## Facts

- Warnborough Ltd (claimant) and Garmite Ltd (defendant) entered into an agreement concerning the sale and development of a piece of land.
- The agreement included terms allowing Warnborough Ltd to repurchase the land at a later date, subject to certain conditions.
- Garmite Ltd contended the transaction was a genuine sale, whereas Warnborough Ltd argued it was essentially a financing arrangement.
- The court examined the agreement’s terms, the existence of a repurchase option, the payment structure, and the parties’ conduct.
- It was found that Warnborough Ltd retained significant control over the land and continued to manage and make decisions about its development.
- The court concluded the agreement was, in substance, a financing arrangement rather than a bona fide sale.

## Issues

1. Whether the transaction between Warnborough Ltd and Garmite Ltd was, in substance, a sale or a disguised financing arrangement.
2. Whether the court should prioritize the true economic reality of the transaction (substance) over its formal legal documentation (form).
3. Whether the parties' conduct and control over the land indicated the real nature of the agreement.

## Decision

- The Court of Appeal determined the transaction was not a true sale but a financing arrangement disguised as a sale.
- The court found that the repurchase option, payment structure, and retention of significant control by Warnborough Ltd supported this conclusion.
- The judgment emphasized that the real purpose and economic substance of the arrangement prevailed over the contract's formal terms.
- Parties cannot use contractual form to conceal the true legal and economic reality of their arrangements.

## Legal Principles

- Courts should apply the substance over form doctrine in contract law by evaluating the true economic nature and purpose of the transaction.
- The assessment of contractual relationships requires analysis of the parties' intentions, contractual terms, conduct, and commercial context.
- Legal agreements should reflect the actual commercial purpose; artificial structures designed to circumvent legal obligations may be disregarded by the courts.
- Transparency and accuracy in documenting the true aim of a transaction are important to avoid legal disputes and liability.

## Conclusion

The Court of Appeal in Warnborough Ltd v Garmite Ltd [2003] EWCA Civ 1544 reaffirmed that in assessing the nature of contractual arrangements, courts prioritize substance over form, recognizing the transaction's genuine economic reality rather than being constrained by its formal documentation.