Woodford Land Ltd v Persimmon Homes Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henderson |
| Judgment Date | 15 April 2011 |
| Neutral Citation | [2011] EWHC 984 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC09C04514 |
| Date | 15 April 2011 |
[2011] EWHC 984 (Ch)
Mr Justice Henderson
Case No: HC09C04514
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr John McGhee QC (instructed by Clifford Chance) for the Claimant
Mr Christopher Pymont QC and Mr Andrew Ayres (instructed by Walker Morris) for the Defendant
Hearing dates: 26, 27, 28 and 31 January 2011
Introduction
This is a rectification claim, but with an unusual twist to it which only became fully apparent in the course of the trial which took place over four days between 26 and 31 January 2011.
The rectification claim concerns an option agreement ("the Agreement") for the sale of a development site in Doncaster made on 27 February 2006 between the claimant, Woodford Land Limited ("Woodford"), as vendor and the defendant, Persimmon Homes Limited ("Persimmon") as purchaser. Woodford says that both parties entered into the Agreement in the belief and with the common intention that the cost of the provision of affordable housing on the site (which was required by the local authority, Doncaster Metropolitan Borough Council ("the Council"), as a condition of planning permission) would fall on and be borne by Persimmon; that the Agreement, on its true construction, provided for the costs in question to be deductible as development costs from the purchase price payable by Persimmon; and that the Agreement should therefore be rectified so as to give effect to the common intention of the parties by excluding the costs of affordable housing from the relevant part of the definition of development costs. An alternative claim for rectification on the grounds of unilateral mistake was also pleaded, but was abandoned by Woodford upon completion of the oral evidence.
Persimmon admits and avers that on the true construction of the Agreement the costs of providing affordable housing are deductible from the purchase price payable by it to Woodford. Persimmon denies, however, that there was any common intention to the contrary at the date of the Agreement, although it accepts that in the initial stages of the negotiations both parties intended that the cost of providing affordable housing would fall on Persimmon. The position changed, according to Persimmon, when its in-house solicitor with conduct of the matter, Mr Baird, amended the travelling draft of the Agreement to include a definition of development costs in terms wide enough to cover the costs of affordable housing, and the amendment was accepted without demur by Woodford. Persimmon says that, viewed objectively, this changed understanding remained essentially the same until the date of the Agreement, with the consequence that the rectification claim must fail.
That, in outline, is the nature of the dispute between the parties on the issue of rectification; but there remains a question which puzzled me when I first read the papers and the skeleton arguments of counsel on the day before the trial. Why was Woodford not arguing that, as a matter of construction, the Agreement meant what Woodford says it was always intended to mean? It seemed to me far from obvious that such an argument was untenable, and in cases of the present type it is almost traditional for the claimant to mount a prior argument based on construction, with the claim for rectification advanced in the alternative. Not only are there commonly perceived tactical advantages in proceeding in this way (it enables evidence of the negotiations, inadmissible on the question of construction, to be placed before the court), but, more importantly, the question of rectification only arises if the contract does not have the meaning contended for by the claimant. If, on its true construction, the contract means what the claimant says it ought to mean, then there is nothing for the court to rectify. Moreover, the true construction of a document is a question of law. It is not something that the parties can agree between themselves, in a manner binding on the court.
When I raised some of these points with counsel for Woodford, Mr John McGhee QC, near the start of his opening submissions, his initial reaction was to say that Woodford would welcome a favourable decision from me on the question of construction, so long as I also acceded to an application for permission to amend the particulars of claim to plead the case on that basis. He said that there had been an expert determination, in which he thought the question of construction had been conceded, but it had not been determined so as to bind the parties. It later transpired, however, that this understanding was mistaken. By the end of the trial it was common ground that the question of construction had indeed been formally determined by an appointed expert, Mr John Male QC, albeit on the basis of a concession by Woodford. The dispute resolution clause in the Agreement, pursuant to which the reference to Mr Male had taken place, provided that he should act "as an expert and not as an arbitrator", and that his decision would be "final and binding save for any manifest error". There was no question of manifest error in his determination, so the question of construction had been decided in a way that was final and binding as a matter of contract between the parties. However, it was also common ground, as I had suggested to Mr McGhee at the start of the trial, that such a contractual resolution of the question could not bind the court, because it was not a judicial decision and the doctrine of res judicata therefore could not apply. Counsel for Persimmon (Mr Christopher Pymont QC, leading Mr Andrew Ayres) accordingly submitted, and Mr McGhee expressly accepted, that if I were to disagree with Woodford on the question of construction, and hold that the Agreement cast the burden of the cost of affordable housing on Persimmon, the rectification claim would have to fail, because there would then be nothing to rectify. Woodford would thus be left without a remedy, having (on this hypothesis) unwisely conceded the construction issue on the reference to Mr Male.
Thus it comes about that the first question which I have to decide is the question of construction, because it is an essential preliminary to the pleaded rectification claim. For differing reasons, however, neither side was at all keen to advance submissions to me on the question: Woodford, because a decision apparently in its favour would in fact leave it without a remedy; and Persimmon, because the question had already been decided in its favour by Mr Male. I have therefore not had the benefit of any argument (written or oral) in support of the construction that would place the burden of the affordable housing costs on Persimmon; and I have had only some fairly short oral and written closing submissions from Mr McGhee in support of Woodford's pleaded case on the question. Nevertheless, there was no disagreement between counsel about the principles that the court should apply in construing a written contract of the present type, so although I would have welcomed fuller assistance on the question, I do not feel unduly handicapped in addressing it.
The question of construction:
(1) Background facts
The relevant background facts are few, and may be shortly stated.
Woodford is a development company within the Woodford group, the holding company of which is now in insolvent administration. The particular role of Woodford within the group was to acquire brownfield sites, to carry out remediation works on them, to obtain planning permission and to sell the sites on to residential developers such as Persimmon. Woodford had an acknowledged reputation for its ability to carry out remediation work. A brief description of Woodford's activities to the above effect was given by Mr Jason Parkinson, who has been Woodford's managing director since 2003, in his oral evidence on the first day of the trial. I have no hesitation in accepting him as a truthful and reliable witness in relation to background matters of this sort, which I am satisfied would have been well known to Persimmon and other residential developers with whom Woodford had regular dealings.
Persimmon is a member of the large and well-known Persimmon group of companies, which is engaged primarily in residential development. Mr Keith Saunders was managing director of Persimmon Homes (South Yorkshire) Limited from 1 January 2000 until 31 December 2005, when he became Regional Chairman for the Yorkshire Region. Mr Gerard (Ged) Collingwood was from 2001 to 2009 a land director for Persimmon Homes (South Yorkshire) Limited. I heard evidence from both Mr Saunders and Mr Collingwood, but it is important to note that Mr Saunders is no longer employed by the Persimmon group and he voluntarily gave evidence for Woodford. Mr Collingwood too is no longer employed by the group, and he was initially unwilling to give evidence for either side. Persimmon also refused to release him from his continuing contractual obligations of confidence. In those circumstances, Woodford took out a witness summons requiring his attendance, but at the last moment he agreed to give evidence for Persimmon and signed a witness statement dated 24 January 2011. He was therefore called as a witness by Persimmon, and was cross-examined by Mr McGhee.
The site in question ("the Site") extends to about 43 acres and was formerly used as the Bombardier Railway Works, otherwise known as the Doncaster Rail Maintenance Depot, Kirk Street, Hexthorpe, Doncaster. The Site is bounded to the north by the river Don, and to the south by an area of terraced housing. The western part of the Site, comprising approximately a third of the total area, was already used as a sports ground at the time when the Site was acquired by Woodford...
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