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Published online by Cambridge University Press: 01 November 1999
Most of the academic discussion of the Trident Beauty has focused on its relevance to the law of restitution, in particular, restitution against third parties. This is understandable given the role restitution played in the judgments. Opinions have differed as to whether the House of Lords reached the correct result and this perhaps reflects the level of debate over what principles should govern restitutionary claims in this area. The restitutionary points were not, however, the beginning and end of the matter and some important issues of assignment have been marginalised in the wake of the restitutionary debate. The assignment of contractual rights is one part of the standard contract text that still defies analysis. However, the recent spate of difficult assignment related cases, evidencing its continued importance to commerce, as well as the near settlement of the modern rules of privity, suggest that the time is ripe to take it out of the too hard basket and put it on the agenda for the next decade. It is not, however, the aim of this paper to detail, much less resolve, every problem that exists within this area of the law. The much more modest aim here is to investigate the assignment issues raised by The Trident Beauty. The end result is that these issues resolve the restitutionary problem raised by the case if the suggested analysis is adopted. It is hoped that this paper will also show that this area of the law is simplified if there is a proper understanding of the relationship between the assignee and obligor and more time spent on construing the rights assigned to the assignee and the obligations of the obligor rather than taking refuge too quickly in phrases such as “the assignee takes subject to the equities” and “the assignee can be in no better position than the assignor”. This paper begins with a look at the decision in The Trident Beauty itself.
I would like to thank Professors John Carter and Jack Beatson for their comments on an earlier draft of this paper.
1 Pan Ocean Shipping Co Ltd v. Creditcorp (The “Trident Beauty”) [1994] 1 W.L.R. 161.
2 See, A Burrows, “Restitution from Assignees” [1994] R.L.R. 52 at 55–56. See also, Kit Barker, “Restitution and Third Parties” [1994] L.M.C.L.Q. 305; D. Friedman, “Restitution from an Assignee” [1994] 110 L.Q.R. 521; P Watts, ‘Does a Subcontractor Have Restitutionary Rights Against the Employer” [1995] L.M.C.L.Q. 398. See further, Mason, and Carter, , Restitution Law in Australia, (Butterworths, Sydney 1995)Google Scholar para. 910.
3 See, Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd [1994] 1 A.C. 85; Darlington Borough Council v. Wilshire Northern Ltd [1995] 1 W.L.R. 68; Bovis International Inc v. The Circle Limited Partnership (1995) 49 Con. L.R. 12; Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 W.L.R. 896; Hendry v. Chartsearch Ltd, The Times, Sept 16, 1998.
4 [1994] 1 W.L.R. 161 at p. 164.
5 [1994] 1 W.L.R. 161 at p. 164.
6 [1994] 1 W.L.R. 161 at p. 165.
7 [1994] 1 W.L.R. 161 at p. 165. He cited the judgments of Bankes and Scrutton L.JJ., in C.A. Stewart & Co v. Phs Van Ommeren (London) Ltd [1918] 2 K.B. 560 and Lord Summer in French Marine v. Compagnie Napolitaine d’Eclairage et de Chauffage par le Gaz [1921] 2 A.C. 494 at p. 517.
8 [1994] 1 W.L.R. 161 at p. 166.
9 [1993] 1 Lloyd's Rep. 443 at p. 449.
10 [1994] 1 W.L.R. 161 at p. 169.
11 [1994] 1 W.L.R. 161 at pp. 170–171.
12 [1977] Ch. 106.
13 [1994] 1 W.L.R. 161 at p. 171.
14 [1994] 1 W.L.R. 161 at p. 171.
15 [1994] 1 W.L.R. 161 at p. 166.
16 [1994] 1 W.L.R. 161 at pp. 164–5. See also, Stocznia Gdanska SA v. Latvian Shipping Co. [1998] 1 W.L.R. 574 at p. 589 per Lord Goff.
17 (1933) 48 C.L.R. 457.
18 (1933) 48 C.L.R. 457 at pp. 480–481.
19 [1994] 1 W.L.R. 161 at pp. 164, 165, 166 per Lord Goff, and pp. 168, 169 per Lord Woolf.
20 This result may have been different if the transaction was a mere direction to pay rather than an assignment.
21 See, Don King Productions Inc v. Warren [1998] 2 All E.R. 608 at p. 632 per Lightman J. (aff’d [1999] 2 All E.R. 218)
22 [1906] 2 K.B. 604.
23 [1994] 1 W.L.R. 161 at p. 164.
24 [1994] 1 W.L.R. 161 at p. 171.
