It creates a so-called "red ink" rule, that there is no limit to verbal rearrangement that the court may deploy to give a commercial sensible meaning when construing a contract in its bargaining context.

Persimmon Ltd appealed on the interpretation given and argued that if they failed on those grounds, the contract should be construed in light of previous negotiations, or that the court should allow for the document to be rectified, because it was clear that the intentions of the parties was different from that found.

It is, I am afraid, not unusual that an interpretation which does not strike one person as sufficiently irrational to justify a conclusion that there has been a linguistic mistake will seem commercially absurd to another: compare the Kirin-Amgen case [2005] RPC 169 at pp.

I agree with the dissenting opinion of Lawrence Collins LJ because I think that to interpret the definition of ARP in accordance with ordinary rules of syntax makes no commercial sense.

To allow evidence of pre-contractual negotiations to be used in aid of construction would therefore require the House to depart from a long and consistent line of authority, the binding force of which has frequently been acknowledged: see Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SC 657, 665 (“well-established and salutary", per Lord President Rodger; Alexiou v Campbell [2007] UKPC 11 (“vouched by…compelling authorities", per Lord Bingham of Cornhill.)

The House is nevertheless invited to do so, on the ground that the rule is illogical and prevents a court from, as the Lord Justice Clerk in Inglis v John Buttery & Co (1878) 3 App Cas 552 said, putting itself in the position of the parties and ascertaining their true intent.

By the nature of things, where negotiations are difficult, the parties’ positions, with each passing letter, are changing and until the final agreement, though converging, still divergent.

Critics of the rule, such as Thomas J in New Zealand (Yoshimoto v Canterbury Golf International Ltd [2001] 1 NZLR 523, 538-549) Professor David McLauchlan (“Contract Interpretation: What is it About?” (2009) 31:5 Sydney Law Review 5-51) and Lord Nicholls of Birkenhead (“My Kingdom for a Horse: The Meaning of Words” (2005) 121 LQR 577-591) point out that although all this may usually be true, in some cases it will not.

Among the dirt of aspirations, proposals and counter-proposals there may gleam the gold of a genuine consensus on some aspect of the transaction expressed in terms which would influence an objective observer in construing the language used by the parties in their final agreement.

Mr Christopher Nugee QC, who appeared for Persimmon, went so far as to say that in saying that such evidence was unhelpful, Lord Wilberforce was not only providing a justification for the rule but delimiting its extent.

I do however accept that it would not be inconsistent with the English objective theory of contractual interpretation to admit evidence of previous communications between the parties as part of the background which may throw light upon what they meant by the language they used.

The general rule, as I said in Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251, 269, is that there are no conceptual limits to what can properly be regarded as background.

They may be inadmissible simply because they are irrelevant to the question which the court has to decide, namely, what the parties would reasonably be taken to have meant by the language which they finally adopted to express their agreement.

In exceptional cases, as Lord Nicholls has forcibly argued, a rule that prior negotiations are always inadmissible will prevent the court from giving effect to what a reasonable man in the position of the parties would have taken them to have meant.

The first is that the admission of pre-contractual negotiations would create greater uncertainty of outcome in disputes over interpretation and add to the cost of advice, litigation or arbitration.

Not only would this be time-consuming and expensive but the scope for disagreement over whether the material affected the construction of the agreement (as in the Yoshimoto case) would be considerably increased.

As against this, it is said that when a dispute over construction is litigated, evidence of the pre-contractual negotiations is almost invariably tendered in support of an alternative claim for rectification (as in Prenn v Simmonds and in this case) or an argument based on estoppel by convention or some alleged exception to the exclusionary rule.

Whereas the surrounding circumstances are, by definition, objective facts, which will usually be uncontroversial, statements in the course of pre-contractual negotiations will be drenched in subjectivity and may, if oral, be very much in dispute.

It is often not easy to distinguish between those statements which (if they were made at all) merely reflect the aspirations of one or other of the parties and those which embody at least a provisional consensus which may throw light on the meaning of the contract which was eventually concluded.

Supporters of the admissibility of pre-contractual negotiations draw attention to the fact that Continental legal systems seem to have little difficulty in taking them into account.

In his judgment in the present case, Briggs J thought that the most powerful argument against admitting evidence of pre-contractual negotiations was that it would be unfair to a third party who took an assignment of the contract or advanced money on its security.

There is clearly strength in this argument, but it is fair to say that the same point can be made (and has been made, notably by Saville LJ in National Bank of Sharjah v Dellborg [1997] EWCA Civ 2070, which is unreported, but the relevant passage is cited in Lord Bingham’s paper in the Edinburgh Law Review) in respect of the admissibility of any form of background.

The rule may well mean, as Lord Nicholls has argued, that parties are sometimes held bound by a contract in terms which, upon a full investigation of the course of negotiations, a reasonable observer would not have taken them to have intended.

But a system which sometimes allows this to happen may be justified in the more general interest of economy and predictability in obtaining advice and adjudicating disputes.

It is possible that empirical study (for example, by the Law Commission) may show that the alleged disadvantages of admissibility are not in practice very significant or that they are outweighed by the advantages of doing more precise justice in exceptional cases or falling into line with international conventions.

But that power was intended, as Lord Reid said in R v National Insurance Comrs, Ex p Hudson [1972] AC 944, 966, to be applied only in a small number of cases in which previous decisions of the House were “thought to be impeding the proper development of the law or to have led to results which were unjust or contrary to public policy".

On its facts, the Karen Oltmann was in my opinion an illegitimate extension of the “private dictionary” principle which, taken to its logical conclusion, would destroy the exclusionary rule and any practical advantages which it may have.

The other is estoppel by convention, which has been developed since the decision in the Karen Oltmann: see Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84.

This, to me, increased the attractions of accepting counsel’s eloquent invitation to reconsider the rule in Prenn v Simmonds [1971] 1 WLR 1381, the pot so gently but effectively stirred by Lord Nicholls of Birkenhead in his Chancery Bar Association lecture of 2005 ([2005] 121 LQR 577).