Defective premises

Citation

Lee, R. (2007), "Defective premises", Property Management, Vol. 25 No. 3. https://doi.org/10.1108/pm.2007.11325cab.001

Defective premises

The following case illustrates the fact that the courts are determined not to allow a claim for damages in respect of a defectively constructed building to be defeated on the technical ground that the property changed hands before the claim was made and thus the first owner suffered no loss (see, for example, Catlin Estates Ltd v. Carter Jonas (a firm) (2005) EWCH 2315, see, Property Management, Vol. 24 No. 5, p. 514, 2006.

In Technotrade Ltd v. Larkstore Ltd (2006) EWCA Civ 1079 (2006) 42 EG the Court of Appeal took a similar approach by upholding the right of an assignee to claim damages from the engineers who had carried out a geo-technical site investigation on a sloping development site in Kent. The investigation had actually been carried out for the then owner of the site who needed it to comply with a condition of the planning permission for the residential development of the site. The developer later sold the site, complete with planning permission and the site investigation report, to Larkstore. Larkstore used the report as part of its contract documentation when instructing the design and build contractors. During construction there was a serious landslip on the site, which caused physical damage to five neighbouring properties by withdrawal of support. The owners of the damaged properties brought action against Larkstore. By this time the contractors had become insolvent so Larkstore joined Technotrade as a third party claiming damages for the stabilisation work that would now be necessary and also for an indemnity against any damages payable to the affected homeowners. However, in order to ensure that they would be able to make the claim, before commencing the action Larkstore made an agreement with the original owner of the site. Under that agreement that owner assigned all of its rights to sue Technotrade, for breach of contract or otherwise in respect of the report, to Larkstore.

It has long been accepted in law that the assignee can recover no more than the assignor could have recovered if no assignment had been made (see, Dawson v. Great Northern and City Railway Co. (1905) 1 KB 260). Technotrade contended that as the original owner had sold the site to Larkstore at full value it had suffered no loss. Thus they argued, Larkstore was entitled to no more than nominal damages.

This argument was rejected by the Court of Appeal. After an extensive review of the previous case law the judges agreed with the view of Staughton in Linden Gardens Trust Ltd. v. Lenesta Sludge Disposals Ltd (1992) 57 BLR 57 that in property development it is well accepted that a party that prepares a development will transfer the fruits of his labour to a successor. Therefore a legal technicality should not be allowed to prevent recovery where there has been a real loss caused by a real breach of contract.

In this case their Lordships added that the rule in the Dawson case was not designed to allow a defendant to escape liability for his breach but only to ensure that “… he does not have to meet a bigger liability than he would have been under to the assignor if the assignment had not been made. In other words the assignee cannot bring to his claim losses which do not flow from the original breach … ”

Applying this to the present case their Lordships held that since the original owner would have been able to claim for all the losses suffered as a result of the negligent site report, Larkstore should be able to do the same.