Zabihi v Janzemini

An accrued right to payment under a costs order is a debt and therefore property capable of assignment, even where the amount remains to be quantified through taxation and litigation may be needed for recovery. Such an assignment is not champertous merely because the assignee may need to enforce it. The critical distinction is between assigning property carrying an incidental right of action and assigning a bare right to litigate. Suspicion arising from the consideration or the assignee’s motives is insufficient without evidence of a champertous agreement. Security paid into court for a cross-undertaking in damages should not be released where the available figures do not clearly establish a surplus payable to the claimant.

The claimant sought to challenge the validity of an assignment by the second defendant to the first defendant of rights arising under an order requiring the claimant to pay the second defendant’s indemnity costs, including £150,000 on account. The claimant argued that the assignment was champertous because the final costs figure remained to be assessed and because the first defendant was intervening in disputes concerning the costs liability.

The claimant also sought release of £50,000 paid into court to fortify a cross-undertaking in damages supporting an earlier freezing order. The application was referred from Master Price, who was conducting the detailed assessment of costs. The central issues were whether the costs rights were assignable and whether the figures justified release of the security.

1. The assignment was valid. Under section 136 of the Law of Property Act 1925, an established obligation to pay costs constituted a debt and therefore a piece of property capable of legal assignment. The fact that the amount remained to be quantified by taxation did not alter its character as an existing right to payment.

2. The court applied the distinction explained in Camdex International Limited v Bank of Zambia [1998] QB 22: an assignment of property remains valid even though recovery may require litigation, whereas an assignment of a bare right to litigate may be invalid and, in an appropriate case, champertous. There was no agreement to share litigation proceeds, and the assignee was enforcing an assigned debt rather than acquiring a mere right of action.

3. Laurent v Sale & Co [1963] 1 WLR 829 was distinguishable. Its unusual facts supported an inference of a colourable champertous purpose. No comparable inference could be drawn here in the absence of live evidence or material justifying it. The assignee’s motives were immaterial where it was relying on a validly assigned legal right, consistently with Fitzroy v Cave [1905] 2 KB 364.

4. The £50,000 security was not released. The court could not properly determine the disputed costs figures on this short application. The material did not establish a clear surplus of liabilities owed by the first defendant to the claimant exceeding £50,000. The security therefore remained in court.

The judgment states that Blackburne J’s order of 28 November 2008 was appealed, and that both the appeal and cross-appeal were dismissed. The present judgment concerned a subsequent application relating to assignment of costs rights and release of security.