CA 2024 002410 - [2025] EWCA Civ 1374

It seems to me that the judge failed to apply the well-known principles of construction to which I have referred. He failed to apply the six principles explained by Lord Neuberger in Arnold v Britton and to undertake the task expressed succinctly by Lord Hamblen in Sara & Hossein Holdings Ltd v Blacks Outdoor Retail Ltd. He did not begin his task by seeking to determine objectively the natural and ordinary meaning of the words used both alone and in their immediate context and then proceed to consider them: a) in the light of the other relevant provisions of the Agreement, b) the overall purpose of clause 3.1 of Schedule 4 and the Agreement, c) in the light of the facts and circumstances known or assumed by the parties at the time of the Agreement, and d) taking into account commercial common sense. Although he rejected what he described as Schedule 4’s plain meaning at [43] he did not set it out or consider it in context at all.

He appears to have been influenced in this approach by the negotiations prior to the execution of the Agreement and to have put those, together with his conclusion about the Coal Authority’s supposed lack of power to reduce a zone of influence, at the heart of his reasoning. His conclusion in that regard, coupled with his reasoning at [45] to the effect that a plain reading of paragraph 5 of Schedule 4 would defy commercial common sense, was the basis for his adoption of a purposive approach to interpretation.

It hardly needs to be said that prior negotiations and subjective intentions are irrelevant. Furthermore, I agree with Mr Jackson that the judge’s conclusion that a zone of influence could not be reduced other than by updating the relevant dataset, has no proper foundation. As Mr Jackson submitted, there was no evidence to support the judge’s conclusion that it is not possible to reduce a zone of influence. That is not what the Guidance Note says and there was no other evidence before the judge to that effect. Furthermore, it was neither party’s case.

It goes without saying that one must consider clause 3.1 of Schedule 4 in the context of the Agreement as a whole, taking into account the fact that it was drafted by professionals. It is relevant that: the additional payment is referred to as the ““Released” Land Payment” (emphasis added); clause 1.1 of Schedule 4 makes reference to Harworth making a request for the size of the Zone of Influence to be “reduced”; that “reduce” is also used in clause 1.2; and that clause 3.1 of Schedule 4 uses both “reduced” and “released”. The relevant context includes the definition of “Zone of Influence” itself and paragraph 5 of Schedule 4. “Zone of Influence” is defined by reference to the “area designated by the Coal Authority as a 27m zone of influence centred on each of the 2 mine shafts at the Property less the area directly on top of the two shafts (which the parties acknowledge is not considered to be a suitable position to site a caravan) . . .” Paragraph 5, however, states that Westfield will not locate “any caravans erect any temporary or permanent buildings or park any vehicles with the Zone of Influence”.

It seems to me that taking all those matters into account (and assuming that the Coal Authority is able to reduce the extent of a zone of influence), the reasonable reader with all the relevant background knowledge which would reasonably have been available to the parties when they entered into the Agreement, (including the matters set out by the judge at [47] of his judgment), would have understood the language to mean what it says. It refers to a reduction of the Zone of Influence or a release of that zone. It does so in the light of the reference to the siting of caravans in the definition itself but makes no reference to change of use or partial exoneration or grant of consent for particular uses. No question of ambiguity arises.

As I have already mentioned, not only did the judge rely upon his conclusion that there was no power to release or reduce a zone of influence except on the basis of a change in dataset, he also relied upon his interpretation of clause 5 of Schedule 4 to justify his purposive construction. He decided that on a plain reading, clause 5 of Schedule 4 applied in relation to the land which was designated as a Zone of Influence at the date of the Agreement and therefore, no development or parking could take place on that land, even if the Zone of Influence was subsequently released or removed. He concluded at [45] that such a reading would defy commercial common sense. I agree that that would make no sense.

It seems to me, however, that in reaching his conclusion the judge failed to give clause 5 its natural and ordinary meaning and to interpret it in the context of Schedule 4 and the Agreement as a whole. First, clause 5 has no temporal element. There is nothing which expressly ties it to the date of the execution of the Agreement. Secondly and, perhaps, more importantly, if clause 5 is read in the context of Schedule 4 as a whole and the obligation in clause 2.2 of the Agreement to pay the Released Land Value in accordance with Schedule 4, it is clear that the reference to the Zone of Influence in clause 5 should not be read as if it were static. It arises in the context of the endeavours to request the reduction of the size of the Zone of Influence recorded at clause 1.1 and the terms of clauses 3.1 and 3.2 of Schedule 4 which address the situation where “the Zone of Influence is reduced.” It seems to me, therefore, that when read in context, if and when the Zone of Influence were to be reduced or released, it would be reduced wherever it is referred to in the Agreement, including in clause 5 of Schedule 4.

