Leasehold flats — Repairs and refurbishment — Flatowner refusing to pay share and claiming damages in building dispute — Freeholder going into voluntary liquidation and assigning rights in dispute to flatowner — Whether owner entitled to pursue action under assignment — First instance decision against owner — Appeal allowed
The plaintiff, S, owned a flat in Cranley Mansions, 260 Gloucester Road, London SW7, as well as being a shareholder in the company which owned the freehold, Cranley Mansions Ltd (“Cranley”). In 1988, Cranley undertook major refurbishment to the common parts of the flats, employing the third defendants (“C”) as their architects. S’s flat was on the fifth and sixth floors and she decided to have extensive works done to her flat at the same time, which involved using the roof space. The fourth defendant was employed by S as architectural consultant. It was proposed by the company that in view of the refurbishment, the works to S’s flat would be incorporated into the project for the common parts and that S would pay 46% thereof. Agreement was reached that C would supervise the repairs to be carried out by the second defendants, the builders. C also reached agreement with the fourth defendant, employed by D, on their operational duties as architects. C issued certificates for work done, but by the time the certification of completion was issued, S’s flat was said to have been in a “disastrous” state. The company sued S for £46,000, but she counterclaimed against them and C by a third party certificate.
C compromised the claim made against them by the second defendant builders. Thereafter the lending institution repossessed her flat and S was declared bankrupt. The company itself became insolvent and went into voluntary liquidation: see [1994] EGCS 95. Cranley’s liquidator assigned to S all rights of action and the benefit of its contribution notice against the third defendants and took no part in the present proceedings. At a hearing before the official referee for S to carry on as an assignee of Cranley’s rights of action against the third defendants, S’s application for substitution was refused. She appealed. Under RSC Ord 15 r7(2) “where at any stage of proceedings … the interest of any party is assigned … to some other person, the court may, if it thinks it necessary in order to ensure that all matters in dispute … may be … completely determined, order that other person” to carry on the proceedings as substituted.
Held The appeal was allowed.
1. The court had to consider both the questions of detriment to the parties as well as the detriment to the administration of justice in prolonging the litigation if there was further delay.
2. In carrying out the balancing exercise required under the discretion in Ord 15 r7(2), the official referee failed to take into account the fact that if S was precluded from pursuing her claim, she would suffer considerable detriment.
3. In the view of the Court of Appeal, in exercising its own discretion, that detriment to S outweighed the other considerations.
Leolin Price QC and Paul Stafford (instructed by Alan Taylor & Co) appeared for the plaintiff appellant; Kenneth Farrow (instructed by Russell-Cooke Potter & Chapman) appeared for the second defendants; Oliver Ticciati (instructed by Berrymans) appeared for the third defendants; Prashant Popat (instructed by Lloyd Cooper) appeared for the fourth defendant; the first defendant, Cranley Mansions Ltd, did not appear and was not represented.
