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Alfred McAlpine Construction Ltd v Panatown Ltd

[2001] 1 AC 518

Case summary last updated at 03/01/2020 17:09 by the Oxbridge Notes in-house law team.

Judgement for the case Alfred McAlpine Construction Ltd v Panatown Ltd

 P constructed a building for X (a company within the same business group as P) on X’s land, and employed D as a subcontractor. In breach of their contract, D built a disastrous structure that required large amounts of money to be paid in repairs. D had also entered a separate “duty of care” contract with X in case D’s work should be defective. However for procedural reasons, it was P that sued D to recover the cost of repairs. HL denied P’s claim: The majority approach (Clyde, Jauncey and Browne-Wilkinson) on the grounds that (1) P had suffered no loss itself and had no intention/had incurred no costs in repairing the building, and (2) could not apply the Albazero/Linden Gardens exception because X (TP) had its own “direct contractual right” and therefore there was “no legal black hole”. The minority approach (dissenting) (Goff and Millett) said that (1) the Albazero exception did not apply in cases of no transfer of ownership being contemplated by the parties (as here), but that (2) although P had suffered no loss personally, he still had an interest in performance, prima facie evidence of which is that he contracted D to build the thing. 
 
Lord Clyde: He challenges Lord Griffith’s “broad view” in Darlington that failure to obtain the deal is itself a loss and no evidence of further damage is necessary. He dislikes it because (1) it is a contradiction to say that the loss is the disappointment at the non-performance and yet the damages to be awarded is the cost of repair, since to award such damages would be to say that the value disappointment necessarily = the value of repair. Furthermore, if this were true, then P would at least intend to do the repairs upon the award being made since repair would cure the “disappointment” loss. A better way of valuing disappointment would be the difference in value between what was delivered and what was promised. (2) the disappointment value may be less than the economic consequence of breach. (3) There is no compulsion for P to account to the person who has suffered the actual loss  e.g. give them the damage money (True, but deterrence is a consideration, + the “disappointment” factor IS actual loss). (4) There is no difference between loss of expectation and breach of contract i.e. Lord Griffiths’ “broad view” would mean that all breaches of contract lead to substantial compensation. He would prefer to take an attitude that a party should be able to recover provided it has to account and pass over the money to TP who actually suffered the loss, while the fact that P didn’t suffer the loss shouldn’t be a ground for escaping liability. However “each case has to be judged on its own circumstances” and because there was an alternative method of claiming (the “duty of care” document with UIPA) the claim by P should be dismissed. 
 
Lord BW: Doesn’t actually say whether the “broader ground” is valid. He says on a “narrower” ground the appeal failed since the party with the proprietary interest here CAN bring an action, but even on Lord Griffith’s broader ground the claim fails. He says that the objection to allowing a party who hasn’t suffered loss to claim damages is that, since D can’t be made liable twice, it would prevent the party that actually has suffered loss from claiming! (this doesn’t go against the broad ground per se since all that doctrine recognises is that it is possible for those without proprietary interests to suffer loss as in Lord Griffith’s example of the husband and wife). 
 
Lord Jauncey: Lord Griffith’s example was only meant to apply to cases where P intended to repair the damage- not in cases here where P had no such intention.
 
Lord Goff (dissenting): The “broader ground” argument is valid- see husband-wife scenario. Because P is suing on the grounds of his own interest, not in the interest of TP, the fact that another party has a different remedy for a different liability is irrelevant. (Firstly, as Clyde said, “expectation interest”, to which Goff is referring is in reality no different to breach itself and secondly, the breach of duty document that UIPA have covers the same project and it is unfair to D to make it liable twice for one breach of contract.) 
 
Lord Millett: The broader ground would be useful for commerce. Radford (see week 3) established that a “performance interest/expectation interest” existed which could be sued on despite no apparent loss. It was held by Oliver J that the agreement spoke for itself in terms of showing that there was loss caused to P by not having the agreement enforced (else why would P be suing). 
 
McKendrick says that Lord Millett and Lord Goff are right in saying that “expectation interest” is a valid and compensable interest: if A orders a kitchen to be fitted but the wrong one, of equal value, is fitted, it would seem unfair to grant no remedy + it would contradict Parke B’s dictum (see week 3 reading). He says that Ruxley is susceptible of various interpretations and, due to the uncertain position of Lord BW there is no clarity as to what the state of the law actually is regarding the proposition that P can claim despite having suffered no physical or financial loss (merely a loss of expectations). In this type of scenario principle must decide.

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