Comma to your senses

This article is about a controversial decision made in the Truss administration, some dairy drivers in Maine USA and a dispute about who should pay for a FSA remedial compensation scheme. What, you may be thinking, could possibly connect those three things?

Liz Truss has endured a difficult first month as PM. The financial markets reacted strongly to her package of unfunded tax cuts, she has been forced into an embarrassing U-turn on the top rate of income tax and she knows there is a political storm brewing about the future indexation of welfare benefits.

Those problems have allowed one controversial decision to slip under the radar. And that's what this article is all about. Therese Coffey, the new Secretary for State for health, has banned her civil servants from using the "Oxford comma".

It is true most "normal people" don't know, or even care, what Oxford commas are, but that doesn't mean they are not important.

The Oxford Comma is the comma used just before the "and" or "or" in a list of three or more things - and its usage can completely change the meaning of a sentence. If I said I had met Donald Trump, a misogynist, and a racist - that would be fine. The Oxford comma suggests I met with three different people. I might get into hot water if I didn't use the Oxford comma and instead said that I had met Donald Trump, a misogynist and a racist. There may be some who think either formulation works, but joking aside a missed comma can create ambiguity and uncertainty. And the natural bedfellow to ambiguity and uncertainty is costly litigation.

The US state of Maine had a law excluding certain workers from overtime pay. This excluded workers who were engaged in "the canning, processing,…,storing, packing for shipment or distribution of" certain perishable foods.

A local dairy did not pay its drivers over-time, on the basis they were involved in the distribution of milk, a perishable food. The drivers sued - losing at the district court level but winning on appeal. The appeal court found the exclusion applied only to those people engaged in the “packing for shipment or distribution” but the drivers were only engaged in the distribution (ie not the packing). The state legislature has now amended the law to reflect its original intention, but that missing comma cost the dairy US$5m. As the drivers' lawyer said "that comma would have sunk our ship".

The US appeals court took a literal approach to statutory interpretation. Whilst the literal approach might yield an "unintended" result, it at least creates certainty.

The question is whether an English court would have taken such a literal approach. The answer is probably "no", based on the Supreme Court decision of Wood v Capita Insurance Services.

The case concerned the interpretation of an indemnity clause in a sale and purchase agreement for an insurance broker. The purchaser was indemnified for loss suffered as a result of claims or complaints for mis-selling registered with the financial services regulator. However, the purchaser had suffered loss as a result of a remediation scheme imposed by the regulator following its self-reporting of mis-selling (rather than through claims or complaints of customers). That remediation scheme had cost the purchaser approximately GBP 1.35m in customer compensation. Added to that was interest and the cost of the remediation itself, giving a claim of cGBP 2.5m. The question was: was this loss covered by the "admittedly opaque" language of the indemnity?

It is not necessary to quote the indemnity or to rehearse the arguments. The following extract from the Supreme Court speeches demonstrates the complexity of both:

the draftsman used an adjectival participle at the start of (A) (“following and arising out of”) and “changed tone” by using a relative pronoun (“and which”) at the start of (B). But the use of the adjectival participle does not tie (A) exclusively into (2) because in (B) the adjectival participle (“pertaining to”) unquestionably applies to both (1) and (2). These detailed points of style and syntax are of little assistance in construing an admittedly opaque clause.

What was interesting though was the court’s comments on the use of commas and how the presence or absence of commas was relevant to the interpretation of the contract.

Again in agreement with Christopher Clarke LJ I do not think that the use of commas in this clause is a strong pointer in favour of Capita’s interpretation, both because there are no set rules for the use of commas and in any event the draftsman’s use of commas in this clause is erratic.

The factor that seemed to be ultimately determinative was not the wording of the indemnity itself, but the wording of a series of warranties in the schedule. Whilst the Supreme Court was at pains to say that textualism and contextualism were not competing paradigms but were both tools of equal weight, at the end of the day the context and the contract when read as a whole is key.

This gives rise to a problem for lawyers and their clients. A court when faced with an identically worded indemnity might come up with a different answer if there are differences in the context and in the other contractual provisions.

This will be the focus of my article next week where I will explore two court judgments that considered an identical phrase in similar insurance contracts, but came to opposite conclusions. What this means is a court decision on the meaning of a phrase used in one contract will not bind later courts if the context and other provisions in a second contract are different.

The Capita case was a £2.5m dispute. The proceedings issued in 2013 were eventually concluded 4 years later in the Supreme Court. Capita won at first instance but Wood won in the Court of Appeal and in the Supreme Court.

At this point, lawyers normally say the answer is in more skilfully drafted contracts. That is easier said than done. The contract in the Capita case was negotiated between two excellent law firms. Only lawyers would use adjectival participles. The truth is there will always be disputes on contracts no matter how skilfully drafted. What is important is how those disputes are resolved.

There is a debate around whether mediations should be made compulsory or not. There are good arguments both ways and the position is more nuanced for complex commercial cases. But that said, whenever the arguments turn on the presence or absence of a comma or the use of adjectival participles (whatever they may be), surely the parties should consider carefully whether an early mediation is a better option than costly litigation.

Simon Goldring

October 2022