St Martins Property Corporation Ltd v Sir Robert McAlpine & Sons Ltd [1994]
Court: House of Lords
Facts: St Martins Property Corporation Ltd engaged McAlpine as its building contractor under a contract with a clause prohibiting assignment without McAlpine’s written consent. St Martins assigned the property and contract to St Martins Investments without McAlpine’s consent. After discovering defects requiring remedial work, St Martins Property Corporation sued McAlpine for breach of contract. McAlpine argued that St Martins Property Corporation could not claim damages because it no longer had a proprietary interest in the property.
Issue: Whether St Martins Property Corporation could claim substantial damages for breach of contract despite having assigned its interest and without obtaining the contractor’s consent.
Held: The House of Lords held that St Martins Property Corporation was entitled to substantial damages. The case extended the Albazero exception from contracts of carriage to building contracts, allowing recovery of damages even when the original contracting party no longer holds a proprietary interest.
Key Judicial Statement:
Lord Browne-Wilkinson: Affirmed that the Albazero exception, allowing recovery for third-party loss in contracts where the transfer of interest was contemplated, applied to building contracts. The original contracting party could recover damages for defects affecting the subsequent owner if it was foreseeable that the property would be transferred and the defect would affect the third party.
Lord Griffiths: Supported the broader principle that damages should not be restricted by the loss of proprietary interest, emphasizing the practical realities of contracting for work and labor where the contracting party may not always have a continuing interest.
Lord Keith, Lord Bridge, and Lord Ackner: Agreed with Lord Browne-Wilkinson’s narrow application of the Albazero exception, recognizing the practical necessity of allowing recovery for foreseeable third-party losses.
💡 Leveluplaw: This case illustrates the extension of the Albazero exception to building contracts, emphasizing that contracts involving the transfer of property interests can still allow for recovery of damages by the original party if the loss was foreseeable and the third party has no direct right to sue. It highlights the importance of considering the potential for future assignments and the foreseeability of defects affecting subsequent owners when drafting and enforcing contracts. This decision underscores the need for parties to anticipate how contractual breaches may impact future owners and the potential legal avenues for seeking compensation.