It follows, therefore, that no commercial absurdity arises and that properly construed, clauses 3.1 and 3.2 of Schedule 4 mean what they say. They refer to a reduction or release of the Zone of Influence not to a permission for a particular use within such a zone. Accordingly, in my judgment, the 15 September Letter did not trigger the obligation in relation to the Released Land Value.

For all of the reasons set out above, I would allow the appeal and dismiss the first ground of the Respondent’s Notice.

What of the second ground of the Respondent’s Notice which is concerned with rectification? The judge did not need to address this alternative remedy because he had decided the matter of construction in Harworth’s favour. As he pointed out at [57] of the judgment, rectification is available in certain circumstances when an agreement is not reflected in the words of a later written document. He concluded, also at [57], that the outcome of the rectification claim was likely to depend upon Ms Toolan’s 20 August 2021 email and Mr Breathnach’s response of 25 August 2021 which he considered to contain an outward expression of accord. He concluded that the parties’ intention was reflected in the words of clause 3.1 and therefore, rectification was likely to have failed.

Mr de la Piquerie says that the judge was wrong to be concerned that the wording of the outward expression of accord was the same as Schedule 4. He submits that outward express of accord is merely evidence of common intention rather than defining it. He relied upon the judgment of the court which was delivered by Leggatt LJ (as he then was) in FSHC Group Holdings Ltd v GLAS Trust Corp Ltd [2019] EWCA Civ 1361 at [73] and [81]. As [73] is best understood in the light of [72], I will set that paragraph out as well:

“The need for an “outward expression of accord”

72.

Joscelyne v Nissen [1970] 2 QB 86 clearly and authoritatively established that a prior concluded contract is not necessary for rectification and that a common intention continuing at the time when a contract is made is sufficient, subject only to the qualification that some outward expression of accord is required. That qualification did no more than spell out the sense in which, as discussed earlier, Simonds J in Crane’s case [1971] 1WLR 1390 used the phrase common intention to refer to what he also called the common agreement of the parties or the true consensus of their minds - in other words, an intention which the parties not only each held but understood each other to share as a result of communication between them. The same principle was stated by Buckley LJ in Lovell & Christmas Ltd v Wall 104 LT 85, 93, in the passage we have quoted earlier (and which was also quoted in Joscelyne v Nissen [1970] 2 QB 86, 92) when he said:

“For rectification it is not enough to set about to find what one or even both of the parties to the contract intended. What you have got to find out is what intention was communicated by one side to the other, and with what common intention and common agreement they made their bargain.”

73.

By insisting on the requirement of an outward expression of accord, the Court of Appeal was thus making clear that it is not sufficient for rectification to prove that each party privately and independently had the same intention as the other with regard to a particular provision of their contract. There can be no common intention of a kind with which the written contract can justifiably be made to conform if the relevant intentions remained locked separately in the breast of each party without being communicated by each party to the other. At the same time, the judgment in Joscelyne v Nissen makes it equally clear that the insistence on an outward expression of accord does not supplant or detract from the need to establish what the parties actually intended the relevant term of the contract (or its effect) to be. The Court of Appeal was not suggesting that only outward appearances are relevant for rectification and that, provided they appear outwardly to be in agreement, the actual intentions of the parties do not matter. On the contrary, the unequivocal holding in Joscelyne v Nissen that the law was correctly stated by Simonds J in Crane’s case [1971] 1 WLR 1390 leaves no room for doubt that, in order to find a common intention, it is necessary to establish what was in the minds of the parties. As we have outlined and as was considered in detail in the Shipley case [1936] Ch 375, which was then approved in Crane’s case, that has always been the basis of the equitable remedy of rectification. The essence of the remedy is that, in a proper case where there is shown to have been a real mistake, the terms of a written contract (or other document) should be reformed in order to give effect to the parties’ real intention.

. . .

81.

