Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994]

Court: House of Lords

Facts: Stock Conversions Ltd, the original lessee of a building, engaged Lenesta Sludge Disposals Ltd for asbestos removal, with a contract containing a clause that prohibited assignment without Lenesta's written consent. Despite this, Stock Conversions assigned the lease and the right to sue for breach of contract to Linden Gardens Trust Ltd without obtaining Lenesta's consent. Linden Gardens later sued Lenesta for defective work. In a related case, St Martin's Property Corp Ltd, which had also assigned its property interest and contract benefits to a new owner, discovered defective work after the assignment.

Issue: Whether the assignment of contractual rights without consent was valid, and whether parties without privity of contract could claim damages for defective performance.

Held: The House of Lords held that: Validity of Assignment Clauses: The no-assignment clause in the contract was valid and enforceable, and not contrary to public policy. Recovery of Damages for Third Parties: While assignment without consent was not valid, the parties could still claim damages for the defective performance under the Albazero exception, where third-party loss was foreseeable.

Key Judicial Statement: Lord Browne-Wilkinson affirmed that the prohibition on assignment without consent was enforceable and aligned with public policy. He also noted that the Albazero exception allowed for the recovery of damages for third parties when the original parties knew the contract would be transferred and the damage was foreseeable. The Court recognized that the specific contract's terms and the foreseeability of third-party loss impacted the enforceability of claims.

💡 Leveluplaw: This case highlights the importance of adhering to contractual clauses prohibiting assignment without consent and underscores the limits of privity of contract. It illustrates how contractual terms can impact the enforceability of claims for defective performance, especially in scenarios involving third parties. Parties should be aware that while non-consent to assignment can be enforced, exceptions like the Albazero principle may allow for recovery of damages even for third parties when their loss is foreseeable. Proper drafting and clear understanding of contractual terms, as well as awareness of potential exceptions, are crucial in managing and protecting contractual rights and obligations.