25 See, J.W. Carter and G.J. Tolhurst, “Restitution: Payments Made Prior to Discharge of Contract” (1994) 7 J.C.L. 273; J.W. Carter, “Discharged Contracts: Claims for Restitution” (1997) 11 J.C.L. 130 and J. Beatson and G.J. Tolhurst, “Debt, Damages and Restitution” [1998] C.L.J. 253.
26 See generally, Stocznia Gdanska SA v. Latvian Shipping Co [1988] 1 W.L.R. 574 and Beatson, , The Use and Abuse of Unjust Enrichment, (Oxford 1991)Google Scholar, chapters 3 & 4.
27 Leslie Shipping Co v. Welstead [1921] 3 K.B. 420; China National Foreign Trade Transportation Corp v. Evlogia Shipping Co SA of Panama (The “Mihalios Xilas”) [1979] 1 W.L.R. 1018.
28 It is suggested that there is nothing in the judgments cited by Lord Goff (see note 7 above) to suggest that this is not the case.
29 See, Tooth v. Hallett (1869) 4 Ch App. 242.
30 See further below.
31 [1977] 1 Ch. 106 at p. 290.
32 See, The British Waggon Company and the Parkgate Waggon Company v. Lea and Co (1880) 5 Q.B.D. 149.
33 See e.g., Investors in Industry Commercial Properties Ltd v. South Bedfordshire DC [1986] 1 All E.R. 787.
34 Cf., Fratelli v. Sorrentino v Buerger [1915] 1 K.B. 307; [1915] 3 K.B. 367, (C.A.).
35 See e.g., Britain & Overseas Trading (Bristles) Ltd v. Brooks Wharf & Bull Wharf [1967] 2 Lloyd's Rep. 51. Alternatively, as noted above, such burdens may suggest the subject right is personal.
36 See, Aspden v. Seddon (No 2) (1876) 1 Ex D. 496 (Aspden v. Seddon (1875) 10 Ch App. 394) as explained by Megarry VC in Tito v. Waddell (No 2) [1977] Ch. 106 at pp. 296–299. Cf, Rhone v. Stephens [1994] 2 A.C. 310 at p. 322 per Lord Templeman (a condition can only be attached to a right if it is relevant to the exercise of the right). Quaere whether the remarks of Lord Macnaghten in Tolhurst v. The Associated Portland Cement Manufacturers (1900) Ltd [1903] A.C. 414 at p. 419, are explicable on this basis.
37 Although Lord Woolf came to the correct decision as regards Tito v. Waddell, both Lord Goff and Lord Woolf did not clearly distinguish between being bound by an obligation or burden and merely taking subject to it in holding that because the obligation to “repay” was not transfered to the assignee, any conditional or provisional aspect of the right that existed against the assignor could not exist against the assignee.
38 See, [1994] 1 W.L.R. 161 at p. 165 per Lord Goff.
39 No argument along the lines of Sir Robert Megarry V.C.'s “pure principle of benefit and burden” was referred to in the speeches.
40 Norman v. FCT (1963) 109 C.L.R. 9 at p. 26 per Windeyer J.
41 See Marshall, , The Assignment of Choses in Action (Pitman & Sons, London 1949) p. 37Google Scholar; W. W. Cook, “The Alienability of Choses in Action” (1916) 29 Harv L.R. 816 at p. 817. See also R v. Preddy [1996] A.C. 815 at p. 834 per Lord Goff.
42 See, Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 W.L.R. 896 at p. 915 per Lord Hoffmann.
43 McDonald v. Dennys Lascelles Ltd (1933) 48 C.L.R. 457.
44 This did not mean the assignee's title to money paid was in question, see [1994] 1 W.L.R. 161 at p. 170 per Lord Woolf. Of course, discharge may effect a revesting of title in respect of personal property, see Mason, and Carter, , Restitution Law in Australia (Butterworths, Sydney 1995)Google Scholar para. 1118.
45 Cf., A Burrows, “Restitution from Assignees” [1994] R.L.R. 52, who agrees with the finding that the assignee had taken an independent claim.
46 See Meagher, , Gummow, and Lehane, , Equity: Doctrines and Remedies, 3rd ed., (Butterworths, Sydney 1992)Google Scholar para. 6.101 and the cases there cited.
47 Tolhurst v. The Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 K.B. 660 at pp. 668–669 per Collins M.R.
48 Tolhurst v. The Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 K.B. 660 at pp. 668–669 per Collins M.R.
49 See Derham, , Set-off, 2nd ed., (Clarendon Press, Oxford 1996)Google Scholar para. 13.2.3 and Meagher, , Gummow, and Lehane, , Equity: Doctrines and Remedies, 3rd ed., (Butterworths, Sydney 1992)Google Scholar para. 697.