The important point made in these passages, however, is not that an outward expression of an accord is unnecessary for rectification. It is that the communication necessary to establish an outwardly expressed accord or common intention which each party understands the other to share need not involve declaring that agreement or intention in express terms. The shared understand may be tacit.”

The Court of Appeal’s conclusions are also relevant and so I shall set them out here:

“Conclusion on the law

176.

For all these reasons, we are unable to accept that the objective test of rectification for common mistake articulated in Lord Hoffmann’s obiter remarks in the Chartbrook case correctly states the law. We consider that we are bound by authority, which also accords with sound legal principle and policy, to hold that, before a written contract may be rectified on the basis of a common mistake, it is necessary to show either (1) that the document fails to give effect to a prior concluded contract or (2) that, when they executed the document, the parties had a common intention in respect of a particular matter which, by mistake, the document did not accurately record. In the latter case it is necessary to show not only that each party to the contract had the same actual intention with regard to the relevant matter, but also that there was an outward expression of accord meaning that, as a result of communication between them, the parties understood each other to share that intention.”

More recently, the Supreme Court has addressed the requirements for rectification in Tyne and Wear Passenger Transport Executive (trading as Nexus) v National Union of Rail, Maritime and Transport Workers & Anr [2024] UKSC 37, [2024] 3 WLR 909. In that case, Lord Leggatt and Lady Simler JJSC, with whom, Lord Lloyd-Jones, Lord Sales and Lord Burrows JJSC agreed, addressed the basis for rectification, the need for outward accord and the relationship with the construction of the contract at [26] – [35]. The most relevant paragraphs are as follows:

“The nature of rectification

26.

The first and fundamental point is that the basic role of rectification is not to correct mistakes in transactions, but to correct mistakes in documents recording transactions. As explained in Snell's Equity , 34th ed (2020), para 16-001:

“Where the terms of a written instrument do not accord with the true agreement between the parties, equity has the power to reform, or rectify, that instrument so as to make it accord with the true agreement. What is rectified is not a mistake in the transaction itself, but a mistake in the way in which that transaction has been expressed in writing.”

In short, rectification is about “putting the record straight”: Allnutt v Wilding [2007] BTC 8003, at para 11 (Mummery LJ) .

. . .

29.

In the common case where the document is contractual, there was at one time a school of thought that rectification could only be ordered to bring the document into conformity with a prior concluded contract. That view was decisively rejected by the Court of Appeal in Joscelyne v Nissen [1970] 2 QB 86 . That case authoritatively established that the claim need not be based on a legally enforceable contract and that a common intention continuing when a contract is made is sufficient, provided there has been an “outward expression of accord” (p 98).

30.

Sometimes the mistake sought to be rectified is simply a clerical error in drawing up the document. But this need not be so. The document as drawn up may contain the exact words which it was intended to contain; but the words may be construed by a court as having a meaning that is different from the meaning which the parties understood and intended them to have. This possibility arises because of the “objective” approach which English law adopts to the interpretation of contractual documents (and other documents on which reliance is intended to be placed), giving them the meaning which the document would convey to a reasonable person regardless of whether this reflects what the maker(s) of the document or parties to the transaction subjectively understood or intended the document to mean. Rectification is available as a safety-valve to prevent the injustice that would occur if a party could take advantage of an objective interpretation which is inconsistent with what (in the case of a bilateral transaction) both parties actually intended the document to mean.

31.

Doubt was cast on this understanding of the law by obiter dicta in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, paras 48–66 , which suggested that the objective test should be applied, not only in interpreting the document sought to be rectified, but also in identifying the prior common intention on which the claim for rectification is based. Among other objections to this approach, it was never explained why the objective meaning of a formal written instrument intended to create legally binding obligations should be displaced in favour of the objective meaning of earlier less formal and less considered communications which were never intended to be binding if the objective meaning of those communications did not accord with the parties’ shared subjective intention. In the words of Snell's Equity , para 16-015, the “traditional orthodox approach” was restored by the judgment of the Court of Appeal in FSHC Group Holdings Ltd v GLAS Trust Corpn Ltd [2020] Ch 365 , holding that the parties must in fact have made a mistake and had the same actual intention for rectification to be granted. There must also be an “outward expression of accord”—meaning that, as a result of communication between them, the parties understood each other to share that intention: see FSHC Group Holdings , para 176.

. . .

33.

