Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd and Others ; St Martins Property Corporation Ltd and Another v Sir Robert McAlpine Ltd (formerly Sir Robert McAlpine and Sons Ltd)

CourtHouse of Lords
JudgeLord Keith of Kinkel, Lord Bridge of Harwich, Lord Griffiths, Lord Ackner, Lord Browne-Wilkinson
Judgment Date22 Jul 1993
JurisdictionEngland & Wales

[1993] UKHL J0722-1

House of Lords

Lord Keith of Kinkel

Lord Bridge of Harwich

Lord Griffiths

Lord Ackner

Lord Browne-Wilkinson

Linden Gardens Trust Limited
(Respondents)
and
Lenesta Sludge Disposals Limited and Others
(Appellants)
St Martin's Property Corporation Limited and Others
(Original Respondents and Cross Appellants)
and
Sir Robert McAlpine and Sons Limited
(Original Appellants and Cross-Respondents)
Lord Keith of Kinkel

My Lords,

1

I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Browne-Wilkinson, and also that prepared by my noble and learned friend Lord Griffiths.

2

I agree entirely with the reasoning which leads Lord Browne-Wilkinson to the conclusion that the appeal in the Linden Gardens case must be allowed, and the cross-appeal by St. Martin's Property Investments Limited dismissed.

3

As regards the appeal by McAlpines in which St. Martin's Property Corporation Limited are respondents I would dismiss that for the reasons given by Lord Browne-Wilkinson, and not upon the broader grounds favoured by Lord Griffiths. I have much sympathy with the view that where a building contractor is in breach of his contract he should not be relieved of liability to pay substantial damages for his breach merely by reason that the other contracting party had no proprietary interest in the works at the time when the breach occurred. There is much force in the analysis that the party who contracted for the works to be done has suffered loss because he did not receive the performance he had bargained for and in order to remedy that has been required to pay for the defects to be put right by another builder. However, the matter was not fully explored in argument before your Lordships, and the possible effects upon other forms of commercial contract remain uncertain. While in some future case the view expressed by my noble and learned friend Lord Griffiths may well prevail, the present case can be disposed of in favour of the respondents without the necessity of deciding upon its correctness.

Lord Bridge of Harwich

My Lords,

4

For the reasons given in the speech of my noble and learned friend Lord Browne-Wilkinson I would allow the appeal in the Linden Gardens case and dismiss both the appeal and the cross-appeal in the St. Martin's case. I would also answer the questions raised by the preliminary issues in each case in the terms proposed by my noble and learned friend and make the orders for costs which he proposes.

5

In the McAlpine appeal I am much attracted by the broad principle favoured by my noble and learned friend Lord Griffiths, but am content from the purpose of the present proceedings to adopt the narrower ground for dismissal of the appeal on which Lord Browne-Wilkinson rests his decision.

Lord Griffiths

My Lords,

6

I have had the advantage of reading the speech of Lord Browne-Wilkinson and agree that for the reasons he gives the first appeal should be allowed. In the second appeal I agree that for the reasons given by my Lord, St. Martin's Property Investments Limited (Investments) have no claim against Sir Robert McAlpine and Sons Limited (McAlpine). I also agree that for reasons which I can state quite shortly, St. Martin's Property Corporation Limited (Corporation) are entitled to recover substantial damages from McAlpine. Accordingly the appeal in the Linden Gardens case must be allowed and the cross-appeal by St. Martin's Property Investments Limited dismissed.

7

McAlpine have successfully resisted Corporation's claim to have assigned the benefit of the contract to Investments. It follows that throughout the performance of the contract McAlpine owed to Corporation a contractual duty to build the podium deck of sound materials and with all reasonable skill and care. Upon the assumption that McAlpine broke this contractual duty the normal measure of damages in such circumstances is the cost of remedying the defect in the building (see East Ham Corporation v. Bernard Sunley & Sons Ltd. [1966] A.C. 406). If the cost of remedying the defect in the podium deck was £800.000 Corporation would in my opinion be entitled to recover that sum from McAlpine.

