Darlington BC v Wiltshier Northern Ltd
Court of Appeal
Citations:  1 WLR 68;  3 All ER 895;  CLC 691; (1995) 11 Const LJ 36;  CLY 487.
Wiltshier entered into a finance agreement with a Morgan Grenfell, a finance company. The aim of the agreement was to build a recreational centre for the benefit of the Council. Wiltshier’s work was defective. Morgan Grenfell assigned all of their rights and causes of action against Wiltshier under the contract to the Council. The Council sued for damages in breach of contract.
Wiltshier argued that the Council could only claim nominal damages. This was because they were not the original party to the financing contract. The original party was Morgan Grenfell. Accordingly, Wiltshier argued, they could only assign the right to claim for Morgan Grenfell’s losses (not the Council’s). Morgan Grenfell had not suffered any losses, so only nominal damages applied.
- What damages could the Council, as an assignee, claim?
The Court of Appeal held in favour of the Council. Both Wilshier and Morgan Grenfell intended the contract to benefit the Council. It was foreseeable that any breach would cause the Council loss. Accordingly, the Council gained the right to recover their own damages when Morgan Grenfell assigned their contractual rights. The Court held that damages should be assessed as if the Council had always been a party to the contract.
This Case is Authority For…
An assignee of contractual rights can recover substantial damages in their own right, so long as the contract was intended to benefit them and those losses were foreseeable at the time of contracting.
At the time this case was decided, the Council had no right to sue on the contract without an assignment of Morgan Grenfell’s rights. This was because of the common law rule of privity of contract.
Dillon LJ and Waite LJ thought that if the contract had not been assigned, Morgan Grenfell could have sued for any losses suffered by the Council. They would have held the damages awarded on constructive trust for the Council. This was an exception to the rule that a claimant can only claim for their own loss.
In the modern era, this is unlikely to be necessary. Third-parties to this kind of contract usually have the right to sue on their own behalf under the Contracts (Rights of Third Parties) Act 1999.