Court of Appeal restates the approach to contractual interpretation – the words ordinary meaning will usually prevail over subjective contracting intentions

Westfield Park Ltd v Harworth Estates Investments Ltd [2025] EWCA Civ 1374

The question

When deciding on contractual interpretation, will courts generally take a literal approach to the wording or a purposive one?

The key takeaway

When it comes to contractual interpretation, courts will always start by looking at the natural and ordinary meaning of the words contained in the contract, meaning even if the contract does not reflect either party's initial intended purpose, they will still be bound by its provisions. Only in very particular circumstances can a party rely on rectification or common mistake to save them from poor drafting.

The background

By an agreement dated 14 October 2014, Harworth Estates Investments Ltd (Harworth) sold the freehold for York Holiday Park (the Holiday Park) to Westfield Park Ltd (Westfield). The Holiday Park included an area for static caravans, known as the 'Bowl'. However, during site investigations, Westfield discovered a 'Zone of Influence' extending 27m around two mineshafts located within the Bowl, in which no building could be constructed.

As a result, Westfield and Harworth agreed to reduce the initial purchase price from £3 million to £2.6 million, with up to £400,000 additionally payable if the Zone of Influence was reduced in size or removed within 12 months of the agreement. The deferred consideration clause under Schedule 4 of the agreement stated:

"Schedule 4

3 Released Land

3.1 If prior to the Long Stop Date the Coal Authority confirm in writing that the Zone of Influence is reduced [Harworth] will provide evidence of such release to [Westfield] and the Released Land Value will be calculated at a rate of £88.96 per m² or part thereof.

…

4. Payment of the Released Land Value

The Released Land Value will be payable by [Westfield] to [Harworth] within 30 days of written demand or of determination of the Released Land Value in the event of a dispute." (the Clause)

In May 2022, the Coal Authority granted permission for static caravans to be located within the Zone of Influence but later clarified that the Zone of Influence itself had not been reduced, merely that they had granted a licence for the static caravans to be located within it. Consequently, Westfield refused to pay the additional £400,000 Harworth claimed was due under the contract.

At first instance, the High Court (HC) judge found in favour of Harworth, reasoning that, as the Coal Authority did not actually have the power to reduce zones of influence on a case-by-case basis (which was assumed under the contract), the wording of the agreement could not be given its ordinary meaning. The judge relied heavily on pre-contractual negotiations and cited the ultimate purpose of the Clause existing in recognition of the ability of Westfield to locate static caravans within the Zone of Influence, as reason to enforce the Clause.

Westfield appealed the decision to the Court of Appeal (CoA).

The decision

The CoA reversed the decision of the HC, holding that on its ordinary meaning the provisions of the Clause "mean what they say"; the clause had not been activated by the Coal Authority merely granting consent for static caravans to be located within the Zone of Influence.

The critical issue for the CoA to determine was how to interpret the Clause  – either to give it its ordinary meaning and reject the payment, or to read the Clause in the context of the parties' pre-contract intentions and enforce the payment, given that Westfield was able to locate static caravans in the Holiday Park.

In its judgment, the CoA reiterated the six fundamental principles of contractual construction established in Arnold v Britton [2015], being:

“(i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the [contract], (iii) the overall purpose of the clause and the [contract] itself, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intention”.

With reference to the sixth criterion in particular, the CoA noted "It hardly needs to be said that prior negotiations and subjective intentions are irrelevant" and that by focussing on pre-contract discussions which had taken place, the judge had wrongly adopted a 'purposive approach to interpretation.'

The CoA also considered the test established in Sara & Hossein Holdings Ltd v Blacks Outdoor Retail Ltd [2023], notably the first section of the test:

"The contract must be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean."

Following this test, the CoA found that, given the ordinary interpretation of the Clause, "The reasonable reader … would have understood the language to mean what it says", meaning that the clause relates explicitly to the removal / reduction in size of the Zone of Influence. The CoA also commented on the Clause's lack of ambiguity, given that no alternative scenarios are provided for, such as "change of use or partial exoneration or grant of consent for particular uses."

The CoA also refused to make a finding of common mistake as this was not pleaded at first instance.

Why is this important?

The courts will not save parties from poor drafting. The decision emphasises the importance of contracting party intentions being adequately reflected in a contract and reconfirms the principles established in Arnold v Britton that Courts will give the wording in a contract its ordinary meaning, rather than adopt a purposive approach and try to deduce the contracting parties' intentions.

Contract drafters should aim to define outcomes with certainty, or alternatively, build in flexibility to account for an outcome being achieved through potentially less conceivable means.

Parties should consider alternative causes of action such as rectification and common mistake when faced with literal contract wording that fails to properly express the parties' intended purpose.

Any practical tips?

To avoid unintended consequences, ensure clauses are drafted to cover the outcome you are attempting to achieve instead of focusing only on the foreseen, specific means to achieve the desired outcome.

Summer 2026