Cases - Alfred McAlpine Construction Ltd v Panatown

Record details

Name

Alfred McAlpine Construction Ltd v Panatown

Date

[2000]; [2001]

Citation

TCLR 547; HL (No. 1) 76 Con LR 224; (No. 2) 1 AC 518)

Keywords

Litigation of massive proportions - party that suffers loss does not have a direct contractual relationship with the party that caused the loss - third parties - collateral warranty - presence of the collateral warranty was fatal to the respondents' claim

Summary

The claimants in this case alleged that the respondents had under-paid them by £4.7m. The respondents countered that the claimants had constructed the building in question with so many defects that it faced demolition. Although the respondents were named as the 'employer' under the building contract for VAT reasons, it was actually a sister company to the respondents that was incurring the loss by reason of the defects.

A separate collateral warranty existed between the sister company and the claimants, but the respondents chose to bring the action under the building contract, as the terms were more favourable for them in doing so.

Eventually, in the House of Lords and after 8 years of litigation, it was decided that the respondents could not claim substantial damages from the claimants for defects to the property, as the respondents had suffered no loss.

The House of Lords found that the presence of the collateral warranty was fatal to the respondents' claim. Had it not been for the collateral warranty, the court indicated that it may have been willing to find in favour of the respondents. However, having developed for itself a means of recovering substantial damages, the House of Lords found that it would be wrong to allow the parent company of the respondent to benefit from a legal exception.