Assignees of the benefit of a deed and ‘black holes’ – Orchard Plaza Management Company Ltd v Balfour Beatty Regional Construction Ltd [2022] EWHC 1490 (TCC)

• Main Author: THAM, Chee Ho
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: Dispute Resolution and Arbitration
• Online Access: https://ink.library.smu.edu.sg/sol_research/4150
• Institution: Singapore Management University

In general, since a contract party may recover damages only for its own losses, so, too, its assignee. Recently, Orchard Plaza Management Co Ltd v Balfour Beatty Regional Construction Ltd 1 presented the High Court with another instance where the losses sustained by an assignee seemed to fall down a “black hole” because of this. However, a third party’s losses may be recovered, exceptionally, by a contract party—hence, its assignee may recover likewise. Orchard Plaza suggests this is also true for contracts made by deed. Around 2007–2008, having obtained funding from AIB Group (UK) Plc (“A”), the defendant (“B”) entered an amended Joint Contracts Tribunal Design and Build contract (the “Building Contract”) with Coltham (Orchard) Ltd (“C1”) to design and convert an existing offi ce block (the “Property”) into apartments and commercial units. C1 owned the freehold of the Property. Pursuant to the Building Contract, 2 B executed a contract made by deed (the “Deed”), seemingly unsupported by any consideration, 3 on 22 October 2007. The other parties to the Deed were C1 as “Benefi ciary” and A as “Funder” of the project. 4 The Deed included an assignable collateral warranty (the “Collateral Warranty”) by which B covenanted to A that, inter alia, it had performed its Building Contract obligations with reasonable skill and diligence. 5 Later, C1 granted the claimant (“C2”), a management company established for this purpose and whose members were purchasers of the apartments, a long lease of the Property. In 2015, C2 became aware of defects in the cladding selected and installed by B, and in 2020 was served an improvement notice by the council to replace it. Meanwhile, on 28 June 2017, A had assigned to C1 its rights under the Collateral Warranty, which C1 assigned to C2 on 10 July 2017. C2 then sued B for breaching it. The Contracts (Rights of Third Parties) Act 1999 often gives assignees of the benefi t of a construction contract 6 recourse against the builders. However, C2 did not raise the point: 7 the interlocutory hearing before Morris J focused on C2’s entitlements as an assignee to recover damages for B’s breach of the Collateral Warranty, the benefi t of which had been