PANATOWN IN THE HOUSE OF LORDS: NO SUBSTANTIAL DAMAGES

DUTY OF CARE DEED DEFEATS BOTH DUNLOP/ALBAZERO EXCEPTION AND LORD GRIFFITHS’s PRINCIPLE

The decision of the Court of Appeal in Panatown has finally reached the House of Lords: Alfred McAlpine Construction Ltd v Panatown Ltd [2000] BLR 331, HL. By a bare majority, the House has reversed the Court of Appeal on the ground that the duty of care deed (‘DCD’) given directly by the defaulting contractors to the third party owners of the site prevented this from being a ‘black hole’ case and disabled the innocent contracting party from recovering substantial damages based on the cost of rectifying the defective work. In reaching this result, the majority favoured a strict application of Lord Diplock’s exceptional principle of damages in The Albazero [1977] AC 774, HL, and (it seems) a restrictive interpretation of the principle of damages stated by Lord Griffiths in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd ; St Martins Property Corporation Ltd v Sir Robert McAlpine Ltd [1994] 1 AC 85, HL (hereafter ‘ St Martins ’). All five members of the Lords gave individual speeches. The result is not only a strong body of dissent (from Lord Goff of Chieveley and Lord Millett) but a tantalising mix of the pragmatic and the conceptual, with rather less internal reconciliation than one might have wished. Regrettably, some of the conceptual questions receive diverse treatment among the various speeches. In the result, coaxing a set of propositions with majority support from their Lordships’ analyses is no easy task.