Litigation Recent Decisions 17/2/98

Decisions are taken from Lawtel's Case Law database. LTL: Lawtel report; TLR: Times Law Reports; ILR: Independent Law Report

The question of land ownership in damages claim

Alfred McAlpine Construction v Panatown (1998)

Court: CA (Evans LJ, Hutchison LJ and Mantell LJ) 5/2/9Text: Appeal against the decision of the Official Referee reversing the decision of the arbitrator to award substantial damages for defective works. The contractors, McAlpine, undertook to design and build an office building and multi-storey car park on JCT standard terms. The building was completed but the employer, Panatown, alleged that it was seriously defective to the extent that it might have to be demolished and rebuilt and that McAlpine was in breach of its contract. Panatown, although the employers under the construction contract, were not and had never been the owners of the construction site. Its associated company, Unex Investment Properties (UIP) was both the owner of the site and, broadly, the developer who sought to have the building constructed on it. The arrangements were designed to avoid the construction contract becoming liable to VAT. The contractors entered a Duty of Care Deed (DCD) with UIP on the same day that they entered the building contract. Panatown commenced arbitration proceedings against McAlpine, claiming damages for alleged defective works. McAlpine's defence was that Panatown was not entitled to recover damages for the alleged breaches of contract because it was not and never had been the owner of the site, so that the loss which Panatown claimed by reason of the allegedly defective condition of the building had been suffered not by Panatown but by UIP, the developer and owner of the site. Therefore Panatown could not recover more than nominal damages, even if the breaches were proved and nor could UIP recover damages for breach of this contract, to which it was not party, added to which it was not party to the arbitration. The arbitrator held that this defence failed but the Official Referee reached the opposite conclusion. Panatown appealed. Concentrating on the damages claim for allegedly defective work, the issues before the Court of Appeal were: (i) Was the rule, or exception, in Dunlop v Lambert (1839) 6Cl. and F.600 excluded because there was a contract between McAlpine and UIP which displaced the employer's right to recover substantial damages, as occurred in The Albazero (1977) AC 774? (ii) Was Panatown entitled to recover substantial damages on the "broader" ground defined by Lord Griffiths in St Martin's Property Corporation v Sir Robert McAlpine sub nom Linden Gardens Trust (1993) notwithstanding that it did not own the land?