From: Larissa Katz <larissa.m.katz@gmail.com>
Date: Monday, May 3, 2021 at 12:26
To: Angela Swan <aswan@airdberlis.com>
Cc: Andrew Tettenborn <a.m.tettenborn@swansea.ac.uk>, Stéphane Sérafin <Stephane.Serafin@uottawa.ca>, Timothy Pilkington <timothy.pilkington@sjc.ox.ac.uk>, Ying Liew <ying.liew@unimelb.edu.au>, Robert Stevens <robert.stevens@law.ox.ac.uk>, Peter Radan <peter.radan@mq.edu.au>, ODG <obligations@uwo.ca>
Subject: Re: Equitable Assignment Query

Dear Angela and others,

I shall deal with Stéphane’s comment first and then Robert’s.

 

Stéphane, I do not think that you are correct in saying that an equitable assignment is “complete without notice”.  As I have said, without notice, the debtor can safely pay the assignor, leaving the assignee with nothing; it has no cause of action against the debtor.  In that sense, I do not know what “complete” means.  Yes, the assignee may have a claim over against the assignor for what the assignor has received from the debtor but that cause of action is hardly the result of the assignment; it may, I assume, be based on some contractual or perhaps equitable right, but it’s there has been no assignment.  One can promise to assign, just as one can promise to transfer or convey property, but the making of that promise cannot affect the seller, vendor or debtor unless it is party to the contract or other relation.  That connection is achieved with an assignment of a chose in action by the giving of notice.

 

Robert, you say that the financing of accounts receivable would be impossible if notice has to be given to the debtor.  Notice has to be given to the debtor if the secured party is to prevent the debtor paying the assignor and getting a good receipt from it.  In other words, thereby nullifying the whole purpose of the taking of the security interest.  Our Personal Property Security Act, the Canadian equivalent of Article 9 of the UCC, requires notice to be given to the debtor.  The act provides:

PART II

VALIDITY OF SECURITY AGREEMENTS AND RIGHTS OF PARTIES

Effectiveness of security agreement

9(1)      Except as otherwise provided by this or any other Act, a security agreement is effective according to its terms between the parties to it and against third parties.

10        Where a security agreement is in writing, the secured party shall deliver a copy of the security agreement to the debtor within ten days after the execution thereof, and, if the secured party fails to do so after a request by the debtor, the Superior Court of Justice, on the application of the debtor, may order the delivery of such a copy to the debtor.

The law is more complicated because it has to deal with things other than security interests taken in simple debts, i.e., choses in action.  The requirement of notice is to protect the secured party, the assignee, from the risk that the debtor may pay the assignor, the party who has agreed to give the security interest in the account receivable.

Notice is the essence of an assignment.

Angela

 

From: Andrew Tettenborn <a.m.tettenborn@swansea.ac.uk>
Sent: 3-May-21 11:18 AM
To: Stéphane Sérafin <Stephane.Serafin@uottawa.ca>; Angela Swan <aswan@airdberlis.com>; 'Timothy Pilkington' <timothy.pilkington@sjc.ox.ac.uk>; Ying Liew <ying.liew@unimelb.edu.au>; Robert Stevens <robert.stevens@law.ox.ac.uk>
Cc: Peter Radan <peter.radan@mq.edu.au>; obligations@uwo.ca
Subject: Re: Equitable Assignment Query

 

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This is absolutely right. Even if there is a valid assignment the debtor who doesn't know abiout it can hardly be blamed if he pays the assignor, and for that reason alone must get a good receipt. But where in Peter's hypo is the assignment, whether in equity or otherwise? All we have here is the fact that the client asked the solicitor, as it turned out fruitlessly, to assign the debt on his behalf. We don't even have notice to the would-be assignee.

Andrew

On 03/05/2021 15:58, Stéphane Sérafin wrote:

I think we need to distinguish the effects of notice under a legal (statutory) assignment and an equitable assignment. For a statutory assignment you are correct most jurisdictions require notice as a condition of the assignment’s substantive validity.

 

For assignments in equity, however, the assignment is complete without notice, and notice instead has certain effects on the relationship between the obligor and assignor, which may incidentally affect the position of the assignee. For instance, whether the obligor can discharge the obligation by tendering performance to the assignor is a matter that will depend on whether notice has been given to the obligor.

