Ambulatory Defined Terms and Deferred Consideration: Court of Appeal holds that “reduction/release” of a Zone of Influence—not mere permission—triggers payment; rectification requires a proved outward accord (Westfield Park Ltd v Harworth Estates Investments Ltd [2025] EWCA Civ 1374)

Ambulatory Defined Terms and Deferred Consideration: “Reduction/Release” of a Zone of Influence—not Mere Permission—Triggers Payment; Rectification Requires a Proved Outward Accord

Introduction

In Westfield Park Ltd v Harworth Estates Investments Ltd [2025] EWCA Civ 1374, the Court of Appeal (Asplin, Coulson and Fraser LJJ) resolved a dispute about the trigger for a deferred consideration clause in a land sale contract for a holiday park development at a former colliery near York. The central issue was whether an “additional” or “Released Land” payment became payable when the Coal Authority indicated that siting static caravans within an area designated as a “Zone of Influence” (ZOI) would be acceptable, or only when the ZOI itself was formally reduced or released.

The purchaser (Westfield) appealed HHJ Klein’s first-instance decision that treated a Coal Authority letter permitting static caravans (save for the protective caps) as the trigger for payment under Schedule 4 of the sale agreement. Harworth (the seller) sought to uphold the outcome on additional grounds, including rectification based on alleged common intention and an alternative Coal Authority letter said to be equivalent.

The appeal required the Court to apply modern principles of contractual interpretation, consider whether to admit fresh evidence concerning technical guidance on mining risk, and address the doctrinal requirements for rectification. The judgment provides important guidance on how defined terms referencing external designations should be read across an agreement (as ambulatory rather than frozen), what will (and will not) satisfy a contractual trigger tied to “reduction” or “release,” and what evidential threshold applies to rectification claims post-FSHC and Nexus.

Summary of the Judgment

  • The Court of Appeal allowed Westfield’s appeal on construction: the natural and ordinary meaning of Schedule 4 required a reduction or release of the ZOI itself; a letter recording that the Coal Authority would not object to static caravans in parts of the ZOI did not qualify.
  • Clause 5 of Schedule 4 (restricting use “within the Zone of Influence”) was construed as ambulatory: references to “Zone of Influence” update if the ZOI is later reduced or released. This removes any supposed “commercial absurdity.”
  • The Court refused Westfield’s application to adduce fresh evidence (the CIRIA Manual), finding it would not have had an important influence and was not clearly authoritative or directly probative of the Coal Authority’s legal ability to reduce a ZOI.
  • Harworth’s Respondent’s Notice failed on both grounds: (i) the alternative Coal Authority letter did not alter the analysis; and (ii) rectification could not be granted because the judge made no findings of common subjective intention with an outward expression of accord, and it was neither possible nor appropriate to remit.

Background

The property comprised a holiday park site including the “Bowl,” intended for static caravans. During due diligence, Westfield’s solicitor discovered that two mineshafts in the Bowl carried a Coal Authority “Zone of Influence” (buffer zone around a mine entry). The parties renegotiated the price down from £3m to £2.6m and agreed an earn-out mechanism: up to £400,000, at £88.96 per m², for land “released” from the ZOI by the Coal Authority within 12 months.

The agreement defined “Zone of Influence” by reference to the Coal Authority’s 27m radius designation (less the areas directly atop the caps), totalling 4,496.28 m². Schedule 4 contemplated that Harworth might engage with the Coal Authority to “reduce” the ZOI; the Released Land Value would be payable if the Coal Authority “confirm in writing that the Zone of Influence is reduced.”

After completion, correspondence from the Coal Authority variously: (i) indicated no objection to siting static caravans (except on the caps) and advised no permanent buildings in the ZOI; (ii) seemingly “reduced” the ZOI to the cap radius (3.66m) but only for the siting of static caravans; and later (iii) clarified there is “essentially just one zone of influence … 27m,” distinguishing this from a 3.66m exclusion zone for built development and static caravans. Harworth demanded the Released Land Value. Westfield refused.

At first instance, HHJ Klein concluded that, given his view that a ZOI is not case-by-case reducible, a literal reading created a commercial absurdity (especially as clause 5 would seemingly forever forbid caravans within the originally designated ZOI) and therefore adopted a purposive construction: the payment was triggered once the Coal Authority, in writing, did not object to siting static caravans in the area (15 September 2022 letter).

