In Linden Gardens the lessee of the premises, Stock Conversions Ltd, entered into three contracts for the removal of asbestos:
- In June 1979 with Lenesta Sludge (first defendant) as prospective sub-contractor.
- In July 1979 with McLaughlin & Harvey (second defendant) as main contractor: H.
- In February 1985 with Ashwell Construction (third defendant).
Completion of the works under contracts (1) and (2) took place in March 1980 and under contract (3) on 16 August 1985. On 3 July Stock Conversions commenced legal proceedings against Lenesta for damages for breach of contract. Stock Conversions made the following assignment, presumably for market value, to Linden Gardens Trust Ltd:
- On 1 August 1985 of its interest in the 3rd, 5th and 6th floors.
- On 2 December 1986 of its interest in the 4th floor.
- On 14 January 1987 of the rights of action under the contracts with McLaughlin and Ashwell.
Proceedings commenced by Stock Conversions in July 1985 against Lenesta Sludge were amended in 1987, Linden Gardens becoming the claimant, and McLaughlin and Ashwell the second and third defendants respectively.
The Court of Appeal had to consider the assignment of causes of action for damages for breach of contract. Staughton LJ stated:
'But it is said that in such a case the assignee can recover no more as damages than the assignor could have recorded. That proposition seems to me well founded. It stems from the principle already discussed, that the debtor is not to be put in any worse position by reason of the assignment. And it is established by [Dawson v Great Northern and City Railway Co] see also [GUS Property Management Ltd v Littlewoods Mail Order Stores Ltd]... But in a case such as the present, one must elucidate the proposition slightly; the assignee can recover no more damages than the assignor could have received if there had been no assignment, and if the building had not been transferred to the assignee.'
The assumption which forms the root of the statement, i.e. 'no assignment' and 'no transfer', confirms the approach adopted in Dawson and GUS Property Management.
Staughton LJ went on to state:
'Stock Conversion had an accrued cause of action against McLaughlin & Harvey by 25 March 1980, the date of practical completion of that company's works. They subsequently incurred the cost of remedial works in the sum of £22,205.02. That claim was validly assigned to Linden Gardens Trust, who can recover in respect of it. Further breaches of contract were later discovered, giving rise to remedial works in 1987 and 1988, and to expense and loss in the sum of £236,000. Stock Conversions acquired a cause of action in respect of some of these defects against McLaughlin & Harvey, dating from 1980 and in respect of others against Ashwell Construction for defective work in 1985. It is immaterial that during the Ashwell Construction works Stock Conversion disposed of part of their interest in the building. In my opinion, Stock Conversion acquired the right to substantial damages for those breaches of contract, and did not lose it when they disposed of the rest of their interest in the building for its sound market value, on 12 December 1986. After the assignment on 14 January 1987, Linden Gardens Trust as assignees became entitled to enforce Stock Conversions' claim. It is immaterial that Linden Gardens Trust subsequently incurred the expense of remedial work and suffered loss of rent while it was carried out, although the cost and loss may assist them in establishing the damage which would, but for the assignment and transfer of property, have been recoverable by Stock Conversion.'
Sir Michael Kerr stated:
'The next point is then that an assignee can recover damages from the debtor to the same extent as his assignor could have done, but he cannot enforce any claims, let alone under new heads of damage, which would not have been available to his assignor. However, his right to damages, limited to that extent, is enforceable by him even though he is not accountable to his assignor. These principles are illustrated by [Dawson] and [GUS Property Management]. There is no problem about Linden Gardens' right to recover the £22,205.02 which Stock Conversions had spent in remedying the original breach by McLaughlin & Harvey. But in my view Linden Gardens are also prima facie entitled to recover the £236,000 odd which they themselves expended in remedying the other breaches by these contractors and the further breaches by Ashwell, all of which had been committed prior to Stock Conversions' assignment to Linden Gardens. Both are claims for damages which had vested in Stock Conversions and which were validly assigned to Linden Gardens. The fact that, at the time of the assignment, Stock Conversions were aware of the full extent of the breaches, and therefore of the extent of their claims for damages, does not appear to me to make any difference to the validity and effect of the assignment to Linden Gardens. The only limitation upon Linden Gardens' right of recovery is to the extent to which the defendants may be able to show that Linden Gardens' claims exceed what would have been recoverable by Stock Conversions if there had been no assignment. But that is merely a question which goes to quantum, like the discussion in the speech of Lord Keith in GUS as to what would be the appropriate measure of damages in the circumstances.’
