Knox D'arcy Operations Ltd & Anor v Manches LLP

Actual notice of an equitable assignment may be established by oral communications which objectively convey, with sufficient certainty, that the assignee rather than the assignor is entitled to the relevant benefit. The communication need not use the word assignment, be written, or identify the precise assignee, although the recipient may need to enquire further if the identity matters. An appellate court should respect a trial judge’s evaluation of witness evidence and factual inferences unless it is wrong. Where solicitors’ terms confer a contractual right to use funds held on a client’s behalf for that client’s fees, an assignment unknown to the solicitors does not necessarily defeat that right. Costs orders are matters for the trial judge’s discretion.

Templeton Insurance Limited assigned the benefit of litigation proceeds, first to Investments and then to Operations. Manches acted for Templeton and received the proceeds into its client account. It claimed a contractual and general lien over the money for unpaid fees owed by Templeton. The High Court found that Manches had received sufficient oral notice before receiving the money that a Knox D’Arcy company, rather than Templeton, was entitled to the proceeds. Judgment was entered for the claimants. Manches appealed the notice finding and sought permission to challenge the costs order. The Court of Appeal also considered, on an alternative basis, whether Manches could have used the money if it had received no prior notice.

1. Disposition. Rimer LJ gave the leading judgment, with Pill LJ and Black LJ agreeing. The appeal was dismissed. Permission to appeal the costs order and on the renewed grounds was refused.
2. Actual notice. The burden of proving notice lay on the claimants. Notice of an equitable assignment may nevertheless be established orally. The question is whether the communication, objectively understood, gave the recipient an intelligent and sufficiently certain apprehension that the assignor would not receive the benefit and that another company would.
3. The conversations were not casual. They occurred between the solicitor conducting major litigation and individuals speaking for the corporate group. Descriptions that the litigation was a Knox D’Arcy case and that Knox D’Arcy had an interest were capable of conveying the substantive effect of the assignments in lay terms. The word assignment and the identity of the particular Knox D’Arcy company were not indispensable. If the identity became relevant, Manches could have sought clarification. The trial judge was entitled to find actual notice, and the Court of Appeal had no basis to interfere with his evaluation of the evidence. The question of constructive notice did not arise and the court expressed no view on it. The approach was consistent with the reasoning in Lloyd v. Banks [1868] 3 LR Ch. App 488.
4. Alternative contractual point. The assignments were of a legal chose in action. Until perfected at law by written notice under the Law of Property Act 1925, they operated in equity, with Templeton retaining legal ownership as trustee for the equitable assignees. If Manches had received the money without notice, its terms of business would nevertheless have entitled it to use funds held on Templeton’s behalf for Templeton’s fees. The unknown assignment would not have displaced that contractual right, and later notice would not have affected it.
5. Costs. The claimants had achieved substantial success despite failing on a damages claim. Costs were pre-eminently a matter for the trial judge’s discretion. The Court of Appeal would interfere only for an error of principle or an order that was obviously wrong, neither of which was shown.

• Court of Appeal (Civil Division): In [2013] EWCA Civ 33, dismissed Manches’ appeal and refused permission to appeal the costs order and the renewed grounds.
• High Court of Justice, Chancery Division: On 22 July 2011, Mr Robin Knowles CBE QC, sitting as a Deputy High Court Judge, found that Manches had received prior notice of the assignments, declared liability for the money held, ordered payment to the claimants, and awarded the claimants 75% of their costs.