In this article, Richard Gray barrister takes a brief look at the differences between a Deed of Assignment and a Notice of Assignment and the effect of the assignment on the contracting party
At the end of 2020, Elysium Law were instructed to act for a significant number of clients in relation to claims made by a company known as Felicitas Solutions Ltd (an Isle of Man Company) for recovery of loans which had been assigned out of various trust companies following loan planning entered into by various employees/contractors.
Following our detailed response, as to which please see the article on our website written by my colleague Ruby Keeler-Williams, the threatened litigation by way of debt claims seem to disappear. It is important to note that the original loans had been assigned by various Trustees to Felicitas, by reason of which, Felicitas stood in the shoes of the original creditor, which allowed the threatened action to be pursued.
After a period of inertia, Our Clients, as well as others, have been served with demand letters by a new assignee known as West 28th Street Ltd. Accompanying the demand letters is a Notice of Assignment, by reason of which the Assignee has informed the alleged debtor of the Assignees right to enforce the debt.
Following two conferences we held last week and a number of phone call enquiries which we have received, we have been asked to comment upon the purport and effect of the Notice of Assignment, which the alleged debtors have received. Questions such as what does this mean (relating to the content) but more importantly is the ‘Notice’ valid?
Here I want to look briefly at the differences between the two documents.
There is no need for payment to make the assignment valid and therefore it is normally created by Deed.
The creation of a legal assignment is governed by Section 136 of the Law of Property Act 1925:
136 Legal assignments of things in action.
(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—
(a) the legal right to such debt or thing in action;
(b) all legal and other remedies for the same; and
(c) the power to give a good discharge for the same without the concurrence of the assignor:
Some of the basic requirements for a legal assignment are;
- The assignment must not be subject to conditions.
- The rights to be assigned must not relate to only part of a debt, or other legal chose in action.
- The assignment must be in writing and signed by the assignor.
- The other party or parties to the agreement must be given notice of the assignment.
Notice of assignment
To create a legal assignment, section 136 requires that express notice in writing of the assignment must be given to the other contracting party (the debtor).
Notice must be in writing
Section 136 of the LPA 1925 requires “express notice in writing” to be given to the other original contracting party (or parties).
Must the notice take any particular form?
The short answer is no. Other than the requirement that it is in writing, there is no prescribed form for the notice of assignment or its contents. However, common sense suggests that the notice must clearly identify the agreement concerned.
Can we challenge the Notice?
No. You can challenge the validity of the assignment assignment by ‘attacking the Deed, which must conform with Section 136. In this specific case, the Notice sent by West 28th Street in itself is valid. Clearly, any claims made must be effected by a compliant Deed and it is that which will require detailed consideration before any right to claim under the alleged debt is considered.
Can I demand sight of the assignment agreement
On receiving a notice of assignment, you may seek to satisfy yourself that the assignment has in fact taken place. The Court of Appeal has confirmed that this is a valid concern, but that does not give an automatic right to require sight of the assignment agreement.
In Van Lynn Developments Limited v Pelias Construction Co 1QB 607 Lord Denning said:
“After receiving the notice, the debtor will be entitled, of course, to require a sight of the assignment so as to be satisfied that it is valid…”
The Court of Appeal subsequently confirmed this stating the contracting party is entitled to satisfy itself that a valid absolute assignment has taken place, so that it can be confident the assignee can give it a good discharge of its obligations
The important document is the Deed of Assignment, which sets out the rights assigned by the Assignor. The Notice of Assignment is simply a communication that there has been an assignment. The deed is governed by Section 136 of the LP 1925. It should be possible to obtain a copy of the Deed prior to any action taken in respect of it.
For more information on the claims by West 28th Street or if advice is needed on the drafting of a Deed, then please call us on 0151-328-1968 or visit www.elysium-law.com.