Analysis

Precedents Cited and Their Role

  • Arnold v Britton [2015] UKSC 36: Reaffirmed the primacy of the contract’s natural and ordinary meaning, read in its context, with due regard to commercial common sense but not to the point of rewriting the bargain. Asplin LJ emphasised the iterative, text-first approach and that the judge below failed to apply the Arnold matrix of factors.
  • Wood v Capita [2017] UKSC 24: Emphasised interpretation as a “unitary exercise,” balancing text and context. The Court adopted this approach in rejecting a purposive re-casting of straightforward words.
  • Sara & Hossein v Blacks [2023] UKSC 2: Lord Hamblen’s summary of interpretation principles (objective meaning; consider the contract as a whole; iterative cross-checking). The Court followed this structured methodology.
  • Network Rail v ABC Electrification [2020] EWCA Civ 1645: Carr LJ warned against reading clauses in a vacuum; context matters, but it cannot justify departing from clear language. Applied here to reject an outcome-driven departure from the wording “reduced … [or] released.”
  • Napier Park [2014] EWCA Civ 984 and Sans Souci [2012] UKPC 6: Cited on the nuance that “ambiguity” is not limited to linguistic ambiguity; the real question is whether meaning is open to question. The Court nevertheless concluded “no question of ambiguity arises” on this text.
  • FSHC Group Holdings v GLAS Trust [2019] EWCA Civ 1361: Restated rectification for common mistake as a subjective test requiring common actual intention plus an outward expression of accord. The Court used FSHC (and Nexus) to explain why rectification could not be granted absent findings.
  • Tyne and Wear PTE (Nexus) v RMT [2024] UKSC 37: Reaffirmed that rectification corrects documents, not transactions; requires proof of common subjective intention and outward accord; functions as a safety-valve where objective interpretation diverges from the parties’ shared intention. The Court followed this, but held there were no findings capable of supporting rectification here.
  • Rainy Sky; Gan Insurance; Joscelyne v Nissen; Lovell & Christmas; Crane; Shipley; Allnutt v Wilding: These authorities frame the interpretative balance and the rectification test. The Court applied the orthodoxy, declining to displace clear text or to infer a common intention in the absence of proper findings.
  • On remittal and reasons: Michael Hyde; English v Emery Reimbold & Strick; Aerospace Publishing. The Court noted remittal would be inappropriate given the posture of the case and elapsed time.

Legal Reasoning

The Court’s reasoning is a model application of contemporary construction principles:

  • Start with the language: Schedule 4 repeatedly uses “reduce” and “release” in relation to the ZOI; the trigger in clause 3.1 is the Coal Authority confirming “in writing that the Zone of Influence is reduced.” The agreement does not speak of “permission,” “no objection,” or “partial relaxation” for particular uses. On its ordinary meaning, the trigger requires a change in the designation or extent of the ZOI, not merely toleration of a use.
  • Read the instrument as a whole: The defined term “Zone of Influence” appears across Schedule 4. Clause 5 limits use “within the Zone of Influence” but contains no temporal wording. Read contextually, “Zone of Influence” is ambulatory: if the ZOI is reduced or released, all references update accordingly. This removes the first-instance concern that a literal reading would forever bar use even after a formal reduction. No commercial absurdity arises.
  • Context and known background: The parties envisaged attempts to secure a reduction (cll 1.1–1.2). The area-based pricing mechanism (£88.96/m²) underscores that the bargain was about the quantum of land taken out of the ZOI, not about permissions for use within an unchanged ZOI. The Court accepted the background catalogued by the judge, but refused to let it displace the agreed textual trigger.
  • Commercial common sense: Properly deployed, it supports—not supplants—the language. Tying payment to an objectively measurable reduction or release of a technical designation (the ZOI) is clear, administrable, and matches the per m² calculation.
  • No reliance on prior negotiations: The Court emphasised that pre-contractual communications could not be used to rewrite the bargain.
  • On the Coal Authority’s powers: The Court criticised the trial judge’s unsupported conclusion that a ZOI could not be reduced except by dataset updates. There was no evidential foundation for that premise and it was not either party’s case. Importantly, however, the Court’s construction did not require deciding the precise scope of the Coal Authority’s powers; it sufficed that, on the contract’s language, only a reduction/release—not a no-objection letter—would trigger payment.

Applying this reasoning, the Court held the 15 September 2022 letter—which in substance permitted static caravans (save for the caps) and described a reduction only for that particular use—did not meet the contractual trigger. The alternative 7 September letter added nothing and the Respondent’s Notice failed on that ground.

Fresh Evidence

Westfield’s bid to adduce chapter 14 of the CIRIA “Abandoned Mine Workings Manual” (C758) to show that “risk zones/ZOIs” can be reduced was refused. The Court reasoned that:

  • There was no reliable evidence that the Manual was an authoritative source for the Coal Authority’s power to alter a ZOI.
  • The cited chapter concerns “perceived risk zones” and “potential cone of collapse,” not the Coal Authority’s legal authority to reduce a ZOI.
  • It was not shown the material would have had an important influence on the result.

The Court’s criteria mirror the well-known test for fresh evidence on appeal. Given its conclusions on construction, the issue was ultimately peripheral.

Rectification

Harworth invited the Court to uphold the judgment by rectifying the agreement to reflect a supposed common intention that payment would be made if the Coal Authority did not object to caravans in the ZOI. The Court:

  • Reiterated (following FSHC and Nexus) that rectification requires proof of a common subjective intention coupled with an outward expression of accord—communication by which each party understood the other to share that intention.
  • Noted that the trial judge expressly did not determine the rectification claim (having found for Harworth on construction), and made no findings of common subjective intention.
  • Rejected attempts to “patch together” passages of the judgment (including on email exchanges and witness understandings) as if they were findings of a shared, outwardly expressed accord about the payment trigger.
  • Declined to remit: it was not appropriate, given elapsed time and that the judge would be considering a new point post-hearing.

