Burrows Investments Ltd v Ward Homes Ltd

Words permitting a transfer of land for specified infrastructure, roads, footpaths, public open space or other social or community purposes must be construed in their contractual and commercial context. The general words did not include completed market dwellings sold at cost to a social housing provider, despite the social purpose of affordable housing and the possibility of a planning obligation.

A party deprived by a deliberate contractual breach of the opportunity to negotiate a release from a restriction may recover negotiating damages. The absence of conventional financial loss does not preclude that remedy where the restriction could have been enforced by injunction. Matters such as actual loss and the value of the release concern quantum.

Burrows sold a housing-development site to Ward under an agreement containing overage provisions and restrictions on disposals during the overage period. Ward later obtained revised planning permission, subject to a section 106 agreement requiring five affordable homes. It transferred five completed units to a registered social landlord without Burrows’s consent or a deed of covenant.

The High Court held that the transfer was a permitted disposal because it was a transfer of land for social or community purposes. It also held that Burrows could not recover negotiating damages because no overage would ultimately have been payable: [2015] EWHC 2287 (Ch).

Burrows appealed. The issues were whether the transfer was a permitted disposal under paragraph (c) of the contractual definition, and, if not, whether Burrows could recover damages assessed by reference to a hypothetical negotiation.

Appeal allowed. Henderson LJ, with whom Rupert Jackson LJ agreed, held that the transfer was not a permitted disposal and that Burrows was entitled in principle to negotiating damages. The matter was remitted for assessment of quantum if not agreed.

1. Paragraph (c) had to be construed as part of the overage agreement as a whole. The flexible ejusdem generis aid to construction supported reading the words “other social/community purposes” in the light of the specified purposes: land for roads, footpaths and public open space. The language was not apt to include a completed dwelling sold to an external purchaser.

2. Although affordable housing serves social and community purposes, and the parties contemplated that a new planning permission might require it, that did not overcome the contractual language and context. A completed dwelling was a Market Unit. A sale of such units to a registered social landlord at cost could materially depress the overage calculation. If the parties had intended that such a sale should be permitted, they would not have left it to be inferred from paragraph (c).

3. Ward therefore breached the express restriction in clause 4.9. Burrows had a legitimate interest in Ward’s performance and had lost the opportunity to negotiate a reasonable price for a release. The restriction was a potentially valuable contractual asset. The court applied the negotiating-damages principles associated with Wrotham Park and explained in [2009] UKPC 45.

4. That Burrows would ultimately have suffered no conventional loss did not prevent recovery. It could have sought an injunction before the transfer, and Ward deliberately completed the transfer without giving it that opportunity. The absence of actual loss, the foreseeability of affordable housing, the urgency of the variation and its value to Ward were relevant to the hypothetical negotiation and quantum, not to entitlement in principle.

• Court of Appeal (Civil Division): Allowed Burrows’s appeal on both construction and negotiating damages, and remitted quantum: [2017] EWCA Civ 1577 .
• High Court, Chancery Division: Held that the affordable-housing transfer was a permitted disposal and that negotiating damages were unavailable: [2015] EWHC 2287 (Ch).