Neutral Citation Number: [2013] EWHC 1801 (Ch)
Case No: 1MA30294
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Date: 28 June 2013
Before :

MARK CAWSON QC
(sitting as a Deputy Judge of the High Court)

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BETWEEN:-

	FONS HF (In Liquidation)	Claimant	
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	(1) CORPORAL LIMITED 
(2) PILLAR SECURITISATION S.A.R.L.	
Defendants	

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Neil Cadwallader, instructed by Heatons LLP, for the Claimant
Andreas Gledhill, instructed by Keystone Law, for the Second Defendant

Hearing dates: 10 and 11 June 2013
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JUDGMENT
MARK CAWSON QC 
INTRODUCTION
1.	The issue that arises for determination in this claim is the true interpretation of Clause 3.1.1 of a Legal Charge dated 29 September 2008 made between the Claimant, Fons HF (“Fons”) (1) and Kaupthing Bank Luxembourg S.A. (“Kaupthing”) (2) (“the Charge”), and whether the first legal mortgage of “the Shares” provided for thereby extends to Fons’ rights under two shareholder loan agreements dated 17 October 2007 and 15 February 2008 (“the SLAs”) pursuant to which Fons lent the respective sums of £563,500 and 35% of £1,500,000 to Corporal Limited (“Corporal”), a company in which Fons was the holder of both ordinary and preference shares.
2.	The expression “Shares” referred to in Clause 3.1.1 of the Charge was defined by Clause 1.1 thereof to mean:
“All shares (if any) specified in Schedule 1 (shares), and also all other stocks, shares, debentures, bonds, warrants, coupons or other securities now or in the future owned by the Chargor in Corporal from time to time or any in which it has an interest”.
3.	Both Fons and Kaupthing have entered into liquidation. There is now no issue but that the benefit of the Charge now vests in the Second Defendant, Pillar Securitisation SARL (“Pillar”), which argues that the wording of the definition set out in para 2 above (“the Definition”) is, as a matter of true construction thereof, sufficiently wide to catch Fons’ rights under the SLAs on the basis that these rights fall within the meaning of “other securities” and/or “debentures” as those expressions are used in the Definition.
4.	Fons, on the other hand, argues that, as a matter of true construction of Clause 3.1.1 and the Definition, neither the word “other securities”, nor the word “debentures ”, ought to be so widely construed as extending to documents such as the SLAs, which merely concern the terms for the making of unsecured loans.
5.	Corporal has played no real part in the proceedings, apart from serving a neutral defence. It was joined as a party to the proceedings merely so as to ensure that it is bound by the decision, and it was not represented before me.
6.	Fons was represented by Mr Neil Cadwallader of Counsel, and Pillar by Mr Andreas Gledhill of Counsel. I am most grateful to them both for their helpful written and oral submissions.
Background
7.	Fons is a public limited liability company incorporated under the laws of Iceland. Under the terms of a subscription agreement dated 30 June 2006, Fons, through its wholly owned subsidiary, Talden Holdings SA (“Talden”) (a company incorporated under the laws of Luxembourg), invested a total of £7,000,000 in Corporal by subscribing for 85,750 A ordinary shares at 10p per share, and 6,991,425 preference shares at £1 per share.
8.	On the same day Corporal adopted new Articles of Association, entered into a facility agreement with Royal Bank of Scotland plc (“RBS”), and also entered into a Subordination Deed (“the Subordination Deed”) between Corporal (as "Debtor”) (1), Baugur Group HF (“Baugur Group”), BG Holdings EHF (“Baugur”) and Talden (as “Subordinated Creditors”) (2) and RBS (3), regulating the respective rights of the parties in Corporal.
9.	The net result of the above events was that Corporal’s capital and debt structure ranked in the following order: -
9.1	Firstly, RBS’s secured loan facility of approximately £8,000,000;
9.2	Secondly, £4,483,448 due to Baugur Group under a shareholder loan agreement;
9.3	Thirdly, £19,975,000 preference shares of £1 each in Corporal held as to 65% by Baugur and 35% by Fons; and
9.4	Fourthly, A and B ordinary shares of 10p each in Corporal comprising 24,500 A ordinary shares held as to 65% by Baugur and 35% by Fons, and B ordinary shares (representing only about 2% of the ordinary share capital) held by management.
10.	Baugur had acquired the toy retailer Hamleys in 2003, and Corporal was, at all relevant times, used as a corporate vehicle for the carrying on of this business.
11.	By a Share Purchase Agreement dated 30 March 2007 and made between Fons (1) and Talden (2), Fons acquired Talden’s shareholding in Corporal and in three other companies. The purchase price was apportioned or divided such that the purchase price attributable to Talden’s shareholding in Corporal was expressed as being £7,000,000.
12.	The circumstances behind the entry by Fons into the SLAs are explained in the witness statement of Alasdair Dunn, the Chief Operating Officer of Corporal, which was adduced in evidence by Fons without challenge. In short, Corporal was, at Baugur’s instigation in 2007, looking to develop Hamleys concessions in a number of House of Fraser stores, and this required capital expenditure and other costs to be incurred in excess of those already provided for by Corporal’s business plan. As a new banking facility had only recently been agreed with RBS, it was agreed between Baugur and Fons that they should provide the necessary funding between themselves in proportion to their respective shareholdings in Corporal by way of loans. Thus in August 2007 Baugur advanced £1,046,500, and in October 2007 Fons advanced £563,500 to Corporal.
13.	This loan made by Fons was unsecured, and was documented by the first of the SLAs, dated 17 October 2007. This provided, in essence, that:-
13.1	The loan would bear interest at a rate of 8% per annum, rolled up on an annual basis (Clause 3);
13.2	The loan should become repayable:-
13.2.1	If an “Exit Event” occurred, which included default in making any payment due, Corporal ceasing to trade, and Corporal becoming insolvent;
13.2.2	At any time on demand by Fons following the last day of the “Subordination Period” (as defined by the Subordination Deed, and meaning in essence, when RBS had been repaid).
(Clauses 4 and 5).
14.	Two particular provisions of the first SLA should be noted:-
14.1	Clause 4.2 provided that a certificate from Fons as to the amount at any time due from Corporal to Fons under the SLA should, in the absence of manifest error, be conclusive; and
14.2	By clause 6, it was provided that any payment made by Corporal under the SLA should be made in full, without set off or counterclaim and, unless otherwise required by law, free and clear of any deductions or withholdings.
15.	The following year (2008) Baugur and Fons agreed to provide further loans to Corporal to fund the refurbishment of Hamleys Store on Regent Street, London. £1,500,000 in total was advanced, 65% of this sum being advanced by Baugur, and 35% by Fons.
16.	These further advances were made pursuant to the second SLA dated 8 February 2008. The essential difference between this and the first SLA was that both Baugur and Fons were made party to the second SLA as “the Lenders”, making the one “Loan” of £1,500,000. Otherwise, the second SLA was, so far as relevant, in the same terms as the first SLA, although it should be noted that the certificate provided for by Clause 4.1 was, in the case of the second SLA, to be given by Baugur as “Agent”.
17.	The circumstances leading up to the grant of the Charge were dealt with in evidence on behalf of Fons by Andri Freyr Stefansson (“Mr Stefansson”), now Senior Legal Counsel with Landsbankinn HF, who was, between February 2007 and April 2009 in- house legal Counsel for Fons. In evidence Mr Stefansson confirmed the contents of his witness statement dated 24 April 2013, before being cross-examined in respect of a number of matters dealt with therein.
18.	As at June 2008, Fons owed some 2.5 billion Icelandic Krona (ISK) to Kaupthing on an unsecured basis. Mr Stefansson referred in his witness statement to this equating to approximately £12,500,000, although a web printout from the “OANDA” website put to Mr Stefansson in cross-examination suggests that 2.5 billion ISK equated to approximately £14,000,000 as at the end of September 2008.
19.	Mr Stefansson refers to Fons, in 2008, having come under pressure from Kaupthing to provide security for its indebtedness, and that of its subsidiary Talden, to Kaupthing. According to Mr Stefansson, the Board of Directors of Fons suggested that the appropriate mechanism would be for Fons to provide a charge over its shares in Corporal - see para 10 of Mr Stefansson’s statement.
20.	Certainly, it is clear from an exchange of emails between Fons’ majority shareholder and Chief Executive Officer, Palmi Haraldsson (“Mr Haraldsson”), and Kaupthing’s Chief Executive Officer Magnus Gudmundsson (“Mr Gudmundsson”) on Sunday 4 May 2008, that there had been high level communication between the two companies about a “pledge” of Fons’ shares in Corporal in order to support Fons’ and Talden’s indebtedness to Kaupthing, Fons having already provided a guarantee for Talden’s indebtedness to Kaupthing. Thus in an email dated 4 May 2008, Mr Gudmundsson asked of Mr Haraldsson: “Who will give us a pledge in hamlays (sic)? Who should we talk to?”
21.	After this high level exchange, the matter was passed on to others to deal with, being dealt with thereafter on behalf of Kaupthing by Andri Sigurdsson (“Mr Sigurdsson”), a “Senior Lawyer”, and subsequently by Solvi Solvason (“Mr Solvason”), “Head of Corporate and Financial Law”. Matters were dealt with thereafter on behalf of Fons by Mr Stefansson, who at that stage had graduated with a law degree, but had not been formally admitted to practice.
22.	Mr Stefansson was cross-examined by Mr Gledhill on behalf of Pillar as to his experience in 2008 given that he had not, at that stage, been admitted to practice. However, he was able to explain that prior to being employed by Fons, he had been employed by the US Navy dealing as a lawyer with substantial procurement contracts. He struck me as diligent and competent, and although we are dealing with events some five years ago, I do not accept any suggestion, to the extent that it is made, that Mr Stefansson was not properly up to the task of dealing with, or properly understanding matters on Fons’ behalf in 2008.
23.	It is apparent from the documents, including an email from Mr Solvason to Mr Stefansson dated 27 May 2008, that, at that stage, it had been agreed, or at least discussed, that charges or pledges would also be provided by Fons over shareholdings in Hornblow Continental Corporation (“Hornblow”), which still may have been a subsidiary of Talden, and in 365 HF (“365”) owned (or formerly owned) by a subsidiary of Fons called Fons Capital.
24.	A first draft of the Charge, drafted on behalf of Kaupthing by its solicitors, Eversheds LLP, was emailed by Mr Solvason to Mr Stefansson on 4 June 2008, accompanied by two separate documents, described as “Share Pledge Agreement” and “Equitable Mortgage of Shares”, in respect of the shareholdings in Hornblow and 365. These latter drafts provided for pledges/charges simply over the shares held in these two companies, and rights relating thereto, and, unlike the Definition in the Charge, contained no extended definition of “Shares”. It would appear that these documents were never in fact executed, although this only emerged during the course of Mr Stefansson’s cross-examination, and the reason why these documents were never executed remains unexplained.
25.	A point is taken by Pillar that whilst the earlier exchange of emails had referred only to Fons giving a “pledge in hamlays (sic)”, Clause 3.1.1 of the first draft of the Charge submitted on 4 June 2008 went much further, seeking to charge all Fons’ investments, and not simply those in Corporal. Reliance is placed by Pillar upon the definition of “Shares” in Clause 1.1 of the first draft, which read: “.... all shares (if any) specified in Schedule 1 [in fact all of Fons’ ordinary and preference shares in Corporal] ... and also all other stocks, shares, debentures, bonds, warrants, coupons or other securities now or in the future owned by the chargor from time to time or any in which it has an interest”, the point being that the last part of this definition did not appear on its face to be limited to interests in Corporal.
26.	On 10 June 2008, Mr Stefansson emailed Mr Solvason his comments on the first draft, and suggested, as was subsequently accepted on behalf of Kaupthing, that the words “in Corporal” be added after the word “Chargor” in the definition of “Shares” as the Charge was only supposed to relate to Fons’ investment in Corporal.
27.	I am not persuaded by Pillar’s point that the first draft of the Charge really did intend to extend the scope of the Charge to all Fons’ investments of the relevant kind, and not simply those in Corporal. I note that Mr Solvason’s covering letter dated 4 July 2008 referred to the Charge as a charge on the shares in Corporal rather than a charge intended to have wider effect, and I consider it more likely that the effect of Mr Stefansson’s amendment, accepted on behalf of Kaupthing, was merely to clarify that the Charge simply related to Corporal albeit that Mr Stefansson might have thought that Kaupthing was seeking a wider charge. Indeed had the first draft been intended to catch all Fons investments in shares then one at least of the other two charges (the shares the subject matter of the other relating to Hornblow apparently having been owned by Talden and not Fons) would never have been necessary.
28.	It is right to observe that Mr Stefansson, who was aware of the existence of the SLAs, but did not appreciate that it might be suggested that the Charge would attach to Fons’ rights thereunder, did not seek to exclude or cut down the wider definition of “Shares” in the Definition. This was notwithstanding the much narrower terms of the charge or pledge on shares contained in the other two draft charges, a point relied upon by Pillar insofar as this might be admissible as an aid to construction.
