COST OF REPAIRS RECOVERABLE UNLESS OBVIOUSLY DISPROPORTIONATE

McLaren Murdoch & Hamilton Ltd v The Abercromby Motor Group Ltd (unreported, Outer House of the Court of Session, 22 November 2002)

The decision of Lord Drummond Young in McLaren Murdoch & Hamilton Ltd v The Abercromby Motor Group Ltd (unreported, Outer House of the Court of Session, 22 November 2002), establishes two points of considerable importance. The first is that he held that a party is entitled to recover the cost of making works conform to the contract unless the cost involved is manifestly disproportionate to any benefit that will be obtained from it. Further, he held that, in deciding whether or not there is a sufficient degree of disproportion, the balance between cost and benefit should not be weighed too finely. Secondly, he held that the defenders were entitled to recover substantial damages from the pursuers notwithstanding the fact that the cost of making the works conform to the contract was initially borne, not by the defenders, but by another member of the same corporate group. In so concluding he rejected the ‘wide ground’ adopted by the minority of the House of Lords in Alfred McAlpine Construction plc v Panatown Ltd [2001] 1 AC 530 but he followed the approach of Lord Clyde and held that, in an appropriate case, the contracting party could sue and recover damages in respect of the loss suffered by the third party.