funding No 1 plc and others [2011] EWHC 2111 (Ch), [2011] All ER (D) 22 (Aug)
The court’s task when addressing issues of construction was to ascertain the meaning which the instrument would convey to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument was addressed. Identification of the relevant audience was important, because it served to identify the range of background facts relevant to interpretation. A distinction had to be made between commercial absurdity and irrationality and apparent unfairness or one-sidedness.
The former might compel the court to conclude that something had to have gone wrong with the language, but it was no part of the court’s task to mend businessmen’s bargains. Commercial absurdity might require the court to depart from the apparently unambiguous natural meaning of a provision in an instrument. Questions of commercial commonsense falling short of absurdity might, however, enable the court to choose between genuinely alternative meanings of an ambiguous provision. The greater the ambiguity, the more persuasive might be an argument