8

It is however submitted that two factors prevent this normal and just result of McAlpine's breach of contract. The first ground upon which McAlpine resists the claim is that Corporation had transferred their building lease to Investments before the podium deck was built and thus had no proprietary interest in the property when the breach occurred. The second is that for financial reasons beneficial to Corporation and Investment. Investment reimbursed Corporation for the money that they paid for the repairs to the podium deck.

9

In my view neither of these considerations provide McAlpine with a defence to Corporation's claim. I cannot accept that in a contract of this nature, namely for work, labour and the supply of materials, the recovery of more than nominal damages for breach of contract is dependent upon the plaintiff having a proprietary interest in the subject matter of the contract at the date of breach. In everyday life contracts for work and labour are constantly being placed by those who have no proprietary interest in the subject matter of the contract. To take a common example, the matrimonial home is owned by the wife and the couple's remaining assets are owned by the husband and he is the sole earner. The house requires a new roof and the husband places a contract with a builder to carry out the work. The husband is not acting as agent for his wife, he makes the contract as principal because only he can pay for it. The builder fails to replace the roof properly and the husband has to call in and pay another builder to complete the work. Is it to be said that the husband has suffered no damage because he does not own the property? Such a result would in my view be absurd and the answer is that the husband has suffered loss because he did not receive the bargain for which he had contracted with the first builder and the measure of damages is the cost of securing the performance of that bargain by completing the roof repairs properly by the second builder. To put this simple example closer to the facts of this appeal - at the time the husband employs the builder he owns the house but just after the builder starts work the couple are advised to divide their assets so the husband transfers the house to his wife. This is no concern of the builder whose bargain is with the husband. If the roof turns out to be defective the husband can recover from the builder the cost of putting it right and thus obtain the benefit of the bargain that the builder had promised to deliver. It was suggested in argument that the answer to the example I have given is that the husband could assign the benefit of the contract to the wife. But what if, as in this case, the builder has a clause in the contract forbidding assignment without his consent and refuses to give consent as McAlpine has done. It is then said that neither husband nor wife can recover damages; this seems to me to be so unjust a result that the law cannot tolerate it.

10

The principal authority relied upon by McAlpine in support of the proposition that the contracting party suffers no loss if they did not have a proprietary interest in the property at the time of the breach was The Albazero [1977] A.C. 774. The situation in that case was however wholly different from the present. The Albazero was not concerned with money being paid to enable the bargain, i.e. the contract of carriage, to be fulfilled. The damages sought in The Albazero were claimed for the loss of the cargo, and as at the date of the breach the property in the cargo was vested in another with a right to sue it is readily understandable that the law should deny to the original party to the contract a right to recover damages for a loss of the cargo which had caused him no financial loss. 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.

11

The second ground upon which the recovery of damages is resisted is that Investments in fact reimbursed Corporation for the money they spent on the repairs. But here again in my view who actually pays for the repairs is no concern of the defendant who broke the contract. 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. Authority for this is to be found in Jones v. Stroud District Council [1986] 1 W.L.R. 1141. The case in fact was one in tort and not contract but the principle of whether or not it is a defence if someone else has paid for work for which the defendant would otherwise be liable must apply to both tort and contract. The claim was for damages to a building which had suffered damage as a result of the defendant's negligence. In giving judgment Neill L.J. said, at p. 1150:

"The plaintiffs failed to provide any documents relating to the work (of repairs) carried out by Marlothian Ltd. and there is no evidence that the plaintiffs have paid or are liable to pay any sum to Marlothian in respect of that work. It was submitted on behalf of the plaintiffs, however, that if the repairs were necessary and were carried out it was not to the point that the plaintiffs had not proved that they had paid for the repairs themselves. Our attention was drawn to The Endeavour (1890) 6 Asp. M.C. 511, where repairs to a vessel were carried out but before paying for them the...

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