Of the suggestion that Lord Keith's reasoning in GUS Property Management can be distinguished on the grounds that in that case the price for the transferred property was not market value but was'... fixed in an internal group transaction and for accounting purposes only, without any reference to the true value of the building', Staughton LJ stated:
‘It may well be said that this passage appears to accept that, if Rest had sold the building for its sound market value, they would have suffered no loss, and, consequently the pursuers could have recovered only nominal damages. The claim would then indeed have disappeared into a legal black hole. However, I do not consider that Lord Keith expressed an opinion to that effect, even obiter and sub silentio. There was no issue as to what would have happened if Rest had received the full market value of the building in sound condition.'
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|Linden Gardens Ltd v Lenesta Sludge Ltd|
|Court||House of Lords|
|Citation(s)|| 1 AC 85|
 3 WLR 408
 3 All ER 417
 UKHL 4
|Judge(s) sitting||Lord Keith|
|Duty of care, privity, assignment|
Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd UKHL 4,  1 AC 85 is a judicial decision of the House of Lords in relation to assignment and privity of contract under English contract law.
Stock Conversions Ltd, the lessee of a building, used a JCT standard form contract to hire Lenesta to remove asbestos. Clause 17(1) said "The employer shall not without written consent of the contractor assign this contract." Lenesta subcontracted another firm to do the job. More asbestos was soon found, and a third business was contracted. Then Stock Conversions Ltd assigned the building lease to Linden Gardens, and at the same time, without Lenesta ever having consented, assigning its right of action against Lenesta to Linden Gardens. More asbestos was found and Linden Gardens sued the contractors for negligence and breach of contract. The Court of Appeal found the assignment was effective. Lenesta appealed.
In a second joined case, St Martin's Property Corp Ltd had been granted a 150-year lease on a site from a council where they began a shop development, and in 1974 used the JCT standard contract with the same clause 17 to hire Sir Robert McAlpine as a builder. They assigned their interest and the benefits of the contracts to another company, without Sir Robert McAlpine Ltd's consent. Then in 1981 it was found that the building work was defective, and remedial work would cost £800,000. The Court of Appeal by a majority held the assignment was invalid but that St Martin's Property Corp Ltd was entitled to damages.
The House of Lords held that a true construction of clause 17(1) prohibited assignment without consent and that since a party to such a contract might have a genuine commercial interest in ensuring that contractual relations with the party he selected were preserved, there was no reason for holding the contractual prohibition on assignment as being contrary to public policy.
In the second case because the development was, to the knowledge of the parties, likely to be occupied or purchased by third parties, damage to a subsequent owner was foreseeable. Because of the specific contractual provision that rights of action were not assignable without the defendants' consent, the parties could properly be treated as having entered into the contract on the basis that the first plaintiffs would be entitled to enforce against the defendants contractual rights on behalf of those third parties who would suffer from defective performance of the contract but were unable to acquire rights under it. Accordingly, the first plaintiffs were entitled to substantial damages for any breaches of the contract by the defendants.
Lord Browne-Wilkinson adapted the concept of Lord Diplock in The Albazero that there is an exception applicable to contracts of carriage: ‘that the consignor may recover substantial damages against the shipowner if there is privity of contract between him and the carrier for the carriage of goods; although, if the goods are not his property or at his risk, he will be accountable to the true owner for the proceeds of his judgment.’