Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994]
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Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1993] UKHL 4, [1994] 1 AC 85 involved conjoined appeals in the Judicial Committee of the House of Lords, addressing the issue of continued privity of contract following the assignment of property under English contract law.
Stock Conversions Ltd, the original lessee, utilised a JCT standard form contract to engage Lenesta for asbestos removal. Within this contract, Clause 17(1) explicitly stated that "The employer shall not, without the written consent of the contractor, assign this contract." Despite this provision, Stock Conversions Ltd assigned the building lease to Linden Gardens and simultaneously transferred its right of action against Lenesta to Linden Gardens, all without obtaining Lenesta's consent. Asbestos-related issues persisted, prompting Linden Gardens to initiate legal proceedings, claiming negligence and breach of contract. In a separate but related case, St Martin's Property Corp Ltd assigned its property interest and contract benefits to a new owner after completing a shop development, all without the contractor's consent. Subsequently, defective work was discovered.
The House of Lords delivered a verdict that a genuine construction of Clause 17(1) prohibited assignment without consent, and importantly, this prohibition was deemed not contrary to public policy. In the second case, where the likelihood of third-party occupation or purchase was high, any damages resulting from defective works would be borne by subsequent owners rather than the original developer. The existence of a specific contractual provision barring assignment without consent allowed the first claimants to enforce the contract against the defendants on behalf of third parties affected by defective performance. Lord Browne-Wilkinson applied the concept articulated by Lord Diplock in The Albazero [1977], noting an exception applicable to contracts of carriage, which permits the consignor to recover substantial damages against the carrier even if there is privity of contract between the consignor and the carrier.
In summary, the House of Lords affirmed the validity of the prohibition on assignment without consent, emphasising that such a restriction aligns with public policy. Additionally, the court recognised the enforceability of contractual duties on behalf of third parties in specific scenarios, particularly when the parties involved anticipated the likelihood of assignment and the subsequent impact on new owners.
Stock Conversions Ltd, the original lessee, utilised a JCT standard form contract to engage Lenesta for asbestos removal. Within this contract, Clause 17(1) explicitly stated that "The employer shall not, without the written consent of the contractor, assign this contract." Despite this provision, Stock Conversions Ltd assigned the building lease to Linden Gardens and simultaneously transferred its right of action against Lenesta to Linden Gardens, all without obtaining Lenesta's consent. Asbestos-related issues persisted, prompting Linden Gardens to initiate legal proceedings, claiming negligence and breach of contract. In a separate but related case, St Martin's Property Corp Ltd assigned its property interest and contract benefits to a new owner after completing a shop development, all without the contractor's consent. Subsequently, defective work was discovered.
The House of Lords delivered a verdict that a genuine construction of Clause 17(1) prohibited assignment without consent, and importantly, this prohibition was deemed not contrary to public policy. In the second case, where the likelihood of third-party occupation or purchase was high, any damages resulting from defective works would be borne by subsequent owners rather than the original developer. The existence of a specific contractual provision barring assignment without consent allowed the first claimants to enforce the contract against the defendants on behalf of third parties affected by defective performance. Lord Browne-Wilkinson applied the concept articulated by Lord Diplock in The Albazero [1977], noting an exception applicable to contracts of carriage, which permits the consignor to recover substantial damages against the carrier even if there is privity of contract between the consignor and the carrier.
In summary, the House of Lords affirmed the validity of the prohibition on assignment without consent, emphasising that such a restriction aligns with public policy. Additionally, the court recognised the enforceability of contractual duties on behalf of third parties in specific scenarios, particularly when the parties involved anticipated the likelihood of assignment and the subsequent impact on new owners.
