Tactus Holdings Limited (in administration) v Philip Mark Jordan & Ors

An application to substitute a claimant under CPR rule 19.2(4) requires the applicant to establish that the existing party’s interest has passed to it, or that substitution is desirable. Where substitution would remove the existing claimant, the applicant must ordinarily prove the transfer on the balance of probabilities. A contractual prohibition on assignment may make an attempted assignment ineffective. An assignee who acquires only a creditor’s rights does not thereby become a lender providing financial facilities. A bare right of action is also unavailable where the assignment amounts to champerty. The court may determine legal and construction issues summarily where the relevant facts are not seriously disputed.

Chillblast Limited applied under CPR rules 19.2 and 19.4 to be substituted for Tactus Holdings Limited as claimant in proceedings arising from a share purchase agreement. Tactus had assigned to Chillblast its rights and claims against the sellers. The sellers objected, contending that the assignment breached the agreement’s prohibition on assignment and was void as champertous.

The court considered the meaning of CPR rule 19.2(4), the applicable standard of proof, the construction of the contractual exception for a lender providing financial facilities, and whether Chillblast had a legitimate commercial interest in the assigned claims.

1. Application dismissed. Chillblast was not substituted for Tactus as claimant.
2. CPR rule 19.2(4)(a) and (b) were treated as alternative jurisdictional routes following the 2023 amendment removing the word “and” from rule 19.2(4)(a). Chillblast relied only on the alleged transfer of Tactus’s interest, so the validity of the assignment was decisive.
3. Because substitution would remove Tactus from the proceedings, Chillblast had to establish on the balance of probabilities that it had acquired Tactus’s interest. The court nevertheless stated that, where disputed facts have a plausible evidential basis, the applicant may instead have a good arguable case or real prospect of establishing a valid assignment, in which event joinder rather than substitution may be appropriate.
4. Clause 13.1 of the SPA prohibited assignment, trust or other dealing with the agreement or rights under it, subject to limited exceptions. The exception for assignment to “any lender who provides financial facilities” did not apply. Chillblast had acquired Santander’s rights as creditor but had not assumed Santander’s lending obligations, advanced funds, or provided continuing financial facilities. The Santander Assignment was not a novation.
5. The prohibition also extended to the creation of a trust. The court made no decision whether a trust could otherwise have arisen.
6. Alternatively, the assignment was champertous. Chillblast had no pre-existing property interest in Tactus’s claims. Common directors, acquired businesses, creditor status created by the Santander Assignment, and payment of costs did not establish a sufficient independent legitimate commercial interest. The Santander Assignment and Tactus Assignment formed part of the same transaction directed towards acquiring the litigation proceeds for Chillblast’s benefit.
7. The assignment therefore neither transferred Tactus’s interest nor made substitution desirable under CPR rule 19.2(4). The court had no discretion to substitute Chillblast and, if a discretion existed, would have refused the application.