Skip to content

The point of no return

“There are few, if any, words in the English language which, when viewed in splendid isolation, are capable of only one meaning. The word ‘return’ is not one of the few.” This was the challenge facing the Court of Appeal in a case about the return, within a certain period, of film materials relating to “Starbright”. 

European Film Bonds provided a completion guarantee to Lotus who were responsible for marketing and selling the film. It would be triggered if the film was not completed on time. Under a convoluted provision in a schedule, if certain specified materials were not returned within a certain period, the film would be conclusively presumed to have been completed. In this case no payment would be due under the guarantee.

Lotus had sent the materials by courier within the period but they did not arrive with EFB in time.

EFB argued the word “return” required the materials to be physically delivered back to them. Lotus argued that materials were returned at the point they were dispatched with the courier. In addition, Lotus argued ambiguity in the word “return” meant that commercial common sense should apply so that it should be held to the less onerous time limit (because no reasonable person with all the relevant background would have understood the provision to have the draconian consequences that would follow from EFB’s meaning). 

The Court of Appeal agreed with European Film Bonds. It acknowledged Lotus’ meaning was probably the more common. However what mattered was what the word meant in context.

  • The obligation in the schedule provided that Lotus “...shall return those Lotus Delivery Materials ... to EFB or the Guarantor..”.  On a plain reading this did not mean “to Fedex or some other carrier”.
  • The purpose of returning the materials was to allow EFB to cure any defects.
  • Given the strength of the immediate context in which the word “return” appeared, the court did not attach weight to the fact that words connoting receipt appeared elsewhere in the guarantee.
  • On the information available to the court the time period was sufficient and in any event the consequences of failure to meet either time limit were serious.

Related blog topics