 

Best regards,

 

 

Stéphane Sérafin Professeur adjoint | Assistant Professor Faculté de droit, Section de common law | Faculty of Law, Common Law Section

 

 

From: Angela Swan <aswan@airdberlis.com>
Sent: May 3, 2021 10:28 AM
To: 'Timothy Pilkington' <timothy.pilkington@sjc.ox.ac.uk>; Ying Liew <ying.liew@unimelb.edu.au>; Robert Stevens <robert.stevens@law.ox.ac.uk>
Cc: Peter Radan <peter.radan@mq.edu.au>; obligations@uwo.ca
Subject: RE: Equitable Assignment Query

 

Attention : courriel externe | external email

I understand the “law of assignment” to involve the law governing the transfer of a chose in action.  In practical terms the important questions are (i) who can sue the debtor and, as an aspect of this question, to whom can the debtor look for a good receipt?; (ii) what must be done to effect to an assignment?, (iii) what defences may the debtor raise if sued by the assignee, with or without the assignor.

The requirements of a legal assignment are set out in Ontario in the Conveyancing and Law of Property Act:

53.(1)   Any absolute assignment made on or after the 31st day of December, 1897, by writing under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action is effectual in law, subject to all equities that would have been entitled to priority over the right of the assignee if this section had not been enacted, to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor.

The transfer is achieved by the notice; until the debtor receives notice it can pay the assignor and get a good receipt from it.  Without notice, there can be no assignment in the sense in which I use that word.

An equitable assignment also requires notice but that notice need not meet the requirements of a legal assignment. The classic statement of the effect of notice is that of Lord Macnaghten in William Brandt’s Sons & Co. v. Dunlop Rubber Company, Limited., [1905] A.C. 454 (H.L.).  Lord Macnaghten was there dealing with what constitutes an equitable assignment where the notice in question did not “purport to be an assignment nor use the language of an assignment”.  He said, p. 462:

An equitable assignment does not always take that form.  It may be addressed to the debtor.  It may be couched in the language of command.  It may be a courteous request.  It may assume the form of mere permission.  The language is immaterial if the meaning is plain.  All that is necessary is that the debtor should be given to understand that the debt has been made over by the creditor to some third person.  If the debtor ignores such a notice, he does so at his peril.  If the assignment be for valuable consideration and communicated to the third person, it cannot be revoked by the creditor or safely disregarded by the debtor.

(Emphasis added.)

On the facts given by Peter, no notice was given to C, the debtor and, as I said, there could then be no assignment.  The giving of notice is the method by which the right of the assignee to the chose in action is conferred; the notice protects the assignee’s “title” in the chose in action; as Lord Macnaghten says, after notice the debtor pays the assignor “at [its] peril”.  In other words, without notice, there would have been no transfer of the chose in action, either at law or in equity; C would have been free to pay B and no one else could say that C did not have the right to do that.  On C’s paying B, no one else can have a claim against C. The chose in action has disappeared; the debt has been discharged.  The subsequent fight between the other parties mentioned by Peter does not involve an assignment because there hasn’t been one and, until C gets notice there cannot be one.

Angela Swan

 

From: Timothy Pilkington <timothy.pilkington@sjc.ox.ac.uk>
Sent: 3-May-21 8:59 AM
To: Ying Liew <ying.liew@unimelb.edu.au>; Robert Stevens <robert.stevens@law.ox.ac.uk>
Cc: Angela Swan <aswan@airdberlis.com>; Peter Radan <peter.radan@mq.edu.au>; obligations@uwo.ca
Subject: Re: Equitable Assignment Query

 

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Not clear to me that where this is an equitable "assignment" that A holds the money on trust for B (though B's interest is very similar to its interest under a trust cf. Edelman and Elliot).

TP

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From: Ying Liew <ying.liew@unimelb.edu.au>
Sent: Tuesday, May 4, 2021 12:32 AM
To: Robert Stevens <robert.stevens@law.ox.ac.uk>
Cc: Angela Swan <aswan@airdberlis.com>; Peter Radan <peter.radan@mq.edu.au>; obligations@uwo.ca <obligations@uwo.ca>
Subject: Re: Equitable Assignment Query

 

I agree with Rob: notice to the debtor is not necessary to perfect an equitable assignment. But even if the debtor then pays the assignor, notice not having been given, it seems to me that everything turns on the law of assignment. If there was an equitable assignment then the assignor holds the money on trust for the assignee. 

