In 2007, Burrows Investment Ltd (“Burrows”) sold Ward Homes Ltd (“Ward”) a plot of land with planning permission for the development of residential units. The sale agreement prohibited Ward from disposing of the land other than where it was permitted by the agreement. A permitted disposal included both the sale of a residential unit in the open market at arm’s length and where the transfer was for “other social or community spaces”. At the date of the sale, there was no requirement that certain units be used for social housing. However, in 2012, after Ward made an application for permission to build additional units, the local authority made it a requirement that a small number of units be used for social housing. As a result, Ward disposed of five residential units to a registered provider of social housing. Burrows contended that this disposal was not permitted under the sale agreement and as such they should be awarded “negotiating” – i.e. Wrotham Park - damages as they had lost the opportunity to negotiate with Ward a price to permit them to make the disposal. At first instance, Ward succeeded in arguing that the disposal of land for social housing was for a social purpose. Burrows appealed to the Court of Appeal.
The Court of Appeal allowed the appeal. On a proper construction of the sale agreement the disposal of residential units to a registered provider of social housing was not a permitted disposal. It also followed that it was appropriate to award negotiating damages. Ward had breached the agreement, which could in principle have been enforced by an injunction, and as a result had denied Burrows the opportunity to negotiate a price for releasing Ward from its obligation.