Arnold v Britton  UKSC 36 concerned service charge provisions in residential leases. The lessees typically covenanted to pay ‘a proportionate part’ of the cost of providing the services, expressed to be £90 in the first year, rising by 10 per cent per year thereafter.
The issue for the court was essentially whether this meant: (i) a fixed service charge of £90 with a yearly increase of 10 per cent; or (ii) a fair proportion of the cost of providing the services, up to a maximum of £90 in the first year, that maximum figure rising by 10 per cent each year thereafter. If the former, it would mean that by 2072, the lessees would be paying over £550,000 per year in service charge.
he majority of the Supreme Court preferred the former, more literal construction. According to Lord Neuberger, ‘The reliance placed in some cases on commercial common sense and surrounding circumstances ... should not be invoked to undervalue the importance of the language of the provision which is to be construed.’ The Court accepted that the less clear the words, the more ready the court will be to depart from their natural meaning. However, that did not mean that the court should look for drafting errors to facilitate a departure from the natural meaning.
Further, it was stressed that commercial common sense should not be invoked retrospectively, just because, for example, the contractual arrangement had worked out badly for one of the parties. In this regard it should be noted that at the time the leases were drafted, an inflation rate of 10 per cent was not out of the ordinary and therefore the leases could not be said to have lacked commercial purpose at the time they were entered into. In any event, as Lord Neuberger noted, the purpose of contractual interpretation is to ascertain what the parties agreed and not what the court thought they should have agreed. It was not the court’s role when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice.
This does not of course change the position where there is actual ambiguity and in this regard, decisions such as Rainy Sky v Kookmin Bank  UKSC 50 remain good law. Accordingly, where there are two possible constructions, the court was entitled to prefer the construction which was consistent with business common sense and to reject the other. The qualification that Arnold v Britton provides is that the court should not go looking for ambiguity.