29.	On the same day as the Charge was executed, Kaupthing also executed a “Release Letter” (“the Release Letter”), under which Kaupthing undertook to “do all such acts and things ... necessary to ensure that the security constituted by the Legal Charge is released” ... by ... “end of January 2009”, subject to Kaupthing having by then received the following:
29.1	Payment of the proceeds from the expected sale of Fons’ stake in WF Group Holdings Ltd/Woodward Food Service (“Woodwards”), estimated to produce “between GBP 8.5-9 million”;
29.2	Payment of the proceeds of the expected sale of a subsidiary of Woodwards called DBC, estimated to produce a further £2.5 million; 
29.3	Payment of the proceeds of expected sales of Fons’ stakes in Hornblow and two other companies, estimated to produce ISK 300 million (equivalent to some £1.7 million at the then exchange rate); and
29.4	Such additional cash payment or security as might be required to cover “in full the Bank's exposure on Fons HF and/or Talden Holdings SA
30.	There are a number of other matters of potential relevance by way of background that require to be considered.
31.	There is no evidence that Kaupthing was aware of the existence of the SFLs at or prior to the time of the grant of the Charge, or that Kaupthing had obtained any valuation report or other evidence as to the value of Fons’ shareholding in Corporal. In para 13 of his witness statement, Mr Stefansson said that although he was aware of the SLAs at the time of the grant of the Charge, he had no reason to think that Kaupthing was aware of them, and he said that the SLAs were never discussed during course of the negotiations in respect of the terms of the Charge. Mr Stefansson was not challenged in relation to this evidence, and Pillar led no evidence to the contrary.
32.	Mr Stefansson went on to say in para 13 of his witness statement that if Kaupthing had asked for the SLAs to be given as security in addition to the granting of a charge over Fons’ shares in Corporal, he believes that Fons would have refused to provide the same, and further, that he does not believe that Kaupthing would have asked even if it had been aware of them, Mr Stefansson’s evidence being that the shares were “more than adequate security”, a point taken again in para 26 of his statement where he said that: “The requested security was to cover the amount of the Debt Fons owed Kaupthing, the shares were considered sufficient security to cover the Debt”.
33.	Mr Stefansson was cross-examined as to this, it being put to him that the shares cannot have been considered sufficient security in themselves because the debt was some 2.5 billion IKR which, as at 29 September 2008, was some £14,000,000, whereas on Fons’ acquisition from Talden of its shareholding in Corporal, a value of £7,000,000 had been put on the shares, which Mr Stefansson confirmed under cross- examination he regarded to be a proper price. Under cross-examination, Mr Stefansson maintained his position that at the date of the Charge, Fons’ shares in Corporal were regarded as providing sufficient security for the indebtedness to Kaupthing. Mr Stefansson’s reasons for saying that he still thought that a charge by Fons over its shareholding in Corporal would provide sufficient security were expressed to be based on the contents of the Release Letter. I have to say that I did not find this answer very satisfactory because the Release Letter provided no additional security for the indebtedness of Fons to Kaupthing and therefore cannot have served to provide more valuable security than that provided by the Charge. However, I can understand how an anticipation that the various funds referred to in the Release Letter might be forthcoming in order to discharge Corporal’s indebtedness to Kaupthing might conceivably have persuaded Kaupthing to take a more relaxed view as to the value of the shareholding over which it was taking the Charge particularly given the imminence of the date on which it was anticipated that the Release Letter would be given effect to (end of January 2009), albeit that never occurred.
The Charge
34.	The Charge, as drafted by Eversheds LLP for Kaupthing, is described on its front sheet as “Legal Charge over shares
35.	The “Charging Clause” (Clause 3.1) includes a charge by way of first mortgage over “the Shares” as defined by Clause 1.1, and a charge by way of first mortgage over the “Distribution Rights” from time to time accruing on “the Shares”.
36.	“Distribution Rights” are, in Clause 1.1, defined to mean:
“(a) All dividends, distributions, interest and other income paid or payable on any Share;
(b)	All shares or other property derived from any Share (whether by way of conversion, consolidation, subdivision, substitution, redemption, bonus, preference, option or otherwise); and
(c)	A other allotments, accretions, rights, benefits and advantages of all kinds accruing, offered or otherwise derived from or incidental to any Share”.
37.	Clause 1.2.1.7 of the Charge provided that the word "Security” ... “includes any assignment by way of security, charge, lien, mortgage, pledge or other security interest securing any obligation of any person and any other agreement or arrangement having similar effect
38.	Clause 1.1.2 of the Charge provided that: “Where something (or a list of things) is introduced by the word “including” or by the phrase “in particular”, or is followed by the phrase “or otherwise”, the intention is to state an example (or examples) and not to be exhaustive (and the same applies when other similar words or phrases are used).
The correct approach to construction
39.	The modem starting point is, of course, Lord Hoffmann’s speech in Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896 at 912F-913E:-
“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(1)	The background was famously referred to by Lord Wilberforce as the ‘matrix of fact', but the phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(2)	The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(3)	The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax ...
(4)	The rule that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require Judges to attribute to the parties an intention which they plainly could not have had
40.	In Jumbo King Ltd v. Faithful Properties Ltd (1999) HK CFAR 279, Lord Hoffmann made clear that:-
“If the ordinary meaning of words makes sense in relation to the rest of the document and the factual background, then the Court will give effect to that language even though the circumstances appear hard for one side or another”
Whilst Lord Hoffmann had earlier in that case recognised, as he had in ICS v West Bromwich, that different principles might apply if one could detect a linguistic mistake, this is a recognition that a court has no jurisdiction to construe a contract simply to achieve a result which is, objectively, more reasonable than that agreed to by the parties.
41.	In BCCI v. Ali [2002] 1 AC 251, at 259F-G, Lord Bingham summarised the objective of the court in construing a document as follows:-
"... The object of the Court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the Court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties’ relationship and all the relevant facts surrounding the transaction so far as known to the parties
In the same case, at 269F, Lord Hoffmann reaffirmed that: “... The primary source for understanding what the parties meant is their language interpreted in accordance with conventional usage ... ”.
42.	In Mannai Investments Co. Ltd v. Eagle Star Life Assurance Co. Ltd [1997] AC 749, Lord Steyn said that:-
“In determining the meaning of the language of a commercial contract ... the law generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way a reasonable commercial person would construe them
43.	In Infiniteland Ltd v. Artisan Contracting Ltd [2006] 1 BCLC 632, at [88], Carnwath L.J. said that:-
“In the context of a professionally drawn legal document such as this, the Court should start from a strong presumption that such expressions [established legal terms] are used in their ordinary legal meanings ”.
