Evidence of pre-contractual negotiations are only admissible to establish that a fact was known to the parties and to elucidate the general object of the contract.
The High Court considered this principle in Harworth Estates Investments Ltd v Westfield Park Ltd [2024] EWHC 2550 (Ch).
The case concerned whether or not an additional payment was due from the defendant under an agreement of October 2021 for the sale and purchase of York Holiday Park Development, on the site of the former North Selby Mine.
The site was marketed for sale as a holiday park comprising, amongst other facilities, a site for static caravans on part of the park known as “the Bowl”, with outline planning permission having been granted in August 2020.
Westfield’s bid of £3m was successful. During the due diligence process, Westfield’s solicitor discovered that “a zone of influence” – an area of ground that might be affected if subsidence of the mine entry was to occur – existed within a radius of 27m from the centre point of each mineshaft, the heads of which were located in the Bowl. Such an area was not suitable for development, including the siting of static caravans. Harworth made representations to the Coal Authority to reduce the zone of influence.
It was agreed the purchase price would be reduced to £2.6m but, if within 12 months of completion, the Coal Authority confirmed in writing that the zone of influence was reduced, a further payment up to a maximum of £400,000 would be payable within 30 days of demand.
The Coal Authority confirmed in May 2022 no objection to the siting of static caravans save that they should not infringe on or over the mineshafts protective capping slabs. In September 2022, it confirmed the zone of influence was reduced to 3.66m – the radius of the caps. Harworth sought payment which Westfield resisted, arguing that it was only due if the zone of influence was reduced for all development purposes.
When construing a contract, the circumstances leading to its execution can be considered but not evidence of negotiations or the parties’ intentions Merthyr (South Wales) Ltd v Merthyr Tydfil CBC [2019] EWCA Civ 526. The court concluded that a reasonable person would appreciate that a general object of the transaction was a sale of the Bowl for the siting of static caravans, that the agreed price was reduced when it became apparent that such caravans could only be sited in the zone of influence with Coal Authority approval and that if such approval was provided an additional payment was due.
Louise Clark is a property law consultant and mediator