It is relevant that the test for rectification, unlike interpretation, is subjective and depends on the parties’ states of mind when considering the correct “target” for rectification in this case.”

On the basis of Lord Leggatt and Lady Simler’s explanation of the availability of rectification, Mr de la Piquerie may be right that the judge’s obiter remarks about the similarity between the content of the emails of 20 and 25 August 2021 and Schedule 4 of the Agreement were somewhat hasty. I am not sure how this helps Harworth, however. It is necessary for Mr de la Piquerie to point to findings as to the common intention of the parties reflected in an outward expression of accord. It seems to me that he is unable to do so.

Mr de la Piquerie submits that the judge found the parties’ common intention at [21] and [56] of his judgment but was confused about the issue of an outward expression of accord. It is clear, however, from [54] of the judgment that the judge was not deciding the rectification claim at all. He did not need to. In those circumstances, it seems to me that it is difficult, if not impossible, to elevate the content of [21] and [56] into findings of fact as to the parties’ common intention. The judge did not make such findings.

In any event, those paragraphs cannot bear the weight which Mr de la Piquerie seeks to place upon them. At [21] the judge comments upon the nature of the proposal made by Mr Breathnach in his 17 August 2021 email and concludes that the proposal was to pay an additional £10,000 up to a maximum of £400,000 “for every static caravan which could be sited in the area of the zones of influence”. At [56] he refers back to his conclusion about the 17 August 2021 email and refers to it as “the first record of a proposal for an additional payment.” These are not findings as to common intention. They both refer to the position of the representative of only one side of the transaction and record a position which was not accepted on behalf of Harworth. A different proposal was made on 20 August 2021.

Nor do I consider that findings of a common intention can be patched together by reference to [13], [14] and [49] of the judgment to which Mr de la Piquerie referred in his oral submissions, or to those paragraphs together with [21] and [56]. At [13] the judge stated that having considered all the evidence, he was satisfied that when “Mr Breathnach wrote of the area of the zone(s) of influence being unsuitable for development, he only had in mind that such an area would not be suitable for development by the siting of static caravans there.” He was focussing on emails dated 28 and 29 July 2021 and went on to find that having regard to those emails, “Ms Toolan . . . would reasonably have understood that, in the 29 July email, when Mr Breathnach referred to undevelopable land, he had in mind land on which static caravans could not be sited.)” At [14], the judge stated that Mr Breathnach had made clear in cross examination that the only development that Mr Flannigan had ever wanted to carry out was the siting of static caravans in the Bowl and at [49] the judge set out his construction of the Agreement.

It seems to me that these are not findings as to the common intention of the parties at all. [49] contains the judge’s interpretation of the Agreement and [13] and [14] refer to the fact that Mr Breathnach and Ms Toolan had caravans in mind in relation to the development of the Bowl before the exchange of emails in August 2021. They do not address the issue of common intention.

In any event, it is not appropriate for us to seek to create what is said to have been the common intention of the parties by sewing together paragraphs from the judgment which are concerned with matters which arose at different times and in different contexts. The judge did not consider common intention because he did not need to address the alternative claim in rectification. It is not possible or appropriate to thread the alleged findings together with an alleged error by the judge in an obiter comment in order to reach the conclusion that we should decide that but for his error, the judge would have granted rectification. Nor is it possible, in the absence of such findings, for us to grant rectification of the Agreement.

Although Mr de la Piquerie confirmed that he was not asking us to remit this matter to the judge for him to make the necessary findings, he did mention the idea at one point. It seems to me that had Mr de la Piquerie asked us to do so, we would have declined. Although in some circumstances, it has been suggested that a matter might be remitted in order to enable the judge to provide reasons in relation to a particular point, (see, for example, the discussion in Michael Hyde & Associates Ltd v J D Williams & Co Ltd [2001] PNLR 8 at [20], English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, [2002]1 WLR 2409 at [25], and Aerospace Publishing Ltd v Thames Water Utilities Ltd [2006] EWCA Civ 717), this is a different case and it would not be appropriate to do so here. It seems to me that the judge could not go back and re-calibrate his thinking and reconsider the evidence in relation to a new point at this stage. Apart from anything else, too much time has elapsed since he heard this matter.

On this basis, I would dismiss this ground of the Respondent’s Notice. To summarise, therefore, I would allow the appeal and dismiss the Respondent’s Notice.

I agree.

I also agree.