Technotrade Ltd v Larkstore Ltd

An assignment of an accrued contractual cause of action transfers the remedies attached to it. The assignee may recover substantial loss occurring after the breach and after transfer of the relevant property, even where the loss preceded the assignment.

The rule that an assignee cannot recover more than the assignor protects the contract-breaker from increased liability caused by the assignment. It does not extinguish liability merely because the property and cause of action passed at different times. The comparison is with what the assignor could have recovered had neither the assignment nor the property transfer occurred. Recovery remains subject to causation, remoteness, quantum and limitation.

Technotrade Ltd prepared a soil investigation report under a contract with Starglade Ltd, the owner of a residential development site. Starglade sold the site to Larkstore Ltd without then formally assigning the contractual cause of action. A landslip subsequently caused substantial damage and required stabilisation works. Starglade later assigned the report, its contractual rights and its remedies to Larkstore.

In Part 20 proceedings, HHJ David Wilcox held that the assignment entitled Larkstore to claim substantial contractual damages from Technotrade. Technotrade appealed. The central issue was whether an assignee could recover loss suffered after the property transfer but before the assignment, although the assignor itself had suffered no substantial loss.

1. Appeal dismissed. Larkstore's valid assignment entitled it to sue Technotrade for substantial damages for breach of contract. The claim did not fail merely because the landslip occurred after Starglade sold the site and before Starglade assigned the cause of action.

2. Per Mummery LJ, with whom Rix LJ and Peter Smith J agreed, the contractual cause of action was complete when Technotrade supplied the allegedly defective report. Although only nominal damages were then provable, contractual damages are not confined to loss existing when the cause of action accrues. Later loss may be recovered, subject to causation, remoteness, quantum and limitation.

3. The assignment transferred the cause of action and its remedies, rather than a fixed amount of loss. Under section 136 of the Law of Property Act 1925, a written assignment accompanied by express notice transfers the legal right to the chose in action and the associated legal and other remedies, subject to prior equities.

4. The rule that an assignee cannot recover more than the assignor could have recovered protects the debtor from prejudice caused by the assignment. It does not allow a contract-breaker to escape liability because ownership of the property and the cause of action passed at different times. The correct comparison asks what the assignor could have recovered had there been no assignment and no transfer of the property to the assignee.

5. The Court followed the Court of Appeal ruling in Linden Gardens Trust v Lenesta Sludge Disposals [1992] 57 BLR 57. Dawson v Great Northern and City Railways Company [1905] 1 KB 260 did not establish a wider bar: it prevented recovery only for a new head of loss introduced by the assignee's different business.

6. Rix LJ added that the assignee cannot introduce losses which do not follow from the original breach. Here, however, the cause of action carried potential liability for losses ultimately flowing from that breach, and the subsequent assignment reunited the cause of action with the alleged loss.

7. The Court determined only whether substantial damages could in principle be claimed. Causation, remoteness, categories of loss and quantum remained open. Both parties' applications for permission to appeal on the duty-of-care issue were refused, with no order as to costs.

1. Court of Appeal (Civil Division): By judgment dated 27 July 2006, the Court dismissed Technotrade's appeal on the assignment issue. It also refused both parties' applications for permission to appeal on the duty-of-care issue.
2. High Court, Queen's Bench Division, Technology and Construction Court: HHJ David Wilcox determined preliminary issues in the Part 20 proceedings on 2 December 2005. He held, among other matters, that the valid assignment entitled Larkstore to claim substantial contractual damages from Technotrade. No neutral or report citation is stated.