Co-Operative Group Ltd v Birse Developments Ltd & Ors

For limitation purposes, a negligent subcontractor’s liability may accrue before the main contractor’s liability to the employer is formally quantified. A purely contingent liability is insufficient by itself, but it may contribute to actionable damage where the claimant’s existing assets or contractual rights have suffered measurable devaluation.

The damaged asset and package of rights principles are not confined to physical property or newly acquired rights. They may apply where defective work causes a contractor’s existing contractual position to become less valuable. Notification of the employer’s claim and later trial ascertainment are not necessarily the events causing damage.

A failed assignment may declare a trust, but only where the contract and admissible factual matrix show an intention to create one. Clear language intending an assignment, where assignment was legally possible subject only to consent, did not have that effect.

The proceedings concerned preliminary issues arising from defects in a warehouse development. Birse, the main contractor, brought claims in negligence against Jubb and Geofirma, alleging that their defective design, inspection or works caused Birse loss corresponding to its liability to the employer and leaseholder.

The court was asked whether those tort claims were barred under section 2 of the Limitation Act 1980. It was also asked whether an attempted third assignment of the benefit of Jubb’s collateral warranty, made without Jubb’s consent, created a trust in favour of Co-op.

The assumed facts included practical completion in 1998, later physical damage, and the commencement of proceedings in 2010 and 2013.

1. Limitation. Birse’s causes of action in negligence against Jubb and Geofirma were time-barred under section 2 of the Limitation Act 1980. A negligence claim requires actionable damage. Purely contingent liability is not, without more, damage, but it may form part of present damage where there is an additional measurable financial detriment.
2. The relevant risk arising from negligent design or inspection by subcontractors was that the main contractor would construct and hand over a defective development, thereby becoming liable to remedy defects or pay compensation. That liability reduced the value of Birse’s interest in the development and its contractual rights. The damage accrued, at latest, by practical completion.
3. The damaged asset rule was capable of applying to a beneficial interest in a trust or to contractual rights, not merely to physical property. The package of rights rule was likewise capable of applying where an existing package of rights was rendered less valuable, rather than only where a claimant acquired defective rights. Bell v Peter Browne and Knapp v Ecclesiastical Insurance supported that conclusion.
4. The later notification of Co-op’s claim did not alter Birse’s legal position and was not the material event. Nor could accrual be postponed until Birse’s liability was ascertained at trial. Knowledge was irrelevant to accrual on these facts, subject to the separate statutory regime in section 14A of the Limitation Act 1980, which was not argued.
5. The judge respectfully questioned and declined to follow the obiter view expressed in Linklaters Business Services v Sir Robert McAlpine Ltd that relevant loss arose when the employer’s claim was first intimated.
6. Trust. A prohibition on assignment normally prevents transfer of the contractual right as against the counterparty but does not necessarily prevent a trust. Whether a failed assignment creates a trust depends on the intention disclosed by the assignment, the contract and the admissible factual matrix. Legal impossibility of assignment may support such an inference, but it is not enough that consent was simply omitted.
7. The deed used clear language of assignment and contained no language redolent of a trust, prior covenant to settle or intention to hold the warranty for Co-op. Since assignment was legally possible if consent had been obtained, there was no justification for construing the deed as a declaration of trust. The attempted assignment therefore created no trust.