Sirius International Insurance Company (Publ) (Appellants v FAI General Insurance Limited and others (Respondents)

The case before the House of Lords was an appeal by Sirius International Insurance Company (Publ) against the decision of the Court of Appeal in a dispute with FAI General Insurance Limited and its provisional liquidators. The central issue was whether the terms of a Tomlin order, which settled a dispute between the parties, satisfied the conditions set out in a side letter to a letter of credit. The side letter stipulated that Sirius could not pay any claim without FAI's prior written agreement, unless certain conditions were met. The dispute centred on whether the acknowledgment of indebtedness in the Tomlin order satisfied one of these conditions.

The House of Lords, after examining the commercial context and the language of the Tomlin order, concluded that the acknowledgment of indebtedness in the Tomlin order did indeed satisfy the condition in the side letter. The court rejected the Court of Appeal's interpretation, which held that the condition had not been met. The Lords found that the Court of Appeal's approach was too literal and did not reflect a commercially sensible construction of the agreement. They emphasized that the interpretation of commercial documents should be guided by a reasonable commercial person's understanding, avoiding undue emphasis on the precise wording.

The House of Lords allowed the appeal, reinstating the decision of the lower court that the condition in the side letter was satisfied by the Tomlin order. This meant that Sirius was entitled to draw down on the letter of credit and that the proceeds should be paid into an escrow account pending the resolution of the remaining claims between the parties. The final orders of the House of Lords affirmed the decision of Jacob J, which had been overturned by the Court of Appeal.