Wynn Realisation Ltd v Vogue Holdings Inc

Contractual words must be construed in the context of the agreement as a whole. Where a contract states that a price is “exclusive of VAT”, that ordinarily indicates that any VAT properly payable is additional to the stated price. A related warranty that the vendor will not opt to tax addresses the specific consequences of that election and does not determine liability where VAT arises on another statutory basis. The court should give meaningful effect to each part of the clause and avoid an interpretation which renders material words redundant.

Wynn sold the Ketley Business Park to Vogue under an agreement which described the purchase price as exclusive of VAT. The agreement also warranted that Wynn would not elect to charge VAT and stated that no VAT would accordingly be payable on completion.

VAT later became payable on the part of the property constituting a new building. Wynn paid the VAT demanded and claimed the amount from Vogue. The High Court dismissed the claim, construing “exclusive of VAT” in its contractual context as meaning that no VAT was payable. Wynn appealed.

1. The appeal was allowed. Judgment was entered for Wynn for £107,250, with interest from 8 March 1991 at the contractual rate. Costs were awarded in the appeal and below.
2. Per Morritt LJ, the contractual wording had to be construed as a whole. The tailpiece of clause 2(a) was primarily a warranty that Wynn would not exercise an option to tax. Its statement that no VAT would be payable was based on the mistaken assumption that VAT could arise only through such an election.
3. That warranty did not cover VAT arising because the property included a new building. If Vogue had paid VAT, it would have had no claim under the warranty for damages because the liability did not arise from an option to tax.
4. The words “exclusive of VAT” could not be treated as redundant. They assumed that VAT might be payable in circumstances outside the warranty and meant that, if VAT was payable, the price for the land was not VAT-inclusive and had to be grossed up.
5. The different wording “plus VAT” in clause 17 concerned chattels and did not require a different construction of clause 2(a). A suggested explanation based on Jaymarke Development Ltd v Elinacre Ltd [1992] STC 575 was too speculative.
6. Auld LJ agreed. Clarke LJ agreed, although with hesitation, emphasising that the respondent’s construction gave no effective meaning to “exclusive of VAT”. The decision was unanimous.

• Court of Appeal (Civil Division): allowed Wynn’s appeal from the order of His Honour Judge Weeks QC dated 16 July 1997 and entered judgment for £107,250 plus contractual interest.
• High Court, Chancery Division, Birmingham District Registry: dismissed Wynn’s claim for VAT on the sale price.