This is a recognition that when an agreement drafted by a lawyer uses established legal terms or expressions, then there is a strong presumption that those terms are employed in their proper legal sense.
44.	Particular reliance was placed by Mr Gledhill on the more recent decision of the Supreme Court in Rainy Sky SA v. Kookmin Bank [2011] 1 WLR 2900. In that case, Lord Clarke, in a judgment with which all the other members of the Court were in agreement, at para [14] reaffirmed that:-
“The ultimate aim of interpreting a provision in a contract, especially a commercial contract, is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. As Lord Hoffman made clear in the first of the principles he summarises in the Investors Compensation Scheme case ... the relevant reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation they were in at the time of the contract”.
45.	The approach that had been taken by the majority in the Court of Appeal in Rainy Sky SA was reflected in the following passage from the Judgment of Patten L.J., cited by Lord Clarke at para [18]:-
“ Unless the most natural meaning of the words produces a result which is so extreme as to suggest that it was unintended, the Court has no alternative but to give effect to its terms”.
This was on the basis that:
“To do otherwise would be to risk imposing obligations on the other party which they were never willing to assume and in circumstances which amount to no more than guesswork on the part of the Court”.
46.	On the other hand, in his dissenting Judgment in the Court of Appeal, Sir Simon Tuckey, in a passage cited by Lord Clarke at para [16] had said:-
“If the language of the bond leads clearly to a conclusion that one or other of the constructions contended for is the correct one, the Court must give effect to it, however surprising or unreasonable the result might be. But if there are two possible constructions, the Court is entitled to reject one that is unreasonable and, in a commercial context, the one which flouts business common sense ... the more unreasonable the result, the more unlikely it is that the parties can have intended it”.
47.	The Supreme Court, in allowing the appeal against the decision of the Court of Appeal, preferred the approach of Sir Simon Tuckey to that of the majority - see para [39] of Lord Clarke’s Judgment. However, the Supreme Court went further, because Lord Clarke expressly rejected the suggestion that a construction suggested by the wording could be rejected Only if it was unreasonable and flouted business common sense - see para [45]. Further, at para [30] Lord Clarke expressly approved the following passage from the Judgment of Longmore L.J. in Barclays Bank plc v. HHY Luxembourg SARL [2011] 1 BCLC 336 at paras 25 and 26, which Lord Clarke described as neatly summarising the correct approach to the problem:*
“[25] The matter does not of course rest there because when alternative constructions are available one has to consider which is the more commercially sensible. On this aspect of the matter Mr Zacaroli has all the cards ...
[26] The Judge said that it did not flout common sense to say that the clause provided for a very limited level of release, but that, with respect, is not quite the way to look at the matter. If a clause is capable of two meanings, as on any view this clause is, it is quite possible that neither meaning will flout common sense. In such circumstances, it is much more appropriate to adopt the more, rather than the less, commercial construction”.
48.	It is important to note that at para [21] Lord Clarke accepted the submission of the appellants that the exercise of construction is essentially “one unitary exercise”.
49.	Ultimately, I consider that the present state of the law, and in particular the interplay between the wording of the document and where one should apply the more commercial construction, is helpfully summarised by Aikens LJ in BMA Special Opportunity Hub Finance Ltd and others v African Minerals Finance Ltd [2013] EWCA Civ 416, at para [24]:
“The court's job is to discern the intention of the parties, objectively speaking, from the words used in the commercial document, in the relevant context and against the factual background in which the document was created. The starting point is the wording of the document itself and the principle that the commercial parties who agreed the wording intended the words used to mean what they say in setting out the parties' respective rights and obligations. If there are two possible constructions of the document a court is entitled to prefer the construction which is more consistent with “business common sense,” if that can be ascertained. However, I would agree with the statements of Briggs J, in Jackson v Dear ( [2012] EWHC 2060 (Ch) at 40 ) first, that “commercial common sense” is not to be elevated to an overriding criterion of construction and, secondly, that the parties should not be subjected to “. . . the individual judge's own notions of what might have been the sensible solution to the parties' conundrum”. I would add, still less should the issue of construction be determined by what seems like “commercial common sense” from the point of view of one of the parties to the contract.”
50.	In the present case much of Fons’ evidence was directed at dealing with defences of estoppel and rectification pleaded by Pillar, but subsequently abandoned, and also at dealing with a further issue raised by Pillar that it abandoned late in the day, namely an argument that there was a “commercial equivalence” between the types of loan made by Fons as governed by the SLAs, and Fons’ shareholding, and in particular its holding of preference shares. The abandonment of these various issues has limited significantly the evidence contained in Fons’ witness statements that is admissible or relevant for determining the issues as to construction still requiring determination.
51.	In considering the evidence, I must bear firmly in mind that whilst I am to have regard to the background “matrix of fact”, the previous negotiations of the parties, and their declarations of subjective intent, are inadmissible for the purposes thereof save, at least in the former case, for the purpose of establishing the parties’ state of knowledge of the facts - see ICS v West Bromwich at 913A, and Chartbrook Homes Ltd v. Persimmon Homes Ltd [2009] 1 AC 1101, at 112ID, per Lord Hoffmann.
52.	Included within the inadmissible previous negotiations would be earlier drafts of the relevant document - see National Bank of Australasia v. Falkingham & Son [1901] AC 585 at 591, save that such materials might be admissible for the purposes of identifying proferens when construing contra proferentem.
53.	Further, subject to certain limited exceptions, the subsequent conduct of the parties is an inadmissible aid to construction - see e.g. Amalgamated Investment and Property Co. Ltd v. Texas Commercial International Bank Ltd [1982] QB 84, at 120A-B.
Expressions used within the Definition
54.	Before turning to consider what the particular words “other securities” and “debentures” meant as those words were used in the Definition, it is necessary, albeit with a degree of caution, to look at how those words have been construed in other cases with a view, amongst other things, to seeing whether one can detect therefrom any particular common or ordinary meaning that might inform the relevant reasonable man’s understanding of what the parties might be taken to have meant by the use thereof. Indeed, both parties took me to a number of cases dealing with the meaning of these words.
55.	Mr Gledhill, on behalf of Pillar, was right to point out that the governing law of the Charge is English law (Clause 18.1), and that the references therein to particular provisions of the Companies Act 1985 and the Insolvency Act 1986 make clear that we are here concerned with English law concepts.
