Civil procedure – Summary judgment – Professional negligence – Claimant bringing proceedings against defendant law firm as purported assignee of underlying claim alleging professional negligence – Defendant applying for summary judgment – Whether purported assignment of cause of action ineffective as expressly prohibited by retainer – Application granted
In 2013, APL loaned B £3,865,042 to remortgage Burleigh House, his Surrey mansion. The loan was secured by a legal charge over the property, payable at a monthly flat rate of 2.8% on the balance for the duration of the loan (ie, 33.6% per annum). If interest payments were made within seven days of falling due (with no arrears outstanding), interest would be reduced to the flat rate of 1.4% per month. The term of the loan was 12 months and, if the principal was not paid after that time, the loan would continue but be terminable on three months’ notice.
In 2014, B said he received two offers to refinance, both at a rate of 9% per annum, and stopped making payments under the loan. B sought to challenge the loan as in breach of the consumer credit legislation and retained the defendant firm of solicitors. The terms of the retainer were derived from the signed engagement letter and the defendant’s standard terms and conditions, which provided by clause 15.11: “You may not assign all or any part of the benefit of, or your rights and benefits under, the agreement of which these standard terms and condition [sic] form part.”
County court proceedings were issued on B’s behalf which sought to challenge the validity and/or enforceability of the loan. B subsequently disinstructed the defendant. His claim against APL went to trial but was mainly unsuccessful. APL obtained a possession order in respect of the property.
B was subsequently declared bankrupt and purported to assign alleged causes of action against the defendant to the claimant which issued proceedings against the defendant in both contract and tort. The defendant applied for summary judgment pursuant to CPR 24.2 contending, amongst other things, that B’s purported assignment to the claimant was ineffective as it was expressly prohibited by the retainer.
Held: The application was granted.
(1) On an application for summary judgment, the court had to consider whether the party defending the application had a “realistic” as opposed to “fanciful” prospect of success. The court was not to conduct a mini-trial. However, it did not have to take at face value and without analysis everything asserted by a claimant: it might be clear that there was no real substance in factual assertions made, particularly if contradicted by contemporaneous documents. In reaching its conclusion, the court had to take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that could reasonably be expected to be available at trial. The court should hesitate about making a final decision without a trial, even where there was no obvious conflict of fact, where reasonable grounds existed for believing that a fuller investigation into the facts would add to or alter the evidence available to a trial judge and so affect the outcome of the case.
It was not uncommon for an application under CPR 24 to give rise to a short point of law or construction and, if the court was satisfied that it had all the evidence necessary for the proper determination of the question and the parties had had an adequate opportunity to address it, the court should grasp the nettle and decide the case. It was not enough simply to argue that the case should be allowed to go to trial because something might turn up which would have a bearing on the question of construction: Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) and AC Ward & Sons Ltd v Catlin (Five) Ltd [2010] Lloyd’s Rep IR 301 followed.
(2) In Linden Gardens Trust Ltd v Lenesta Sludge Disposal Ltd [1994] 1 AC 85; [1993] EGCS 139, it was considered “satisfactorily settled” law that an attempted assignment of contractual rights in breach of a contractual prohibition was ineffective to transfer such rights; otherwise, it would defeat the legitimate commercial reason for inserting the contractual prohibition to ensure that the original parties to the contract were not brought into direct contractual relations with third parties.
The claimant accepted that the non-assignment provision at clause 15.11 of the defendant’s standard terms and conditions related expressly to contractual rights. The Lenesta principle meant that B’s purported assignment of his right to sue for breach of contract to the claimant was ineffective. The claimant appeared to accept that the defendant was entitled to summary judgment on the breach of contract claim, although it made no express concession to that effect.
(3) The claimant had no real prospect of showing that clause 15.11 did not also preclude assignment of the right to sue in tort. The defendant was right to argue that the broad scope of clause 15.11 had to be borne in mind when interpreting it. Application of the principle established in Fiona Trust & Holding Corp v Privalov [2007] Bus LR 1719 dictated that “rights… under… the agreement” in clause 15.11 included tortious rights. It would be irrational for the defendant to agree that its clients could assign tortious rights during the retainer. If that were possible, the defendant could find itself under tortious obligations to safeguard the economic interests of a mystery assignee without consent, regardless of money-laundering issues, conflicts or other issues, meaning that it could owe obligations to a party it would not have chosen to do business with, and would still be subject to its unassignable contractual obligations towards its original client. Further, there might be a risk of double jeopardy: the original client could sue under the unassignable contractual rights, while the assignee could sue in tort, in respect of acts and omissions in the course of the same retainer.
On that basis, per Fiona Trust, it was to be assumed that the parties would not have intended such consequences without clear language to that effect. There was none. Therefore, the claimant had no real prospect of showing that B validly assigned his rights to sue the defendant in contract or tort such as to give it standing to bring the claims. There was no other compelling reason that the case or issue should be disposed of at a trial. Accordingly, the defendant was entitled to summary judgment on the whole claim under CPR 24.2.
Stephen Hackett (instructed by Griffin Law) appeared for the claimant; Simon Goldstone (instructed by Kennedys) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Burleigh House (PTC) Ltd v Irwin Mitchell LLP
