“The Contractor shall, within 14 days of a written request to do so by the Employer, execute and deliver to the Employer deeds of collateral warranty in the respective forms set out in Appendix 6 hereto in favour of any Fund, any Purchaser and any Lessee.”
“INTRODUCTION … 2. The Defendant’s position in these proceedings is: … 2.4 In any event, it is denied that the Defendant is liable to the Claimant for two primary reasons: (1) …. (2) In any event the Claimant brings this action as assignee of a collateral warranty issued in favour of a funder of the works. At the time of entry into that warranty, the losses claimed by the Defendant are not a likely or foreseeable consequence of breaches of that warranty of the nature alleged in this case. Accordingly the losses claimed are too remote. … 7. As to paragraph 6: 7.1 It is admitted that the Defendant is in breach of the terms of the Collateral Warranty. 7.2 However, it is denied that it is liable to the Claimant under the terms of the warranty. The warranty was issued in favour of a funder and the Claimant can only recover losses of the sort which would ordinarily flow from a warranty provided to a funder in this factual scenario. … LOSS AND DAMAGE … 58. In any event, it is denied that the Claimant is entitled to pursue the Defendant for the cost of the remedial works under the assigned Performance Warranty for two reasons: 58.1 … 58.2 Further, and in any event, the Claimant brings this action as assignee of a collateral warranty issued in favour of a funder of the works. At the time of entering into that warranty, the losses claimed by the Defendant are not a natural, likely and/or foreseeable consequence of breaches of that warranty of the nature alleged in this case. Accordingly the losses claimed are too remote. 58.3 For the avoidance of doubt, such a defence does not fall within Clause 12.3 of the Performance Warranty which does not displace the usual rules on remoteness” (1) …. (2) In any event the Claimant brings this action as assignee of a collateral warranty issued in favour of a funder of the works. At the time of entry into that warranty, the losses claimed by the Defendant are not a likely or foreseeable consequence of breaches of that warranty of the nature alleged in this case. Accordingly the losses claimed are too remote. 7.1 It is admitted that the Defendant is in breach of the terms of the Collateral Warranty. 7.2 However, it is denied that it is liable to the Claimant under the terms of the warranty. The warranty was issued in favour of a funder and the Claimant can only recover losses of the sort which would ordinarily flow from a warranty provided to a funder in this factual scenario. LOSS AND DAMAGE 58.2 Further, and in any event, the Claimant brings this action as assignee of a collateral warranty issued in favour of a funder of the works. At the time of entering into that warranty, the losses claimed by the Defendant are not a natural, likely and/or foreseeable consequence of breaches of that warranty of the nature alleged in this case. Accordingly the losses claimed are too remote. 58.3 For the avoidance of doubt, such a defence does not fall within Clause 12.3 of the Performance Warranty which does not displace the usual rules on remoteness”
“… may be summarised as follows: A type or kind of loss is not too remote a consequence of a breach of contract if, at the time of contracting (and on the assumption that the parties actually foresaw the breach in question), it was within their reasonable contemplation as a not unlikely result of that breach.”
“31. First, in principle the purpose of damages for breach of contract is to put the party whose rights have been breached in the same position, so far as money can do so, as if his or her rights had been observed. 32. But secondly, the party in a breach of contract is entitled to recover only such part of the loss actually resulting as was, at the time the contract was made, reasonably contemplated as liable to result from the breach. To be recoverable, the type of loss must have been reasonably contemplated as a serious possibility, in the sense discussed in paras 27 and 28 above. 33. Thirdly, what was reasonably contemplated depends upon the knowledge which the parties possessed at that time or, in any event, which the party, who later commits the breach, then possessed. 34. Fourthly, the test to be applied is an objective one. One asks what the defendant must be taken to have had in his or her contemplation rather than only what he or she actually contemplated. In other words, one assumes that the defendant at the time the contract was made had thought about the consequences of its breach. 35. Fifthly, the criterion for deciding what the defendant must be taken to have had in his or her contemplation as the result of a breach of their contract is a factual one.”
“The application of this principle has given rise to particular difficulty in relation to building contracts or tort claims for damage to buildings. Say, for example, a building is sold at full value along with an assignment to the purchaser of claims in contract or tort in relation to the building. The building turns out to need repairs as a result of a breach of the builder’s contract with the assignor (whether that breach is prior, or subsequent, to the sale to the assignee) or of a tort (damaging the building prior to the sale). The assignee pays for the repairs. It might be argued that the assignor in that situation has suffered no loss so that, applying the governing principle that the assignee cannot recover more than the assignor, the assignee has no substantial claim. If correct, “the claim to damages would disappear … into some legal black hole, so that the wrongdoer escaped scot-free”
“The problem has, in any event, normally been circumvented because of the courts’ recognition that, where a third party is, or will become, owner of the defective or damaged property, there is an exception to the general rule that a contracting party can recover damages only for its own loss and not the loss of the third party. Where the exception applies, the contracting party (the assignor) is entitled to substantial damages for the loss suffered by the third party (the assignee): by the same token, there is no question of an award of substantial damages to the assignee infringing the principle that the assignee cannot recover more than the assignor.”
“2. 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? 3. One possible answer to this question would produce “a legal black hole.”
“ 36 Mr Friedman QC (who did not appear in the court below) submitted on behalf of Technotrade that the assignment makes a crucial difference. His broad submission was that the only losses that Larkstore is entitled to claim by virtue of the assignment of the cause of action are the losses that Starglade could itself have recovered from Technotrade at the time of the assignment. As the assignment of the cause of action took place after Starglade had parted with the Site to Larkstore and the substantial damage occurred before the assignment of the cause of action to Larkstore, Starglade and therefore Larkstore had no right to claim and recover substantial damages for loss resulting from the landslip.”