56.	Further, Mr Gledhill was right to draw my attention to Clause 1.2.2 of the Charge set out in para 38 above. I accept his submission that the effect thereof is that the use of the expression “other” before “securities” within the Definition makes it clear, insofar as it needed to be made clear, that the various categories of document or instrument expressly referred to are to be taken to be non-exhaustive examples of “securities” within the meaning of that word as used within the Definition. However, these examples do, in my judgment, assist in informing what the word “securities” is to be taken to have meant.
57.	Further, before looking at meanings which have been given to the words “securities” and “debentures” in other cases, it is necessary to briefly consider what the other types of “securities” specifically listed in the Definition are generally understood to be:-
57.1	“Shares” - it is trite that a share means a share in a company’s share capital - see Section 540(1) of the Companies Act 2006;
57.2	“Stocks ” - stocks are fully paid shares converted into stocks, often issued as a divisible series;
57.3	“Bonds” - a bond is by common definition an obligation by deed - see e.g. Stroud’s Judicial Dictionary at page 322. However, a bond is a common way of securitising a debt so as to make it a marketable or bearer commodity, and an instrument so created is a common meaning of bond;
57.4	“Warrants ” - a warrant is a negotiable instrument that entitles the bearer to the shares specified in it - see e.g. Halsbury’s Laws, Companies, at para 382, and Section 122 of the Companies Act 2006 ;
57.5	“Coupons” - a coupon is, generally, a bearer instrument issued by a company that entitles the holder to payment (usually of some interest) in certain circumstances. Thus, for example, a company that issues a share warrant may, if so authorised by its article, provide (by coupon or otherwise) for the payment of the future dividends on the shares included in the warrant - see Section 779(3) of the Companies Act 2006.
58.	It is to be noted that Chapter 2 of Part 21 of the Companies Act 2006, concerned with “Evidencing and transfer of title to securities without written instrument ”, contains, in Section 783(a) the following definition of “securities”, namely: “shares, debentures, debenture stock, loan stock, bonds, units of a collective investment scheme within the meaning of the Financial Services and Markets Act 2000 (c8) and other securities of any description
59.	So far as the cases that deal with the meaning of “securities” are concerned, I find them to be of limited assistance because they are generally concerned with the definition of “securities” for the purposes of some particular (usually tax) statute when the question is whether the particular obligation falls within one category or another. An example that was cited to me is Singer v. Williams [1921] AC 41 where the various members of the House of Lords expressed divers views as to the normal meaning of the word “securities”. Viscount Cave (at page 49), whilst not excluding extension to other forms of security such as guarantees, referred to a debt or claim the payment of which was in some way secured, the security generally consisting of a right of resort to some fund. Lord Wrenbury (at page 59) limited the definition to the holding of a right of resort to some property or fund, but Lord Phillimore (at page 63) was of the view that: “In a popular sense the word ‘securities’ includes, I think nowadays the scrip of stocks and shares”. Lord Shaw of Dunfermline (at page 57) made the point that the meaning of “securities” will depend on the context in which it is engaged because: “It is an ordinary English word used in a variety of collocations”.
60.	In Re Raynor [1904] 1 Ch. 176 at 179 and 189, the Court of Appeal agreed with the first instance Judge that the word “securities” has as its primary meaning “money secured on property”, but went on to hold that the expression was a flexible one and was widely used as a “synonym for ‘investments’ ”. Thus, in construing an investment clause in a Will, the expression was held to extend to ordinary stocks and shares.
61.	In Henry Ansbacher & Co v. IRC [1961] 1 WLR 1179, a Case particularly relied upon by Mr Gledhill on behalf of Pillar, the Court of Appeal went so far as to hold that the word “security” in the Stamp Acts referred to “any written obligation for payment of money”, and was not confined to instruments creating proprietary rights of any kind, or rights of recourse. However, I note that the Court of Appeal reached this conclusion in order to ensure consistency with another provision of the Stamp Acts, Harman L.J. specifically commentating that this particular meaning did not give the term “security” its “ordinary meaning”. Harman L.J. so said having quoted from a passage from the Judgment of Wright J. in Jones v. IRC [1895] 1 QB 484 at 492, where Wright J. had said: "... The word ‘security’ as used in these Schedules does not mean as in popular language some obligation which is auxiliary to some other obligation, but means any obligation created by any instrument”.
62.	This “popular language” meaning so referred to is consistent with the traditional definition given by Jowitt’s Dictionary of English Law (Second Edition, 1977), referred to in Gore-Browne on Companies at para 27(5), of: “something which makes the enjoyment or enforcement of a right more secure or certain;, i.e. some instrument which contains an additional promise or constitutes evidence of the debt designed to make creditor’s burden easier to discharge”.
63.	Reliance is also placed by Mr Gledhill on what is said to have been a similar conclusion to that in Henry Ansbacher & Co v. IRC (Supra) reached by Ungoed- Thomas J. in IRC v. Parker [1965] 1 Ch. 866 at 886 (overruled in the Court of Appeal, but affirmed on this point by the House of Lords at [1966] AC 141, 160F per Viscount Dilhorne). This case concerned what were described as “debentures” issued to members as a way of distributing undivided profits. The debentures were held to be “securities ” for the purposes of the relevant tax legislation notwithstanding that they amounted to “no more than recognition by the company of an obligation to pay the amounts for which they were issued, dischargeable, unless condition 9 applied, after the happening of certain events, solely at the discretion of the company” (see Viscount Dilhorne at 157B).
64.	The word or expression “debenture” has, in a somewhat similar way, been somewhat diversely defined in the reported cases depending upon the context.
65.	“Debenture” is defined by Section 738 of the Companies Act 2006 such that it ... “includes debenture stock, bonds and other securities of a company, whether or not constituting a charge on the assets of the company
66.	However, at common law, it is clear that no precise definition of the term is possible - see Levy v. Abereorris Slate & Slab Co. (1887) 37 Ch. D 260 at 264 per Chitty J., and Knightsbridge Estate Trust Ltd v. Byrne [1940] AC 613 at 621 (per Viscount Maugham) and 627 (per Lord Romer).
67.	In Levy v. Abercorris Slate & Slab Co. (Supra) at 264, relied upon by Mr Gledhill, Chitty J., following his earlier decision in Edmonds v. Blaina Furnaces Co. (1887) 36 Ch. D 215 at 219, held that: “A debenture means a document which either creates a debt or acknowledges it, and any document which fulfils either of these conditions is a “debenture In that case, the promise to pay was, in fact, supported by a charge.
68.	However, even apart from the wording of Section 738 of the Companies Act 2006, it is clear at common law that the grant of security is not necessary before a document can, in appropriate circumstances, properly be described as a “debenture” - see the decision of the Court of Appeal in Lemon v. Austin Friars Investment Trust Ltd [1926] Ch. 1. In this case, Pollock M.R., made the point that the name ascribed to the document by the parties was not conclusive as to whether or not the document was properly described as a “debenture” (the document was there called an “income stock certificate”). Further, he also referred to the fact that the “primary qualification of a debenture” had been fulfilled - “namely that it is an acknowledgement of the indebtedness” (page 15). However, Pollock MR concluded his Judgment (at page 16) by saying:-
“But it appears to me that the very intention of this instrument is to record indebtedness, to record the source from which that indebtedness is to be liquidated, and to show that the persons who are holders of the certificates are holders in a series and are to be paid pari passu, and that their names are to be recorded in a register. This instrument does, therefore, contain a number of characteristics of a debenture, and in my judgment we ought to hold affirmatively that it is a debenture within the meaning of s. 102 [of the Companies (Consolidation) Act, 1908]
This latter passage does lend support to the proposition that whilst an acknowledgement of indebtedness might be the primary qualification of a debenture, it may not be sufficient in itself to constitute one absent other indicia of a debenture.
Mr Gledhill referred me to a passage from the Judgment of Warrington L.J. in Lemon v. Austin Friars Investment Trust Ltd at page 17 where he said:
“If you find that a document of this kind contains acknowledgement of indebtedness, it satisfies, at all events, that part which was thought to be sufficient by Chitty J. and was said in express terms to be confirmed by Lindley J., and I need not express my own opinion. On these authorities it is obviously sufficient to constitute the document a debenture and on that simple ground, in my opinion, the Judgment of Lawrence J. was correct”
However, as Mr Cadwallader pointed out in reply, this raises the question of what Warrington L.J. meant by the expression “document of this kind”.
69.	No authority was cited to me in which a simple loan agreement has actually been held to be a “debenture ”, whether at common law or otherwise, although it is to be noted that in MV Slavenburg’s Bank v. Intercontinental Natural Resources Ltd [1980] All ER 955 at 976, Lloyd J. would, had been necessary for his decision, have been prepared to hold that a general credit agreement by which a bank was to provide a company with credit facilities was a debenture. However, this was plainly obiter.
70.	Mr Cadwallader, as well as taking me through a number of authorities that I have referred to above, also referred me to Palmer’s Company Law, Volume 3 at 30.033, which reads as follows:-
“In English law a debenture need not be executed as a deed. The debt need not be quantified at the date of its creation and repayment need not be made at a fixed date but instead only in the event of a winding up or upon some contingency. Although the modern meaning of the term “debenture” is thus very wide, it would go too far to assert that every document creating or acknowledging the indebtedness of the company is a debenture. The term would not be used when referring to bills of exchange or other negotiable instruments, deeds of covenant and many other documents where a company stipulates to pay a sum of money”.
No authority is cited for the latter proposition.
The parties’ respective contentions
Pillar
71.	The essence of Pillar’s case is as follows:-
71.1	The SLAs were “securities” within the meaning of the Definition, alternatively they were “debentures”, and so fell within the definition of “Shares” charged by Clause 3.1.1.
71.2	The reference to “securities” cannot have been intended to be limited to “security” within the definition of “security” in Clause 1.2.1.7, i.e. an enforceable security providing for a right of recourse. This is because, applying Clause 1.2.2 of the Charge, the other types of instrument specifically referred to in the Definition are taken to be examples of “securities ”, and not all of these fall within the Clause 1.2.1.7 definition of “security”, in particular shares, bonds, warrants and coupons, albeit that debentures may or may not fall within such definition.
71.3	It is argued on behalf of Pillar that the cases that I have referred to above demonstrate that the words “securities” and “debentures” can have more than one meaning dependent upon the context. Thus, so it is argued, the wording of the Definition is ambiguous, one engages immediately with the decision of the Supreme Court in Rainy Sky SA, and the issue as to which meaning is to prevail is to be determined by reference to what gives effect to the more, rather than the less commercial construction, even if the construction rejected can in no sense be described as flouting common sense.
71.4	As to what is the more, rather than the less commercial construction of Clause 3.1.1 and the Definition, it is argued that:-
71.4.1	It would make no commercial sense to limit the meaning of the word “securities” within the Definition to secure Obligations within the meaning of “security” defined by Clause 1.2.1.7, or even to the concept of “security” in the more limited “popular language” sense referred to in para 62 above. This is because, so it is said, there is simply no sense in Kaupthing having taken a charge over Fons’ shares held as shareholder, but not also over loans made as a shareholder to Corporal, particularly bearing in mind that, in the present case, Fons’ unsecured rights under the SLAs in fact rank ahead of its rights as shareholder.
71.4.2	The same point is made by Pillar insofar as it might be suggested that the reference to “securities ” points to some instrument that is designed to be transmissible or marketable as a security of the kind envisaged by provisions such as Section 738(a) of the Companies Act 1986, or insofar as it might be suggested that the reference to “debentures” points to something rather more formal than simply an acknowledgement of a debt, but to some document containing more indicia of a debenture than that. Again, it is said that when Kaupthing came to taking security in respect of Fons’ interest in Corporal, it objectively made no sense to treat as excluded from the Charge the benefit of instruments such as the SLAs.
71.4.3	It is said that the Charge plainly intended to catch more than just the shares held by Fons in Corporal, hence the extended definition which did not, as we have seen, appear in the draft charges prepared in respect of the shareholdings in Hornblow and 365. In this respect, it is suggested that it is significant that the only other interest in Corporal in fact capable of being caught by the Charge was that of Fons under the SLAs.
71.4.4	It is said that the point is further reinforced by the fact that the indebtedness of Kaupthing was at least £11.5 million, and perhaps as much as £14 million, whereas the value of Fons’ shareholding in Corporal was, so the evidence would tend to suggest, significantly less than that.
71.4.5	Further, so far as may be necessary, Mr Gledhill, on behalf of Pillar, points to the certification provision in Clause 4.1 of the SLAs as introducing into the SLAs something which makes the enjoyment or enforcement of the rights under the SLAs more secure or certain, and the same point is made in respect of Clause 6 thereof limiting rights of set off etc. These, so it is said, are indicia of a “security” within the meaning considered in para 55 above, if not also of a “debenture”.
71.4.6	Mr Gledhill submits that no significance should be attached to the label of the document “Legal Charge over shares”, not least because the effect of the Definition is, on any view, to extend the meaning of “Shares” to instruments that are plainly not shares in the ordinary sense, or necessarily analogous thereto.
