Offer-Hoar v Larkstore Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Rix,Mr Justice Peter Smith |
| Judgment Date | 27 July 2006 |
| Neutral Citation | [2006] EWCA Civ 1079 |
| Docket Number | Case No: A1/2005/2893 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 July 2006 |
[2006] EWCA Civ 1079
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
HHJ DAVID WILCOX
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lord Justice Rix and
Mr Justice Peter Smith
Case No: A1/2005/2893
CLAIM NO HT-05–109
MR DAVID FRIEDMAN QC (instructed by Squire & Co) for the Appellant
MR CHRISTOPHER THOMAS QC & MS GAYNOR CHAMBERS (instructed by Warners)for the Respondent
The issue
This appeal is against a ruling on a preliminary issue in Part 20 proceedings. The litigation arises from a dispute about liability for the substantial physical damage and financial loss resulting from building operations on a residential development site.
The main issue turns on the legal effect of the assignment of a cause of action for breach of contract. Is the assignee of the cause of action entitled to recover from the contract-breaker damages for loss, which occurred after the transfer of the development site by the assignor to the assignee, but before the assignment of the cause of action, in a larger sum than the assignor would have recovered?
One possible answer to this question would produce "a legal black hole." The expression cropped up in argument. The whole topic of assignment, including possible "black holes", is of special interest to practitioners in construction law and their clients. A "black hole" scenario would occur when loss is suffered in consequence of a breach of contract, but the contract-breaker's position is that no-one is legally entitled to recover substantial damages from him.
The question was well put in a Note in the Law Quarterly Review (Vol 110 LQR 42 at p 44 I N Duncan Wallace QC) -
"…whether .. a contract-breaker can avoid an otherwise inescapable liability in damages as a result of the accident of the transfer of the property and assignment of the benefit of the relevant …contract to a third party, either by arguing that the original contracting party or assignor, having parted with the property at full value, has suffered no loss and that the assignee cannot be in a better position, or conversely that an assignee, in a case where he alone can sue, has paid a reduced price, equally suffering no loss. In other words, does the accident of transfer and assignment create a "legal black hole" into which the right to damages disappears, leaving the contract-breaker with an uncovenanted immunity?"
It will be necessary to consider the leading authorities on the effect of the assignment of a cause of action for breach of contract on the liability of the contract-breaker to the assignee for damages, notably the case of Linden Gardens Trust v. LenestaSludge Disposals [1994] 1 AC 85 and (in the Court of Appeal) 57 BLR 57 ( Linden Gardens) . We have been referred to valuable discussions of the decision in an extended case note in the Law Quarterly Review by Mr I N Duncan Wallace QC: (1994) LQR Vol 110 at pp 42–55 and in an article in the Construction Law Journal by Mr John Cartwright—(1993) 9 Const LJ pp 281–296.
The "black hole" question arises here in the context of the assignment of a contract claim for an allegedly negligent soil inspection report obtained by the original owner of a building site for residential development. After the site ceased to be in the ownership of the company which obtained the report, a landslip occurred in the course of building operations by the contractor, who was engaged by the purchaser of the site from the original owner. The cause of action in respect of the report had not, however, been assigned when the site was sold. It was assigned only after the landslip. The assignment was made nearly 5 years after the site itself had changed hands.
General background
Technotrade Limited offers geo-technical site investigation and engineering services. It produced a site investigation report dated 14 December 1998 on a sloping site (the Hillside Nursery Site) in Hythe Road, Hythe, Kent (the Site) . The report, which was produced following a letter of instruction dated 7 November 1998 from the owner of the Site, found that it was satisfactory for the proposed development of a number of two storey houses. The report contained no prohibition against assignment.
At the time when the report was produced the freehold Site was owned by Starglade Limited, who sold it on 21 June 1999 to Larkstore Limited, a property development company. Completion of the sale was in two phases: phase I immediately, phase II in August 2000. The site was offered for sale with planning permission dated 19 November 1997 for 8 detached units. The planning consent had contained a condition requiring a specialised soil report in relation to phase I of the development. The report had been obtained by Starglade in order to satisfy the planning condition. Stargate used the report to satisfy the planning condition and sold the site to Larkstore with the benefit of full planning and building control consents, including all soil investigations.
Larkstore came into possession of the Technotrade report in June 1999 and used it without seeking Technotrade's consent. At no time did Larkstore have any contract with Technotrade relating to its use of the report.
Larkstore engaged Bess Limited, a building and civil engineering contractor, under a design and build contract to carry out works on the Site. The contract documentation included the Technotrade report.
On 28 March 2001 planning permission was granted by Shepway District Council for phase II of the Site. It contained a similar planning condition requiring a specialised soil report prior to the commencement of the development. Larkstore used the Technotrade report to satisfy the condition.
In September 2001 Larkstore sold off part of phase II of the Site to a third party.
On 13 October 2001, while the works were being carried out by Bess on the Site, a landslip occurred, causing damage to properties in North Road uphill from the Site. They were owned by the five Claimants, who allege that the landslip was caused by excavations on the Site down slope and to the rear of their properties.
Extensive stabilisation works had to be undertaken by Larkstore for the purposes of the proposed development.
On 23 February 2004 a Deed of Assignment was entered into between Starglade and Larkstore in consideration of the payment of £1, expressly providing that
"i) Starglade with full title guarantee assigns to Larkstore the Report together with all the benefit and interest and rights of Starglade in and under the Report and the right to enforce the same TO HOLD to Larkstore absolutely.
