Linden Gardens v Lenesta Sludge Ltd PDF

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Summary

Detailed case brief, including paragraph/page references
Property law: chattels ...

Description

Linden Gardens v Lenesta Ltd Area of law concerned:

Assigning Property

Court:

House of Lords

Judge:

Lord Browne-Wilkinson

Date

1994

Counsel: Summary of Facts:

Stock Conversion were owners of a leasehold interest in the third to sixth floors of a building in London. In June 1979 Stock Conversion entered into a building contract with the second defendants, MH. MH were to remove asbestos from the property. The building contract’s clause 17 prevented assignment of the contract. Lenester Sludge Disposals, the first defendants, were the nominated subcontractors for the removal of the asbestos. No consequence to this appeal. Practical completion of the works to be carried out by MH took place on 25 March 1980. More asbestos which should have been removed was found after this. Stock Conversion entered into another contract with Ashwell Construction for the removal of this asbestos, and this contract also contained a covenant against assignment. Practical completion took place in August 1985, and Stock Conversion bore the cost. On 1 April 1985 Stock Conversion assigned to Linden Gardens Trust Ltd the leasehold interest in the third, fifth and sixth floors of the property, subject to a licence back under which Stock Conversion continued to occupy the third floor. In December 1986 Stock Conversion surrendered its licence of the third floor and assigned the fourth floor to Linden Gardens. They received the market value for this, and there was no indication that any allowance was made for the possibility of asbestos in the building. The Proceedings On 3 July 1985 Stock Conversion issued a writ against Lenesta Sludge as sole defendant. On 14 January 1987 Stock Conversion executed a deed of assignment in favour of Linden Gardens, assigning to them Stock Conversion’s rights of action as pleaded in the High Court proceedings in consideration of £1. MH did not, as required by clause 17(1) consent to such assignment. In 1987 and 88 more asbestos was found in the premises. Further work was taken to remove it, which was borne by Linden Gardens. In this action, Linden Gardens, as assignee, claims damages for breach by each of the defendants of their respective building contracts. Notes:  Stock Conversion was the only party in a direct contractual

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relationship with each of the defendants, and they are not party to this action The purported assignment of the benefit of the building contract by Stock Conversion to Linden Gardens was made without the consent of the defendants Any breach of the contract by MH occurred before Stock Conversion parted with its interest in the premises. Since Stock Conversion obtained from Linden Gardens the full market rice for its interest in the premises on the assumption that the asbestos had been eradicated, Stock conversion was not put out of pocked by the breaches.

Relief sought: Issues:

Two issues: (i) The effect of a contractual provision which prohibits a party from assigning the benefit of a contract (ii) Whether a building owner can recover substantial damages for breach of a building contract if he has parted with the property.

Relevant Statute(s): Procedural History: Plaintiff/Appellant’s arguments Defendant/Respondent’s arguments: Result: Judge’s reasoning:

(1) Does clause 17 prohibit the assignment of the benefit of building contracts? In my view clause 17(1) of the contract prohibited the assignment by the employer of the benefit of the contract. This by itself is fatal to the claim of the assignee in the St Martins case. 103 pink

(2) Does clause 17(1) prohibit the assignment of accrued rights of action? Say that before completion of the works the employers assigned the land, together with the existing causes of action against the contractor, to a third party and shortly thereafter the contractor committed a repudiatory breach? On the construction preferred by the Court of Appeal, the right to insist on further performance, being unassignable, would have remained with the original employers whereas the other causes of action and the land would belong to the assignee. Who could decide whether to accept the repudiation, the assignor or the assignee? Court of Appeal: further performance unassignable but accrued rights of action are. Leads to issues. 105/106 pink

These possibilities of confusion persuade me that parties who have specifically contracted to prohibit the assignment of the contract cannot have intended to draw a distinction between the right to performance of the contract and the right to the fruits of the contract. 106 blue

In my view they cannot have contemplated a position in which the right to future performance and the right to benefits accrued under the contract should have become vested in two separate people… In my view, clause 17 clearly prohibits the assignment of any benefit of or under the contract. 106 blue

It follows that the purported assignment to Linden Gardens without the consent of the contractors constituted a breach of clause 17. The claim of Linden Gardens as assignee must therefore fail… 106 blue

Unless… (3) Is a prohibition on assignment void as being contrary to public policy? No. not enough to change the law.

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