St Martins Property Corporation v Sir Robert McAlpine & Sons Ltd [1994] 1 AC 85 (conjoined)

KEY POINTS

• Citing Albazero:

A remedy where no other would be available to a person sustaining loss which under a rational legal system ought to be compensated by the person who has caused it.

• Requirements for the exception of the application of the Albazero exception:

  1. The contract in question must pertain to a substantial property development project.

  2. It must be foreseeable that a breach of the contract could cause harm or loss to subsequent owners of the property, rather than just to the original contracting party.

  3. There is no automatic transfer or vesting of legal rights to sue in favor of the occupiers or owners of the property at the time when they suffer losses due to a breach. 

FACTS

• In 1968, St. Martin's Property Corporation started a property development project in London. They had an agreement with a local authority for a 150-year lease upon project completion. In 1974, they signed a building contract with Sir Robert McAlpine and Sons, similar to a contract in the Linden Gardens case.

• In the mid-1970s, for tax reasons, the State of Kuwait's property interests were transferred to another subsidiary, St. Martin's Property Investments Limited (Investments), through an assignment in 1976. This assignment also included all contracts related to the project. McAlpine was not informed until 1986.

• By the time of the assignment, there were no ongoing breaches of contract. In 1981, issues arose with a part of the development leaking. Remedial work was performed, initially covered by Corporation and later reimbursed by Investments.

JUDGEMENT

• Appeal dismissed.

COMMENTARY

• This case is significant because it provides legal clarity regarding when third parties, who were not part of the original contract, may have standing to seek remedies for contractual breaches in large property development projects.

• It acknowledges the need to consider the presence of third parties, the foreseeability of their potential losses, and the absence of automatic legal rights transfer to these third parties.

RELATED CASES

• Linden Gardens BC v Lenesta Sludge Disposals Ltd

• Alfred McAlpine Construction Ltd v Panatown Ltd