A contractor had done defective work in breach of a building contract with the developer but the loss was suffered by a third party who had by then purchased the development. The developer recovered the loss suffered by the purchaser.
Held: The benefit of a contract may be assigned to a third party without the consent of the other contracting party. If this is not desired, it is open to the parties to agree that the benefit of the contract shall not be assignable by one or either of them, either at all or without the consent of the other party. The JCT conditions providing for a prohibition against assignment of obligations under the contract, was not contrary to public policy, and a purported assignment in breach of that condition was ineffective. The House made available a remedy as a matter of law to solve the problem of transferred loss in the case before them. Both contractor and employer were aware that the property was going to be occupied and possibly purchased by third parties.
Held: It could be foreseen that a breach of the contract might cause loss to others than the employer. A court will have to examine a contract to see if the exception identified in Albazero applied in a contract.
Lord Griffiths said: ‘In cases such as the present the person who places the contract has suffered financial loss because he has to spend money to give him the benefit of the bargain which the defendant had promised but failed to deliver. I therefore cannot accept that it is a condition of recovery in such cases that the plaintiff has a proprietary right in the subject matter of the contract at the date of breach.’
Lord Browne-Wilkinson said: ‘On the contrary, McAlpine had specifically contracted that the rights of action under the building contract could not without McAlpine’s consent be transferred to third parties who became owners or occupiers and might suffer loss. In such a case, it seems to me proper, as in the case of the carriage of goods by land, to treat the parties as having entered into the contract on the footing that Corporation would be entitled to enforce contractual rights for the benefit of those who suffered from defective performance but who, under the terms of the contract, could not acquire any right to hold McAlpine liable for breach. It is truly a case in which the rule provides ‘a remedy where no other would be available to a person sustaining loss which under a rational legal system ought to be compensated by the person who has caused it.’ The Corporation, faced with a breach by McAlpine of their contractual duty to perform the contract with sound materials and with all reasonable skill and care, would be entitled to recover from McAlpine the cost of remedying the defect in the work as the normal measure of damages. There were two possible objections. First, it should not matter that the work was not being done on property owned by Corporation. Where a husband instructs repairs to the roof of the matrimonial home it cannot be said that he has not suffered damage because he did not own the property. He suffers the damage measured by the cost of a proper completion of the repair: ‘In cases such as the present the person who places the contract has suffered financial loss because he has to spend money to give him the benefit of the bargain which the defendant had promised but failed to deliver.’ The second objection, that Corporation had in fact been reimbursed for the cost of the repairs was answered by the consideration that the person who actually pays for the repairs is of no concern to the party who broke the contract, but ‘The court will of course wish to be satisfied that the repairs have been or are likely to be carried out but if they are carried out the cost of doing them must fall upon the defendant who broke his contract.’
Judges:
Lord Browne-Wilkinson, Lord Griffiths
Citations:
Times 23-Jul-1993, Gazette 08-Dec-1993, Independent 30-Jul-1993, [1994] 1 AC 85, [1993] UKHL 4, [1993] 3 All ER 417
Links:
Statutes:
Insolvency Act 1986 286 306 436
Jurisdiction:
England and Wales
Citing:
Cited – Albacruz (Cargo Owners) v Albazero ‘The Albazero’ HL 1977
The House was asked as to the extent to which a consignor can claim damages against a carrier in circumstances where the consignor did not retain either property or risk. To the general principle that a person cannot recover substantial damages for . .
Cited – Dawes v Peck 1799
Where there is a named consignee on a bill of lading it may be inferred that the contracting party is the consignee not the shipper. . .
Appeal from – Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd and Others CA 9-Oct-1990
The claimants had taken an assignment of leasehold premises. They sought to recover for building defects.
Held: The assignment was effective to transfer to Linden Gardens the causes of action for subsisting breaches of contract by M and H and . .
Cited by:
applied – South v Chamberlayne ChD 7-Sep-2001
The claimant occupied a house under a 75 year lease. She obtained an order requiring the landlord to sell the freehold reversion to her, and then set out to sell on her interest. She contracted to sell her interest in the property and her statutory . .
Cited – Mulkerrins v Pricewaterhouse Coopers HL 31-Jul-2003
The claimant sought damages from her former accountants for failing to protect her from bankruptcy. The receiver had unnecessarily caused great difficulties in making their claim that such an action vested in them. The defendants had subsequently, . .
Cited – Alfred Mcalpine Construction Limited v Panatown Limited HL 17-Feb-2000
A main contractor who was building not on his own land, would only be free to claim damages from a sub-contractor for defects in the building where the actual owner of the land would not also have had a remedy. Here, the land owner was able to sue . .
Cited – Smithkline Beecham Plc and others v Apotex Europe Ltd and others PatC 26-Jul-2005
Application was made to join in further parties to support a cross undertaking on being made subject to interim injunctions.
Held: On orders other than asset freezing orders it was not open to the court to impose cross-undertakings against . .
Cited – Regina v Medicines Control Agency ex parte Smith and Nephew (Primecrown Ltd intervening) ChD 1999
The court considered liability to third partries under a cross-undertaking given to the court: ‘Whether the recoverable damage is that which is foreseeable by the plaintiff or that which is directly caused by the injunction is not in point. None of . .
Cited – Orion Finance Ltd v J D Williams and Company Ltd CA 23-Jun-1995
The finance company had taken an assignment of the benefit of a lease of computer equipment and sought payment from the defendants. . .
Cited – Smithkline Beecham Plc Glaxosmithkline UK Ltd and Another v Apotex Europe Ltd and others (No 2) CA 23-May-2006
The parties to the action had given cross undertakings to support the grant of an interim injunction. A third party subsequently applied to be joined, and now sought to take advantage of the cross undertakings to claim the losses incurred through . .
Cited – Barbados Trust Company Ltd v Bank of Zambia and Another CA 27-Feb-2007
The creditor had assigned the debt, but without first giving the debtor defendant the necessary notice. A challenge was made to the ability of the assignee to bring the action, saying that the deed of trust appointed to circumvent the reluctance of . .
Cited – CEP Holdings Ltd, CEP Claddings Ltd v STENI As QBD 9-Oct-2009
The claimants asserted breach by the defendant of an exclusive distributor agreement. The defendants said that the claimants had failed, as required by the contract, to use all reasonable endeavours to promote the product.
Held: There was no . .
Cited – Helmsley Acceptances Ltd v Hampton CA 11-Mar-2010
The claimant lender sought damages from an allegedly negligent valuation by the defendant. It had syndicated its loan, and the defendant now argued that it could only claim for that part of the loan for which it retained ownership.
Held: The . .
Cited – Rossetti Marketing Ltd v Diamond Sofa Company Ltd and Another QBD 3-Oct-2011
The claimants sought compensation under the 1993 Rules. The defendants denied that the claimants were agents within the rules, since they also acted as agents for other furniture makers.
Held: Whether a party is a commercial agent within the . .
Cited – Gard Marine and Energy Ltd and Another v China National Chartering Company Ltd and Another SC 10-May-2017
The dispute followed the grounding of a tanker the Ocean Victory. The ship was working outside of a safe port requirement in the charterparty agreement. The contract required the purchase of insurance against maritime war and protection and . .
Cited – Lowick Rose Llp v Swynson Ltd and Another SC 11-Apr-2017
Losses arose from the misvaluation of a company before its purchase. The respondent had funded the purchase, relying upon a valuation by the predecessor of the appellant firm of accountants. Further advances had been made when the true situation was . .
Lists of cited by and citing cases may be incomplete.
Construction, Contract
Updated: 24 November 2022; Ref: scu.83075