"ii) For the avoidance of doubt the assignment effectively hereby includes the right to sue in respect of breaches of Technotrade of its duties and obligations and to bring all such claims against Technotrade as are available at law."
On the same date Larkstore wrote a side letter to Starglade confirming the agreement that had been reached in relation to the assignment:
"…In consideration of you making the assignment of even date, we undertake to pay you one half of the net monies received from Technotrade Limited.
"Net monies" means all sums received from Technotrade Limited, whether by Court order or judgment or by compromise or otherwise and whether in respect of the cause of action assigned by you to us or otherwise, but after deduction of our costs of pursuing Technotrade Limited and deduction of any costs we may be ordered to pay Technotrade Limited.
We agree to hold all monies received from Technotrade Limited on trust for division in accordance with the foregoing…"
Notice in writing of the assignment was given to Technotrade.
Legal proceedings
In the main proceedings, which were commenced by the Claimants on 25 March 2003, Larkstore is the first defendant. Bess, the second defendant, is insolvent. Hence the importance to Larkstore of making out a case against Technotrade on the basis of the 1998 soil inspection report.
On 6 October 2004 Larkstore commenced Part 20 proceedings against Technotrade. As there had never been a contract between Larkstore and Technotrade, Larkstore had to rely on the assignment of the cause of action as the basis of its contractual claim for damages for breach.
Larkstore also claimed, by virtue of the assignment, the benefit of Starglade's rights of action for breach of duties in tort.
Larkstore made other claims in tort against Technotrade that were not connected with the assignment. The first direct claim was for breach of a duty of care in tort to carry out its duties so as to protect Larkstore from economic loss or damage to people or property. The second claim was for a contribution pursuant to the Civil Liability (Contribution) Act 1978 based on the assertion that Technotrade owed a tortious duty of care to the neighbouring landowners and is liable to them in respect of the same damage as is the subject of the claim by the Claimants against Larkstore.
Preliminary issues
On 14 June 2005 an order was made for the determination of 3 preliminary issues on the Part 20 claim. In his judgment of 2 December 2005, from which this appeal is brought by Technotrade, HHJ David Wilcox answered the issues as follows—
Assignment: Issue 1
i. This is the main point on the appeal. The issue is whether Larkstore is able, by virtue of the assignment from Starglade, to recover the loss, or any part of the loss, allegedly suffered by it. (The point was argued on an...
To continue reading
Request your trial
-
Fox v British Airways Plc
... ... ] 3 All ER 769 ,C A Lowe v Guise [ 2002 ] EWCA Civ 197 ;[ 2002 ]Q B 1369 ;[ 2002 ] 3 WLR 562 ;[ 2002 ] 3 All ER 454 ,C A O›er-Hoar v Larkstore Ltd (Technotrade Ltd, Part 20 defendant) [ 2006 ] EWCA Civ 1079 ;[ 2006 ] 1 WLR 2926 ,C A Pickett v British Rail Engineering Ltd [ 1980 ]A C ... ...
-
Orchard Plaza Management Company Ltd v Balfour Beatty Regional Construction Ltd
...to the debtor and not to allow the debtor to escape liability. Perhaps not surprisingly, therefore, that argument was rejected in Offer-Hoar v Larkstore Ltd. The Court of Appeal said that, in applying the principle that the assignee cannot recover more than the assignor, one should be askin......
-
Equitas Ltd and Another v Walsham Brothers & Company Ltd
...remittance would be suffered by Equitas and not by the syndicates. Nevertheless, Walsham accepts, by analogy with the reasoning in Offer-Hoar v Larkstore Ltd [2006] EWCA Civ 1079, [2006] 1 WLR 2926, that this situation did not create what is sometimes referred to as a "legal black hole" wh......
-
Fox v British Airways Plc
...of real value to himself" for which he was entitled to claim in damages: see per Rix LJ at para. 38 (p. 1385). He also referred to Offer-Hoar v Larkstore Ltd [2006] 1 WLR 2926, in which Rix LJ referred to the law's unwillingness to countenance the existence of "black holes" through which wr......
-
Management and Enforcement
...E.H.R.R. 36 at [78] (Eur. Ct. Hum. Rts.) (trade mark application “proprietary”). 52 But no more: Technotrade Ltd. v. Larkstore Ltd. , [2006] EWCA Civ 1079 at [42]. 53 Beloff , above note 51 at 52. 54 Fredrickson v. Insurance Corp. of British Columbia (1986), 28 D.L.R. (4th) 414 at 423–24 (B......
-
Reconsidering Transferred Loss
...for a third party’sbenefit.20 Linden Gardens TrustvLenesta Sludge Disposals Ltd [1994] 1 AC 85.21 ibid, 114.22 Offer-Hoar vLarkstore Ltd [2006] 1 WLR 2926 at [84]-[86].23 GUS Property Management Ltd vLittlewoods Mail Order Stores Ltd 1982 SLT 533, 538.24 Panat own n 9 above, 575.25 Swynson n......
-
Privity of contract - The benefits of reform
...the ability of the promisee to sue would _____________________________________________________ 19Technotrade Ltd v. Larkstore Ltd [2006] E.W.C.A. Civ. 1079, para. 3 per Mummery J. The reference to damages is to damages in contract, and not in tort: see Chia Kok Leong v. Prosperland Pte Ltd ......