Woodford Land Ltd v Persimmon Homes Ltd

A contract must be construed as a whole. Where a specific provision addresses a subject expressly, it prevails over a general provision which would otherwise create inconsistency. The court must resolve that construction issue before considering rectification; it cannot treat an apparent conflict as an incurable mistake merely because two readings are possible.

Rectification for common mistake requires an objectively ascertained common continuing intention, an outward expression of accord, continuation of that intention when the instrument is executed, and a mistaken failure of the instrument to reflect it. Evidence of subjective intention may assist that objective enquiry, but does not replace it.

Woodford Land Ltd granted Persimmon Homes Ltd options concerning a development site. The agreement allocated responsibility for affordable housing required under a section 106 agreement, but also defined development costs broadly enough potentially to include affordable housing costs as a deduction from the purchase price.

Woodford sought rectification, alleging that both parties had intended Persimmon to bear the affordable housing costs. The court first determined the true construction of the agreement, then considered rectification in the alternative.

1. Construction. The agreement had to be interpreted in its commercial and factual context, applying the principles in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. The previous negotiations and subjective declarations of intent were excluded from construction, but the background known to the parties was admissible.
2. Clause 21 dealt specifically with the incidence of affordable housing obligations. Its reference to the parties bearing the obligation in the agreed shares identified the ultimate burden, not merely the person who would make an interim payment. The related indemnity in paragraph 1.7(c) of schedule 2 reinforced that conclusion.
3. Paragraph 11 of schedule 7 was a general provision covering costs of complying with section 106 agreements. It had to yield to the specific affordable housing provisions in clause 21.3. Accordingly, affordable housing costs were borne by Persimmon and were not deductible from the purchase price.
4. The court rejected the suggestion that the apparent inconsistency automatically required rectification or that the issue could be left unresolved. Construction and correction of mistakes formed part of the single task of interpretation, as explained in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38. The agreement had a clear meaning on ordinary construction principles.
5. Rectification in the alternative. Applying Swainland Builders v Freehold Properties Ltd [2002] EWCA Civ 560, the court found an objectively established common continuing intention, outwardly expressed in the heads of terms and correspondence, which continued until execution. The relevant Persimmon decision-makers were Mr Saunders and Mr Collingwood; the in-house solicitor lacked authority to renegotiate the commercial allocation of the affordable housing burden independently.
6. If construction had been decided otherwise, the agreement would have been rectified by adding “save in respect of Affordable Housing” to paragraph 11 of schedule 7. The claim was nevertheless dismissed because the agreement already produced that result on its true construction.