AGENCY, ‘NO LOSS’ AND LEGAL BLACK HOLES

Rolls-Royce Power Engineering plc and Allen Power Engineering plc v Ricardo Consulting Engineers Ltd [2003] EWHC 2871 (TCC)

In Rolls-Royce Power Engineering plc and Allen Power Engineering plc v Ricardo Consulting Engineers Ltd [2003] EWHC 2871 (TCC) Judge Richard Seymour QC considered a number of difficult issues in relation to the law of agency, the law of negligence and the assessment of damages for breach of contract. The principal cause of the legal difficulties which arose on the facts of the case was that the two claimants were members of the same corporate group but the particulars of claim purported to treat the two companies as one. Judge Seymour rejected the submission that one company (the second claimant) acted as agent for its undisclosed principal (the first claimant). He also rejected the submission that the defendant owed a duty of care to the first claimant. Finally he considered a range of issues concerned with the assessment of damages. In doing so, he adopted a narrow interpretation of the decision of the House of Lords in Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518 (on which see our January 2001 issue) and held that the second claimant was not entitled to sue and recover damages in respect of a loss which had been suffered by the first claimant. The case underlines the need to take great care when setting up a transaction involving a group of companies because a claim may, as in the present case, fall down a legal black hole in the event that the claim belongs to one member of the corporate group but the loss is suffered by another member of that group.