Wimpole Theatre (a firm) v JJ Goodman Lte

A written commercial agreement is construed objectively, using reasonably available background knowledge. Unambiguous language must be applied, even where the result appears commercially unattractive. Pre-contract negotiations, subjective intention and subsequent conduct generally cannot assist construction.

A term may be implied only where it forms part of the proper construction of the agreement and is so obvious that it need not be expressed. Rectification requires convincing proof of a continuing common intention, outward expression of accord and a mistaken failure to record that intention. Rectification for unilateral mistake requires proof that the mistaken party had a specific intention, that the other party knew or turned a blind eye to it, and that both matters are established on the balance of probabilities with a high degree of assurance.

Wimpole Theatre claimed £30,000 under a written agreement with J. J. Goodman Limited concerning the transfer of theatrical activities and the production Woody Sez. Goodman contended that payment depended upon additional obligations, including procuring vacant possession of the theatre by 31 October 2010 and ensuring a specified handover. It alternatively alleged an implied term, collateral oral agreement, rectification for common or unilateral mistake, and absence of binding agreement.

The court determined the construction of the written agreement and the associated validity issues. Trial of alleged breaches and damages under the counterclaim was excluded.

1. Claim. The claim succeeded in principle. Clause 2 required Wimpole to procure signatures by Hartshorn-Hook Productions Ltd and Mary Cossette Productions to the agreement permitting Woody Sez to be staged at the theatre. The clause did not require Wimpole to be the effective cause of the agreement, although Wimpole could not recover if it had prevented its conclusion. Other obligations under the agreement did not constitute conditions precedent to payment under clause 2.
2. Construction. Applying the objective approach in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, reaffirmed in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, the court could not construe clause 5 as imposing a handover obligation. The words “Subject to the agreement of all documentation” were unambiguous: if the documentation was not agreed by 31 October 2010, there was no obligation to complete.
3. Implied term. The alleged handover obligation could not be implied. Under Attorney-General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988, implication is part of the process of construing the instrument as a whole. A term must be part of what the agreement reasonably means, rather than merely reasonable or desirable.
4. Collateral agreement and rectification. The alleged collateral oral agreement was not proved. A collateral contract modifying a written agreement requires strict proof and should be approached with caution. The requirements for common-mistake rectification identified in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71 were not met because there was no continuing common intention or outward expression of accord. Unilateral mistake was also unsupported: there was no evidence that Wimpole knew, or turned a blind eye to, any specific mistaken intention of Goodman.
5. Binding agreement and counterclaim. The agreement was not void for mistake. The court had not determined whether Wimpole breached clause 3. That clause required reasonable endeavours to ensure a smooth transition of whichever listed productions were transferred; it did not require Wimpole to deliver the productions or procure contracts with third-party suppliers. Any further breach claim required particularisation and further trial.