Key Facts
- •Capita sought declarations on the interpretation of Condition 2 in its contract with IBM regarding the cessation of Managed Services for the 'Relevant Service'.
- •The dispute centered on whether IBM's obligations ceased on 30 August 2023, regardless of whether a replacement service was operational.
- •Condition 2 stated that IBM's obligations would cease when a replacement service was operational, assuming this would be on or before 30 August 2023.
- •The replacement service was not operational by 30 August 2023.
- •IBM argued its obligations ceased on 30 August 2023, while Capita argued they continued until a replacement was operational.
- •Both parties relied heavily on the factual matrix and commercial context of the negotiations.
- •A sub-contract existed between IBM and Kyndryl, containing similar terms.
Legal Principles
Contract interpretation principles as set out by Lord Hodge in Wood v Capita.
Wood v Capita Insurance Services Ltd [2017] AC 1173, [10]-[14]
Specific contractual provisions prevail over general provisions when the facts fall within the scope of the specific provision.
Lewison, The Interpretation of Contracts (7th), [7.46]; Welch v Bowmaker (Ir) Ltd [1980] IR 251
Evidence of parties' subjective intentions during negotiations is generally inadmissible; the court focuses on the objective meaning of the contract.
Arnold v Britton [2015] AC 1619, [15]; Prenn v Simmonds [1971] 1 WLR 1381
Outcomes
Capita's application for declarations was refused.
The court found the language of Condition 2, its context within the contract (particularly Conditions 1 and 3), and the overall commercial context supported IBM's interpretation. The court rejected Capita's arguments based on the wording of Condition 2 and its reliance on the general obligations within the contract as yielding to the specific provisions related to the Relevant Service.