Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] UKHL 11 (14 February 1980)

Wimpey sought to rescind a land purchase contract by invoking a contractual clause regarding compulsory acquisition. The purported rescission was held unjustified as the compulsory purchase procedure had begun before the contract date. The House of Lords held this did not constitute repudiation as Wimpey had genuinely, though mistakenly, believed they were entitled to rescind.

Facts

Woodar agreed to sell 14 acres of land at Cobham, Surrey to Wimpey for £850,000 under a contract dated 21st February 1973. The contract included Special Condition I requiring Wimpey to pay £150,000 to Transworld Trade Ltd upon completion. Special Condition E(a)(iii) reserved to Wimpey a power to rescind if any authority with compulsory acquisition powers commenced procedures for compulsory acquisition of the property prior to completion.

Both parties knew before contracting that compulsory purchase procedures regarding 2.3 acres had already commenced in 1970. Following a property market collapse, Wimpey served notice of rescission on 20th March 1974, relying on Condition E(a)(iii). Woodar challenged the validity of this notice and subsequently claimed Wimpey had repudiated the contract.

Issues

Primary Issue

Whether Wimpey’s service of the rescission notice, later held to be unjustified in law, constituted a repudiation of the contract which Woodar could accept as terminating the agreement.

Secondary Issue

Whether Woodar could recover substantial damages for Wimpey’s failure to pay £150,000 to Transworld Trade Ltd, a third party.

Judgment

The House of Lords allowed the appeal by a majority (Lord Wilberforce, Lord Keith and Lord Scarman; Lord Salmon and Lord Russell dissenting on the repudiation issue).

Lord Wilberforce held that a party who takes action relying on the terms of the contract, without manifesting an ulterior intention to abandon it, is not to be treated as repudiating it. The notice of rescission was at most a neutral document, and examining all the circumstances, particularly the discussions with Mr Cornwell showing both parties expected to abide by the court’s decision, demonstrated no intention to abandon the contract.

Lord Keith held that the assertion by one party of a genuinely held but erroneous view as to rights under a contract does not constitute repudiation where the circumstances do not reasonably infer a refusal to perform if that view is shown to be wrong.

Lord Scarman emphasised that the law requires assessment of all acts and conduct, and their objective impact on the other party. Mr Cornwell’s correspondence showed he understood both parties would abide by the court’s determination.

On Damages for Third Party Payment

Although not requiring decision, their Lordships expressed views on the third party payment issue. Lord Wilberforce distinguished Jackson v Horizon Holidays Ltd and doubted whether Woodar could recover substantial damages for the benefit of Transworld in the absence of trust or agency. Lord Scarman called for reconsideration of the rule denying jus quaesitum tertio.

Implications

The case establishes that a party who genuinely but mistakenly relies on a contractual provision to rescind does not thereby repudiate the contract, provided their conduct does not otherwise evince an intention to abandon performance. Repudiation requires clear evidence that a party intends not to perform, viewed objectively in light of all circumstances.

The obiter comments regarding third party rights highlighted dissatisfaction with the privity doctrine and the limited recovery available to a contracting party for benefits intended for third parties, contributing to subsequent calls for reform.

Verdict: Appeal allowed. The contract was not repudiated by Wimpey’s notice of rescission. The Order of the Court of Appeal was discharged. It was declared that the contract of 21st February 1973 was not repudiated by the notice of 24th March 1974. Wimpey was awarded costs in the Court of Appeal and House of Lords; Woodar was awarded costs in the High Court.

Source: Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] UKHL 11 (14 February 1980)