We use cookies to improve your website experience. To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy. By continuing to use the website, you consent to our use of cookies. Close

THIRD-PARTY LOSS

Lloyd's Maritime and Commercial Law Quarterly

THIRD-PARTY LOSS

Paul S Davies*

A enters into a contract with B to confer a benefit upon C. A breaches the contract, so B brings a claim. Can B recover substantial damages and, if so, upon what basis? Does B need to account for any damages to C? This article considers such questions in the light of important recent appellate decisions, including Swynson Ltd v Lowick Rose LLP and BV Nederlandse Industrie Van Eiprodukten v Rembrandt Entreprises Inc. Although courts continue to refer to the “broad ground” of recovery, in substance it appears that the law of damages is shifting away from the “broad ground” towards the “narrow ground”.

I. INTRODUCTION

A enters into a contract with B to confer a benefit upon C. A breaches the contract, so B brings a claim. Can B recover substantial damages and, if so, upon what basis? Does B need to account for any damages to C?
These simple questions have long proved troublesome. It is surprising that English law still does not provide a clear answer.1 In Woodar Investment Development Ltd v Wimpey Construction UK Ltd,2 Lord Scarman said that the law in this area “is most unsatisfactory” and hoped that the House of Lords would “soon have an opportunity of reconsidering it”. His Lordship expressly said that he hoped that the review would be “now, not forty years on”.3 That was in 1980. Forty years later, treatment of the issue at the highest level has not resolved the uncertainty.
The most detailed judicial discussion of the damages that B might recover is to be found in Alfred McAlpine Construction Ltd v Panatown Ltd,4 which left the law in an inconclusive state. Lord Clyde and Lord Jauncey of Tullichettle thought that B could recover substantial damages from A, but would have to account to C for those damages. This has become known as the “narrow ground”: B can recover for C’s loss in certain circumstances. Lord Goff of Chieveley and Lord Millett, on the other hand, were prepared to allow B to recover substantial damages for itself, in substitution for performance of the bargain.5 This has
Third-party loss

93

The rest of this document is only available to i-law.com online subscribers.

If you are already a subscriber, click login button.

Login