Result: rectification failed; the Respondent’s Notice was dismissed on this ground too.

Impact and Significance

This decision has immediate practical consequences for transactional drafting and litigation strategy:

  • Ambulatory defined terms: Where a defined term incorporates an external designation (such as a ZOI, floodplain, contamination zone, listing, or statutory designation), the Court presumes it operates dynamically across the contract unless the instrument fixes it to a specific date. This is particularly powerful for obligation and restriction clauses that refer back to a defined term.
  • Triggers keyed to “reduction” or “release”: If parties intend a payment to turn on formal alteration of an external designation, they must say so. If, instead, they intend to trigger payment on regulatory “no objection” or permission for a particular use within an unchanged designation, the contract must use that language unequivocally.
  • Per m² earn-out logic: An area-based calculation presupposes a change to the area of designated land, not merely a permissive stance on certain uses. Courts will be slow to re-tool a per m² mechanism into a per-use consent mechanism absent clear wording.
  • Commercial common sense: It is a cross-check, not a licence to re-draft. The Court’s approach reinforces the modern orthodoxy that clear wording prevails, read in its context; perceived “absurdity” must be carefully tested against the whole instrument before departing from the text.
  • Rectification remains exceptional: Post-FSHC and Nexus, rectification demands robust proof of (i) common actual intention and (ii) an outward expression of accord. Emails from one side, or parallel—but uncommunicated—assumptions, will not suffice. Appellate courts will not retrofit findings or remit merely to explore a new theory absent a solid platform of first-instance findings.
  • Fresh evidence on appeal: Technical guidance must be shown to be authoritative and probative of the specific legal point. Even then, it must be material in the sense that it would probably have had an important influence on the result.

Complex Concepts Simplified

  • Zone of Influence (ZOI): A buffer area around a mine entry, calculated using technical parameters, within which ground instability risk is higher. It is a designation used by the Coal Authority. Here, it was initially 27m radius, excluding the cap areas.
  • “Reduce” / “Release” of ZOI: A change to the designation and/or its extent. In contractual terms, this means the area counted as “in” the ZOI shrinks (or is eliminated), allowing land previously sterilised by the designation to be “released” for development. It is different from a regulator’s “no objection” to a particular use within an unchanged ZOI.
  • Ambulatory definition: A defined term that tracks an external state of affairs “from time to time.” Unless the contract fixes the meaning to a specific date, references are read as updating when the external fact changes.
  • Rectification (common mistake): An equitable remedy that corrects a document that fails to record the parties’ shared subjective intention at the time of contracting. It requires proof of a common actual intention and an outward expression of accord demonstrating that shared intention—mere parallel private intentions are not enough.
  • Purposive vs literal interpretation: Courts begin with the natural and ordinary meaning of the words in their context. Purpose and commercial common sense assist but cannot override clear language. Purposive interpretation is not a vehicle to cure a bad bargain or drafting infelicities.
  • Fresh evidence on appeal: Admitted sparingly; the material must be reasonably unavailable at trial, credible, and likely to have an important influence on the outcome. Technical documents must be authoritative and relevant to the precise issue.

Drafting Lessons

  • If payment is intended to be triggered by a regulator’s “no objection” (even if the formal designation remains), state the trigger in those words: for example, “upon receipt of written confirmation from [Regulator] that [specified use] is acceptable within the area designated as [Designation], regardless of whether the designation is formally varied.”
  • Define whether references to an external designation are fixed “as at the date of this Agreement” (frozen) or “as varied from time to time” (ambulatory). Be consistent across restrictions and payment mechanisms.
  • Align the calculation method with the trigger: a per m² formula coheres with area released; a per-use or per-pitch formula matches permissions without area change.
  • Specify the evidence that will satisfy the trigger (e.g., a formal re-designation notice, an endorsed plan, or a certificate by an independent expert) and who decides disputes.
  • Avoid mixing technical terms of art (e.g., “zone of influence”) with lay concepts (e.g., “exclusion zone for caravans”) unless distinctions and consequences are clearly spelled out.

Conclusion

Westfield v Harworth is a clear reaffirmation that courts will give primacy to the natural and ordinary meaning of contractual language read in its full context. Where parties key payment to a “reduction” or “release” of a technical designation, a regulator’s written “no objection” to a particular use is not enough—unless the contract says so. The Court’s ambulatory reading of the ZOI across the agreement neutralised the perceived commercial absurdity that drove the first-instance purposive approach.

On rectification, the judgment aligns with the modern authorities: the remedy turns on common subjective intention proven with an outward expression of accord. Without first-instance findings of that kind, appellate courts will not reconstruct the evidential record or order rectification.

The decision will influence the drafting and litigation of deferred consideration clauses and development restrictions wherever defined terms depend on changeable external designations. It underscores that precision pays: say exactly what must change (designation or permission), who must say it, how it is evidenced, and how payment is computed.

Key Authorities

Case Details

Year: 2025
Court: England and Wales Court of Appeal (Civil Division)

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