71.4.7	Mr Gledhill further submits on behalf of Pillar that no significance is to be attached to the fact that the definition uses the words “owned by the charger in Corporal”, insofar as it might be said by Fons to support the argument that the use of the word “securities”, or indeed the use of the word “debentures” pointed to a need for the indebtedness to be a secured one in the sense of providing for a right of recourse, or something that could properly be described as proprietary. Pillar’s case as to this is that:-
71.4.8.1	The word “owned” simply qualifies what precedes it, i.e. that the “stocks, shares, debentures, bonds, warrants, coupons and other securities” have to be owned by Fons to be subject to the charge; and
71.4.8.2	So far as the word “in” is concerned, it is permissible to speak in terms of investing “in” a company to which one has lent money, and Mr Gledhill points to the fact that para 15 of the written statement of Petur Mar Halldorsson, filed and served on Fons’ behalf but not ultimately relied upon at trial, said this about the SLAs: “We saw that as a more secure asset in the form of a loan note in Corporal at 8% interest it was a higher rate of interest
However, I do note from para 15 of Mr Halldorsson’s witness statement that in referring to a “more secure asset”, he is contrasting making a loan to Corporal/Hamleys, as opposed to making a loan to “Baugur Group in Iceland
71.4.8	Thus, in conclusion, the essence of Pillar’s case is that the reasonable objective observed, having regard to the language used, but also mindful of the commercial sense of the situation, and what is said by Pillar to be the commercial answer which made most sense, would have understood the parties to mean that the Definition, and the word “securities” and/or that “debentures” used therein extended to rights such as those of Fons under the SLAs, even if Kaupthing was not specifically aware of the latter.
Fons
72.	The essence of Fons’ case is as follows:-
72.1	The definition of “security” in Clause 1.2.1.7 of the Charge ought to be applied to the word “securities” in the Definition, so as to limit the latter to securities that involve the giving of “security” within the meaning of Clause 1.2.1.7, and that having so defined “securities”, that ought to then inform how “debenture” ought to be construed, limiting the definition to debentures that do involve the grant of “security” within the meaning of clause 1.2.1.7.
72.2	Even if that is not right, the use of words such as “stocks”, “shares”, “debentures ”, “bonds”, “warrants”, and “coupons” in conjunction with the expression “other securities ”, clearly points to an intention to confine the latter to “securities” in the sense of something in the nature of a bearer or transmissible instrument, or at least in the “popular language” sense referred to in para 62 above involving something tangible that makes some underlying debt or contribution to capital, and its enforceability or enjoyment in some way more secure or certain.
72.3	Mr Cadwallader cautions that the exercise of construction or interpretation of a document is not about simply looking at what makes most commercial common sense, and that is not what Rainy Sky SA decided. One must not, he says, conflate the idea of the available meaning of words with all the meanings that the relevant word might have. Thus before deciding the issue on the basis of what makes most commercial sense, one must determine and decide the available meaning of the words in the context in which they are applied, and it is only if one is then left with ambiguity that it becomes permissible to look at which of the alternatives makes the most sense from a commercial perspective.
72.4	Mr Cadwallader argues that business people, seeing the expressions "debentures” and “other securities” as used in conjunction with the rest of the wording of the Definition, would not understand either of them as extending to unsecured loan agreements such as the SLAs on the basis that the ordinary meaning of those words as used in the context of the Charge itself is insufficiently wide to extend to documents or instruments that do not have the attributes referred to in sub-paras 72.1 or 72.2 above.
72.5	Consequently, one simply does not get to the question as to which of the rival constructions makes the most commercial sense.
72.6	However, I understand it to be Fons’ case that, in any event, a consideration of what makes most commercial sense provides no real assistance in the present case because there is no sufficient evidence that the construction contended for by Pillar does in fact make more commercial sense than that contended for by Fons.
72.7	Mr Cadwallader prays in aid of Fons’ construction considerations such as:-
72.7.1	The reference in the Definition to a requirement that the relevant document or instrument be “owned by the Chargor in Corporal”;
72.7.2	The label “Legal Charge over shares” - cf. Chartbrook (supra) at 1112H-1113 A.
72.8	Mr Cadwallader also prays in aid the principle of contra preferentum construction, on the basis that the Charge was drafted by Kaupthing’s solicitors, Eversheds LLP, albeit amended in accordance with Fons’ suggestions. Therefore it is said that the benefit of any doubt in relation to construction ought to be given to Fons.
My decision as to the true meaning of “Shares”
73.	It is necessary to start with the language actually used in the Charge, and I agree with Mr Cadwallader that, before any consideration as to which (if any) construction of the words “other securities” and “debentures” in the context of the Definition and the other provisions of the Charge makes more commercial sense, it is first necessary to consider whether the such words in such context convey a clear and unambiguous meaning that should be given effect to. If they do, and if nothing has gone wrong with the wording, then the Court ought to give effect thereto, even if another result might, looking at the matter objectively, have made more commercial sense.
74.	For this purpose, and in looking for ambiguity, I do not consider it good enough merely to identify “other securities” and “debentures” as being, taken on their own, words capable of different constructions or meaning. I consider that one must ask whether such words, read together with the rest of the Definition and the rest of the Charge, and in context, give rise to an ambiguity.
75.	I do not accept Mr Cadwallader’s argument on behalf of Fons that the definition of “security” in Clause 1.2.1.7 is determinative for the purposes of construing the word “securities”, or indeed the word “debentures” as used in the Definition. I accept Mr Gledhill’s argument that the application of Clause 1.2.2, if not also ordinary principles of construction, leads to the conclusion that the particular documents or instruments specified within the Definition are to be taken to be examples of “securities”. Consequently, as certain of them, e.g. shares, stocks, bonds and warrants, clearly do not fall within the Clause 1.2.1.7 definition of “security”, it seems to me that the parties cannot have intended the meaning of “other securities” or “debentures” in the Definition to be so limited.
76.	Thus I consider that the words “securities” and “debentures” as used in the Definition must have some other meaning than one tied to the definition of “security” in Clause 1.2.1.7.
77.	I have analysed in para 57 above the nature of the particular documents or instruments specified within the Definition. They are all, with the possible exception of “debentures” given the potentially wide common law definition thereof, documents or instruments either designed to be transmissible, or even to be of a bearer nature, or at least have about them a formality or quality demonstrative of making some underlying right more readily enforceable. As to “debentures”, whilst “debentures” might, in an appropriate context, be construed as extending to a simple loan agreement, I accept that the ordinary businessman or, indeed the ordinary company lawyer, would be surprised to hear a simple loan agreement described as a “debenture” absent more by way of indicia of a debenture as commonly understood (cf. the citation from Lemon v Austin Friars at page 16, per Pollack MR, referred to in para 68 above), and that a simple loan agreement does not, without more, accord with the legal meaning of debenture as ordinarily understood.
