Bexhill UK Ltd v Razzaq

An instrument assigns a thing in action absolutely, rather than by way of charge only, where its language and commercial context show an intention to transfer the assignor’s rights to the assignee. A contractual assignment for value of a future thing in action takes effect in equity when the right comes into existence.

The equitable assignee is then beneficially entitled to sue. The legal assignor ordinarily cannot maintain proceedings without joining the assignee. Authority merely to collect receivables in the ordinary course of trading does not authorise the assignor to litigate as the assignee’s agent. Clear wording is required to confer that authority.

Bexhill financed insurance-premium lending undertaken by a company controlled by Mr Razzaq. He guaranteed that company’s liabilities and charged his commercial property as security for the guarantee. Bexhill subsequently sought possession after arrears arose.

Before the relevant arrangements arose, Bexhill had granted Barclays security under a debenture. That instrument purported to assign present and future receivables and associated rights and remedies. HHJ Simon Brown QC held that Bexhill had assigned the relevant rights to Barclays but could nevertheless sue as Barclays’ agent.

Mr Razzaq appealed. The principal questions were whether the right to enforce the charge fell within the assigned receivables, whether its assignment operated absolutely in equity, and whether Bexhill could pursue the claim alone as Barclays’ agent.

1. Appeal allowed. The charge and the right to sue upon it were subject to an absolute equitable assignment in favour of Barclays. Bexhill therefore lacked title to pursue the possession claim as sole claimant, whether on its own behalf or as Barclays’ agent: per Aikens LJ, with whom Black and Ward LJJ agreed.

2. The sums due under the guarantee fell within the debenture’s broad definition of receivables. The right to enforce the charge was a right or remedy for non-payment and was therefore also included. The expression referring to the benefit of rights and remedies meant their value or advantage, rather than only the proceeds of proceedings.

3. Whether an instrument makes an absolute assignment or an assignment by way of charge depends upon its construction as a whole, including its commercial context. The debenture’s clear language assigned existing receivables absolutely. Its provisions concerning fixed and floating charges, perfection and enforcement did not alter that conclusion. The required notices of assignment, which extended to all connected rights, remedies, proceeds and claims, reinforced it.

4. The charge was a future thing in action when the debenture was executed. A contract for value to assign future things in action transfers the beneficial interest to the assignee when the right comes into existence. Because no express notice of the assignment of this particular right was given to Mr Razzaq, the requirements of section 136(1) of the Law of Property Act 1925 were not completed. The assignment therefore operated in equity, while legal title remained with Bexhill.

5. An equitable assignee is ordinarily the person entitled to sue. The legal assignor cannot maintain an action concerning the assigned right unless the equitable assignee is joined. The debenture required Bexhill to collect receivables in the ordinary course of trading as Barclays’ agent, but it did not authorise Bexhill to conduct court proceedings on Barclays’ behalf. Authority to litigate required substantially clearer wording.

6. Bexhill had in any event commenced the proceedings solely as principal. It could not unilaterally change its capacity during the proceedings. If the claim were to continue, an application to join Barclays had to be made and determined by the trial judge.

1. Court of Appeal (Civil Division): The appeal was allowed. The court replaced the trial judge’s determination with declarations that the charge and the right to sue were assigned absolutely in equity to Barclays, that Bexhill could not sue alone, and that any application to join Barclays should be remitted to the judge.

2. Birmingham Mercantile Court, Queen’s Bench Division: HHJ Simon Brown QC ordered on 11 October 2011 that Bexhill had the right and title to sue upon the charge. He found that Bexhill had assigned its rights to Barclays but could enforce them as Barclays’ agent.