By Paul Martin -
Snapshot
- The NSWCA has confirmed that where contractual warranties are assigned, the assignee may recover damages even where the warranties were breached before the assignment took place.
- A contract should be given a businesslike construction, barring some contrary intention evidenced within it.
In business dealings it is not uncommon for parties to a commercial contract to assign their rights to third parties. Indeed, contractual rights may often be further assigned to any number of subsequent assignees in a chain of interlocking transactions. Long after the original assignment, an assignee may seek to claim against a counterparty for pre-assignment breaches.
Does such an assignee face any limits to the enforcement of its rights? The NSW Court of Appeal addressed this issue recently in the case of Walker Group Investments Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27.
Factual background
Walker Group Investments Pty Ltd (‘WGC’) entered into a design and construction contract (‘D&C Contract’) with P&O Trans Australia Holdings Ltd (‘P&O’) to construct a container terminal at Sydney Port. P&O leased the premises from Sydney Ports Corporation. Clause 4.1 of the D&C Contract contained a range of warranties in favour of the principal, including that the works would be fit for purpose.
WGC engaged AMT Engineers Pty Ltd (‘AMT’) to design the concrete pavement at the terminal. Construction occurred in 2003 and 2004. Also in 2004, P&O transferred its leasehold to a subsidiary, which in turn transferred its leasehold to Tzaneros Investments Pty Ltd (‘Tzaneros’) in 2005. At the same time, P&O, its subsidiary and Tzaneros entered into a deed under which P&O purported to assign to Tzaneros contractual warranties given by WGC in the D&C Contract. As required by clause 9.1 of the D&C Contract, WGC issued a letter to the parties indicating its consent to the assignment. After the assignment, Tzaneros became increasingly concerned by growing defects in the pavement, although Tzaneros had been aware of some defects before it acquired the leasehold interest. Tzaneros sued WGC and AMT for the cost of replacing the defective pavement, being a claim of almost $15 million.