“Application of principles 39. Applying this concise account of the legal principles to the particular circumstances of this case, it is, in my judgment, fallacious to contend that Larkstore cannot recover substantial damages from Technotrade, even if it can prove that Technotrade was in breach of contract and otherwise liable for them. 40. The contention is based on the propositions that Starglade (the assignor) had only suffered nominal damages at the date of the assignment, because it no longer owned the Site, and that Larkstore (the assignee) could not acquire by assignment from Starglade any greater right than Starglade had against Technotrade. 41. As I see it, that is not the true legal position. What was assigned by Starglade to Larkstore was a cause of action for breach of contract against Technotrade and the legal remedies for it. It was not an assignment of “a loss”, as Mr Friedman described it in his attempt to persuade the court that the amount of the loss recoverable by Larkstore was limited by what loss had been suffered by Starglade, in this case nil. The assignment included the remedy in damages for the cause of action. The remedy in damages for breach of contract is not, in principle, limited to the loss suffered as at the date of the accrual of the cause of action or as at any particular point of time thereafter. 42. The principle invoked by Technotrade that the assignee cannot recover more than the assignor does not assist it on the facts of this case. The purpose of the principle is to protect the contract-breaker/debtor from being prejudiced by the assignment in having, for example, to pay damages to the assignee which he would not have had to pay to the assignor, had the assignment never taken place. The principle is not intended to enable the contract-breaker/debtor to rely on the fact of the assignment in order to escape all legal liability for breach of contract [i.e. of that contract]. … 44. Indeed, if Mr Friedman’s arguments were accepted, far from being prejudiced by the assignment, Technotrade would improve its position as a result of it. Technotrade would escape all potential contractual liability for the damage caused by the landslip. It would have ceased to be liable to Starglade, which no longer owned the Site. It would not be liable to Larkstore, which did own the site, but the liability to Larkstore would be subject to the Starglade limit proposed by Mr Friedman, which would cancel any claim against Technotrade for substantial damages. By a legal conjuring trick worthy of Houdini the assignment would free Technotrade from the fetters of contractual liability. The position would be that the contract-breaker would be liable to no-one for the substantial loss suffered in consequence of the breach. As a matter of legal principle and good sense, this cannot possibly be the law, and fortunately the authorities cited in argument and discussed below do not compel the court to reach such a result. 45. Mr Friedman submitted that there was no “legal black hole” or conjuring trick here. He contended that the parties did not contemplate that any one other than Starglade would or might suffer loss in consequence of a breach of contract by Technotrade in respect of the report. Technotrade’s retainer was on the basis that it was Starglade who would be carrying out the development of the Site. Losses have been suffered by Larkstore because it chose not to seek any form of warranty from Technotrade, did not engage its own geo-technical advisers and relied on the Technotrade report without obtaining the consent of Technotrade for a purpose for which it had not been written. 46. In my judgment, these arguments amount to no more than an ingenious attempt to deny what has been correctly conceded, namely that the report and the causes of action in respect of it were assignable by Starglade. There was no express prohibition against assignment. No prohibition can be implied from any special circumstances. It was not argued, for example, that the contract between Starglade and Technotrade was of a personal nature and therefore unassignable.”
“48. Dawson v. Great Northern and City Railway Company…was cited for the proposition that the assignee was not entitled to recover any greater amount of compensation than the assignor could have recovered. The width of the general proposition has to be read in context. In that case compensation under theLands Clauses Consolidation Act 1845 was not payable to the assignee for “damage to [her] trade stock” (as distinct from structural damage to premises requiring re-instatement works which did not increase the burden on the defendants), because that was compensation for an item that could not have been recovered by the assignor from the defendants. The assignor did not trade in the stock in question and could not have made a claim for compensation for that item.”
“51. The judge was criticised by Mr Friedman for relying on the following passage in the judgment of Staughton LJ in 57 BLR 57 at p80−81: "That brings me to the last point to be considered in connection with assignment of choses in action. Where the assignment is of a cause of action for damages, the assignee must of course have a sufficient proprietary right, or a genuine commercial interest, if the assignment is not to be invalid. It is no longer in issue in these appeals that the assignees had such a right in each case; we heard no argument to the contrary from the contractors. But it is said that in such a case the assignee can recover no more as damages than the assignor could have recovered. That proposition seems to me well founded. It stems from the principle already discussed, that the debtor is not to be put in any worse position by reason of the assignment. And it is established by Dawson v. Great Northern & City Railway Co[1905] 1 KB 260 ; see also GUS Property Management Ltd v. Littlewoods Mail Order Stores Ltd[1982] SLT 533 by Lord Keith of Kinkel at page 538, cited later in this judgment [pp 89−90]. But in a case such as the present one must elucidate the proposition slightly: the assignee can recover no more damages than the assignor could have recovered if there had been no assignment, and if the building had not been transferred to the assignee." … 54. The judgment of Staughton LJ was rightly relied on by the judge. I am respectfully of the view that the ruling of Staughton LJ on this point is correct as a matter of legal principle and good sense, and ought to be followed by this court in this case. It completely disposes of the argument raised in the defence of Technotrade that Larkstore is not entitled to claim substantial damages from Technotrade, because its assignor, Starglade, had suffered no loss, having parted with the Site before the landslip occurred and before the assignment of its cause of action to Larkstore. 55. I must, however, make it clear that the only point raised in this case at this preliminary stage is whether Larkstore had, by virtue of the assignment, a right to sue Technotrade for substantial damages for breach of contract in respect of loss claimed to have been suffered by it in consequence of the landslip at the Site. There is no question before this court, nor was there below, as to the proper measure or quantum of damages, which Larkstore is entitled to recover against Technotrade. We have heard no argument on it and I express no views on that aspect of the case.”
“A court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed”