Camdex International Ltd v Bank of Zambia

A debt is property capable of legal assignment under section 136 of the Law of Property Act 1925. The fact that recovery will require litigation, or that the debtor refuses or is unable to pay, does not turn the assignment into maintenance or champerty.

The distinction is between a genuine assignment of a debt or other property right, with any right of action incidental to it, and trafficking in a bare cause of action. A transaction is unenforceable only where its substance and object disclose maintenance or champerty, which must be proved independently of an assignment that is valid on its face.

The Central Bank of Kuwait deposited funds with the Bank of Zambia. Following rescheduling agreements, the bank remained indebted. The Central Bank assigned the debt absolutely in writing to Camdex International Ltd and gave the bank written notice.

Longmore J, in the Commercial Court, entered summary judgment for Camdex under RSC Order 14. The bank did not dispute either the underlying indebtedness or the amount due. It contended that the assignment was unenforceable as champertous because litigation to recover the debt was expected and the bank could not pay its creditors in full.

The appeal raised whether a bona fide assignment of an undisputed debt is invalid merely because court proceedings are contemplated or necessary for recovery.

1. The appeal was dismissed unanimously. Hobhouse LJ gave the principal judgment, with which Peter Gibson LJ and Neill LJ agreed. The Bank of Zambia had no arguable defence to Camdex’s claim as assignee.

2. Section 136 of the Law of Property Act 1925 gives legal effect to an absolute written assignment of a debt upon written notice to the debtor. It transfers the debt and the remedies incidental to it. A debt is property, and the possibility or expectation that an assignee must sue to recover it does not make the assignment invalid.

3. The debtor’s refusal or inability to pay did not create a bona fide dispute as to liability. The bank accepted that the debt existed and was due. Its insolvency, arrangements with other creditors and objections to preferential payment could affect execution, but not Camdex’s entitlement to judgment.

4. The court rejected the suggested rule that an assignment of a debt is champertous whenever litigation is contemplated. The authorities distinguish a debt or other property right, to which litigation is incidental, from a bare right to litigate. A bona fide debt remains assignable even if the debtor disputes it wrongly.

5. Maintenance and champerty may nevertheless invalidate an arrangement whose true object is for a stranger without a sufficient interest to finance or traffic in litigation for a share of the proceeds. The court must examine the substance and totality of the transaction. Here the discounted purchase of an undisputed debt from an insolvent debtor was an unobjectionable commercial transaction, not a colourable device for champertous litigation.

6. The court refused a stay of execution. Moneys recovered were to remain within the jurisdiction pending disposal of the appeal hearing.

• Court of Appeal (Civil Division) — dismissed the Bank of Zambia’s appeal from the Commercial Court and upheld summary judgment for Camdex.
• Commercial Court — Longmore J entered summary judgment for Camdex on 18 September 1995 under RSC Order 14.