78.	As the various documents or instruments specifically set out in the Definition are to be taken as examples of “other securities”, they do, in my judgment, point firmly to what the relevant reasonable objective observer would have understood the parties to have intended by the word “securities”, namely some document or instrument with like qualities.
79.	Consequently, I accept Mr Cadwallader’s argument that ordinary business people, or more pertinently, a relevant reasonable objective observer, looking at the wording of the Definition taken as a whole, in particular given the inclusion of the references to "shares", “stocks”, “bonds”, “warrants” and “coupons”, would not understand the parties to have intended the reference to “other securities ”, or indeed the reference to “debentures”, as extending to documents such as the SLAs, or the unsecured liabilities arising thereunder. I consider that, in the present context, the words “other securities” and “debentures” bear an ordinary meaning quite different from a mere loan agreement.
80.	Even if strictly admissible, I am not persuaded that the preparation of the two draft Deeds charging the shareholdings in Hornblow and 365, simply referring to charges, or the equivalent, over shares therein without including an extended definition such as that contained in the Definition, materially assists Pillar. The genesis of the Charge, and the idea that Fons should provide security to Kaupthing came, as we have seen, from pressure applied by Kaupthing, and subsequent communication at board level. The Charge was drafted as a bespoke legal charge by Eversheds LLP for Kaupthing. The fact that the two other draft charges, which contained different proper law and jurisdiction clauses and do not appear to have been drafted by Eversheds LLP, did not contain an extended definition of “shares” is, in a sense, double-edged because, one must assume, each of the documents was ultimately intended to have the same commercial purpose. Thus I gain little or no assistance from this difference in drafting.
81.	Further, I am not persuaded that the fact that the SLAs might have contained a certification clause, and a provision excluding set off etc., are sufficiently indicative of “security” or a “debenture” to lead to any different conclusion. On the other hand, I do consider that the considerations raised by Mr Cadwallader and referred to in para above do lend some, albeit by no means conclusive support to what I consider to be the correct construction.
82.	In these circumstances, I am not persuaded that the relevant wording is capable of admitting a meaning that would include the SLAs within the definition of “securities” or “debentures” in that I do not consider that any relevant reasonable objective observer would have read it in that way (cf. Rainy Sky SA at 325f). Consequently, I do not consider that one gets to the point of having to resolve an ambiguity in the wording by moving on to considering which of the rival constructions makes the more commercial sense. To do so would, it seems to me, involve elevating commercial common sense to an overriding criterion of construction, when it ought not to be so elevated.
83.	However, even if I am wrong as to this and one ought to try and ascertain which construction does make the more commercial sense, I am not persuaded that it follows that the construction contended for by Pillar necessarily results in the more, rather than the less commercial construction.
84.	The present situation is somewhat different from that in Rainy Sky SA where it could readily be seen that the obvious commercial purpose of the bond in question was to protect the buyers against the loss under the relevant contracts in respect of which they were seeking recompense from the bank under the bond, even though the wording of the relevant clause, on one view of that wording, excluded that. In the present case it would certainly have been of benefit to Kaupthing to have security over more assets, particularly if, as may have been the case, the value of Fons’ shareholding in Corporal was less than its indebtedness to Kaupthing. However, the mere fact that one party have been might have been commercially advantaged by a particular construction placed on a provision, even if it is one that the other party might not have objected to if raised at the time, does not mean that the commercial considerations behind that advantage necessarily inform what the parties are to be taken to have intended by the language that they used in formulating the relevant provision.
85.	In the present case the genesis of the Charge was Kaupthing seeking security and, by way of high level communication between the boards of Fons and Kaupthing, Fons offering a charge over its shares in Corporal, seemingly on an anticipated temporary basis given the terms of the Release Letter - see para 19 above, and para 10 of Mr Stefansson’s witness statement. Kaupthing was not aware of the SLAs, and, as we have seen, there is no evidence that it made any enquiries as to the value of the security that it was taking or as to the indebtedness of Corporal to Fons.
86.	One simply does not know what might have been agreed had the point been raised and discussed at the time, and Kaupthing sought the specific inclusion in the Charge of Fons’ rights under the SLAs. Mr Stefansson suggests that Fons would not have agreed to this as the shares were regarded as sufficient security - see para 26 of his statement and paragraph 33 above. It might be said that Mr Stefansson’s evidence is undermined by his inability to identify with any real clarity the basis upon which he maintains that Fons’ shareholding was, in fact, worth as much as its indebtedness to Kaupthing. However, subject to this, he came across to me as a generally impressive and honest witness with no motive other than to tell the truth, and despite this latter point I accept the general tenor of his evidence to the effect that whatever value might have been ascribed to the value of Fons’ shareholding in Corporal in the Share Purchase Agreement dated 30 March 2007 pursuant to which it acquired its shareholding from Talden, Fons perception at the time was that the value of its shareholding did provide sufficient security and that had the point arisen, Fons would have resisted the inclusion of the SLAs within the scope of the Charge. Further one can see why Fons might have wanted to retain the flexibility to seek repayment of the SLAs in order that the funds in question might be redeployed, without interference from Kaupthing. This, to my mind, all provides a credible commercial reason why Fons might not have agreed to the inclusion of the SLAs within the scope of the Charge (cf. Rainy Sky SA at 329c).
87.	I do not consider that it can properly be said that the construction suggested by Pillar does, in fact, make more business sense than that suggested by Fons, and this is, in my judgment, a situation where what parties are to be taken to have intended is, looking at the matter objectively, more readily and appropriately discernible from the actual wording chosen by the parties than the commercial considerations relied upon by Pillar. The position might have been different had there been evidence that Kaupthing had made specific enquiry of Fons as to outstanding loans as between Corporal and Fons, the value thereof, and how the same were documented. However, there is no such evidence.
88.	Thus I consider that, as a matter of true construction of the definition of the expression “Shares” contained in Clause 1.1 of the Charge, it does not extend to include Fons’ rights under the SLAs which are not therefore caught by the charge contained in Clause 3.1.1 of the Charge.
89.	There is no need for the parties to attend on the handing down of this Judgment. If all outstanding matters, including costs, can be agreed ahead of the hand down then a draft agreed order should be submitted for approval. If not, the outstanding issues will be dealt with either at a separate hearing (if possible over the telephone) or in writing, as the parties consider best. I will extend the time for applying for permission to appeal so that the time period for making application to the Court of Appeal for permission to appeal should not begin to run until I have dealt with any application made to me for permission to appeal.