 

Ying

Dr. Ying Khai Liew

Associate Professor

Melbourne Law School
Room 748, Level 7, Law Building, 185 Pelham St, Carlton VIC 3053
T: +613 903 57616 (Ext: 57616)  |  E: ying.liew@unimelb.edu.au

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On 3 May 2021, at 22:24, Robert Stevens <robert.stevens@law.ox.ac.uk> wrote:

External email: Please exercise caution

 

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If an equitable assignment were a transfer, as I think a statutory assignment is, which changed the identity of the creditor, then you would need to notify the debtor.

 

But it isn't. So you don't.

 

In the case of an equitable assignment the assignee acquires an equitable "interest" in the "assigned" debt prior to payment, not just an interest in future property not yet in existence (ie the funds once paid).

---

From: Angela Swan <aswan@airdberlis.com>
Sent: 03 May 2021 13:17
To: Ying Liew <ying.liew@unimelb.edu.au>; Peter Radan <peter.radan@mq.edu.au>
Cc: obligations@uwo.ca <obligations@uwo.ca>
Subject: Re: Equitable Assignment Query

 

For there to be an equitable assignment C, the debtor, has to receive notice of the assignment.  If C pays B, as it clearly can, not having notice of the assignment, then the others can fight over the funds now in B’s hands but that fight has nothing to do with the law of assignment.

 

Angela Swan 

 

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From: Ying Liew <ying.liew@unimelb.edu.au>
Sent: Monday, May 3, 2021 7:17 AM
To: Peter Radan
Cc: obligations@uwo.ca
Subject: Re: Equitable Assignment Query

 

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Dear Peter

 

Please allow me to attempt an answer. In the absence of consideration from D or E for the assignment, the outcome turns on whether we can say that B has done everything in B’s power to effectuate the (legal) assignment (Re Rose). Since signed writing by the assignor (or agent) is necessary for that, the answer should ordinarily be in the negative; however, a court predisposed to follow the difficult decision in Pennington v Waine may nevertheless be inclined to perfect the equitable assignment if it thought that it would have been “unconscionable” in the circumstances for B to have changed her mind. 

 

Yours

Ying 

Dr. Ying Khai Liew

Associate Professor

Melbourne Law School
Room 748, Level 7, Law Building, 185 Pelham St, Carlton VIC 3053
T: +613 903 57616 (Ext: 57616)  |  E: ying.liew@unimelb.edu.au

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On 3 May 2021, at 18:28, Peter Radan <peter.radan@mq.edu.au> wrote:

External email: Please exercise caution

 

---

Colleagues,

 

Something tells me that I maybe should know the answer to this question, but I am not sure that I do, so I would welcome suggestions on this. Add to any reply that the answer is obvious and I should know!

 

A, (eg a solicitor) has a general power of attorney from B. C owes B $500. B wants to assign the debt to D to hold on trust for E and instructs A to prepare the necessary documents. A does so and advises B of the fact. For whatever reason B tells A to sign the documents pursuant to the power of attorney (alternative scenario, B gives written instructions to that effect). B dies before A signs the documents.

 

Although the debt has not been assigned at law, has it been assigned in equity? 

 

Thanks,

 

Peter

 

 

Professor Peter Radan,

Honorary Professor, Macquarie University

Fellow of the Australian Academy of Law

BA, LLB, PhD (Syd), Dip Ed (Syd CAE)

 

Macquarie Law School  

6 First Walk,  

Macquarie University, NSW, 2109

Australia

Email: peter.radan@mq.edu.au

 

Blog: https://www.allaboutnothing.info

 

 

 

 

 

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Andrew Tettenborn Professor of Commercial Law, Swansea University Institute for International Shipping and Trade Law School of Law, University of Swansea Richard Price Building Singleton Park SWANSEA SA2 8PP Phone 01792-602724 / (int) +44-1792-602724 Fax 01792-295855 / (int) +44-1792-295855

Andrew Tettenborn Athro yn y Gyfraith Fasnachol, Prifysgol Abertawe Sefydliad y Gyfraith Llongau a Masnach Ryngwladol Ysgol y Gyfraith, Prifysgol Abertawe Adeilad Richard Price Parc Singleton ABERTAWE SA2 8PP Ffôn 01792-602724 / (rhyngwladol) +44-1792-602724 Ffacs 01792-295855 / (rhyngwladol) +44-1792-295855

 

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