Mailbox (Birmingham) Ltd v Galliford Try Construction Ltd

An equitable assignment of future contractual rights can arise when the rights come into existence, provided the rights are sufficiently identifiable. Whether an assignment is absolute or merely by way of charge depends on construction of the instrument as a whole. A legal assignment under section 136(1) of the Law of Property Act 1925 requires an absolute assignment in writing under the assignor’s hand and express written notice to the debtor. An equitable assignee is generally entitled to sue. An assignor need not be joined where there is no dispute with the assignee and no risk of a further claim. Interest under the Late Payment of Commercial Debts (Interest) Act 1998 is unavailable for liquidated damages, but the court may award interest on an adjudication award under section 35A of the Senior Courts Act 1981.

Mailbox sought summary judgment under Part 24 of the Civil Procedure Rules to enforce an adjudicator’s decision requiring Galliford Try Construction Ltd to pay £2,477,152.86 in liquidated damages and adjudicator’s fees. Galliford Try argued that Mailbox lacked jurisdiction to commence the adjudication because it had assigned the benefit of the building contract to a security trustee. Mailbox argued that no assignment had occurred or, alternatively, that the rights had been reassigned before the adjudication began.

The court also considered whether interest was payable under the Late Payment of Commercial Debts (Interest) Act 1998, and, if not, whether interest should be awarded under section 35A of the Senior Courts Act 1981.

1. The court held that the building contract fell within the debenture’s provision assigning rights under any agreement to which Mailbox was party. Although the contract was a future chose in action when the debenture was executed, the clause operated as an agreement to assign future rights. Once the building contract was made, the rights were sufficiently identifiable and were equitably assigned to the Security Trustee.

2. Construing the debenture as a whole, the assignment was absolute rather than by way of charge. The wording that Mailbox assigned absolutely its rights, the notice provisions, the form of notice, and the distinction between assignments and other security interests supported that conclusion. The right to redeem and the permission to exercise assigned rights did not make the assignment conditional.

3. Receipt of the notice of assignment satisfied section 136(1) of the Law of Property Act 1925. The assignment was absolute, in writing under Mailbox’s hand, and notified expressly in writing to Galliford Try.

4. The Security Trustee reassigned the contractual rights and benefits to Mailbox in equity before, or on the same day as, commencement of the adjudication. Mailbox was therefore the beneficial owner and entitled to commence the adjudication. Following Bexhill UK Limited v Razzaq [2012] EWCA (Civ) 1376, an equitable assignee generally has the right to sue. Joinder of the assignor was unnecessary because there was no dispute between assignor and assignee and no risk of a further claim.

5. The court had sufficient documents to determine the issues summarily. The adjudicator had jurisdiction and his decision was valid.

6. Liquidated damages were not a qualifying debt under sections 1(1) and 3(1) of the Late Payment of Commercial Debts (Interest) Act 1998. The adjudicator therefore had no jurisdiction to award statutory interest. The court nevertheless had power under section 35A of the Senior Courts Act 1981 to award interest from the failure to pay the adjudicator’s award. The appropriate rate was 2% above the Bank of England base rate, not the statutory or contractual rate.

7. Summary judgment was entered for Mailbox for £2,477,152.86, interest of £10,383.68 to 12 January 2017 and thereafter £152.70 per day, £22,183.50 for adjudicator’s fees and expenses, plus costs.