50 See, Photo Production Ltd v. Securicor Transport Ltd [1980] A.C. 827 at p. 849 per Lord Diplock. Cf., Hyundai Heavy Industries Co Ltd v. Papadopoulos [1980] 1 W.L.R. 1129 at p. 1141 per Lord Edmund-Davies. See further, Mason, and Carter, , Restitution Law in Australia (Butterworths, Sydney 1995)Google Scholar para. 1129.
51 The assignee's right is not dependent upon the continued existence of that right in the assignor as the assignor disposes of the right upon assignment. Finer distinctions, of course, must be made where the assignment concerns an equitable assignment of a legal interest.
52 It may be that these are just two ways of saying the same thing, see, Re Harry Simpson & Co Ltd and Companies Act [1964–5] N.S.W.R. 603 at p. 605 per Jacobs J.
53 See e.g., Mangles v. Dixon (1852) 3 H.L.C. 702; 10 E.R. 278.
54 See Goode, , Legal Problems of Credit and Security, 2nd ed., (1988) p. 165Google Scholar.
55 Similar uses of the word “equities” can be found in relation to part performance where, if the requirements of part performance are made out, the defendant is charged upon the equities rather than the contract, meaning that it would be unconscientious for the defendant to rely on the statute, see Maddison v. Alderson (1883) 8 App. Cas. 467 at p. 475. See also J.C. Williamson Ltd v. Lukey and Mulholland (1931) 45 C.L.R. 282 and McBride v. Sandland (1918) 25 C.L.R. 69. As to the “equity of restitution” in relation to relief against forfeiture, see Stockloser v. Johnson [1954] 1 Q.B. 476 at p. 491 per Denning L.J.
56 See, Marshall, , The Assignment of Choses in Action (1950) p. 181Google Scholar. See further, The Southern British National Trust Ltd v. Pither (1937) 57 C.L.R. 89 at p. 108 per Dixon J.
57 Roxburghe v. Cox (1881) 17 Ch D. 520.
58 Westralian Farmers Ltd v. Commonwealth Agricultural Service Engineers Ltd (1936) 54 C.L.R. 361 at pp. 379–380 per Dixon and Evatt J.J.
59 An assignee's rights may also be subject to other remedies available to the assignor, see Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 W.L.R. 896 at p. 917 per Lord Hoffmann (rescission).
60 See The Teno [1977] 2 Lloyd's Rep. 289; Federal Commerce & Navigation Co Ltd. v. Molena Alpha Inc [1978] 1 Q.B. 927. Cf., the position in respect of voyage charters, see Derham, , Set-off, 2nd ed., (Clarendon Press, Oxford 1996)Google Scholar para. 1.7.14
61 See Mangles v. Dixon (1852) 3 H.L.C. 702; 10 E.R. 278.
62 There are, however, cases in which a restitutionary claim has been relied upon successfully by way of set-off: see eg, Hanak v. Green [1958] 2 Q.B. 9. See the criticism of this case in Meagher, , Gummow, and Lehane, , Equity: Doctrines and Remedies, 3rd ed., (Butterworths, Sydney 1992)Google Scholar para. 3710, see also Guinness v. Saunders [1988] 1 W.L.R. 863, (C.A.) (affirmed without ref [1990] 2 A.C. 663 (H.L.)). For a full discussion on the meaning of “impeachment,” see Derham, , Set-off, 2nd ed., (Clarendon Press, Oxford 1996)Google Scholar para. 1.7.1. The issue may arise in quantum meruit claims. Where, however, a defendant resists a claim on the basis of total failure of consideration, that is a defence and not a monetary cross-claim and therefore not relevant to set-off. Where a party makes a money claim on the basis of failure of consideration, often there will not be a claim by the other party to give rise to an issue of set-off. But where there is such a claim it would be rare for one to impeach the other, although a less stringent test for set-off may bring about that result: see Derham, , Set-off, 2nd ed., (Clarendon Press, Oxford 1996)Google Scholar para. 1.7.2.
63 For the position in respect to periodic payments and set-off see Derham, , Set-off, 2nd ed., (Clarendon Press, Oxford 1996)Google Scholar para. 1.7.12.
64 See further, A. Burrows, “Restitution from Assignees” [1994] R.L.R. 52 at pp. 53–54.
65 See above.
66 Burrows, however, has argued that this case is analogous to the position that prevents a subcontractor bringing a claim for restitution against the owner, that is, it would undermine the contract between the owner and head contractor. Similarly he says ‘if Asells a ship to B requiring B to pay the purchase price to C—as part of a contractual purchase deal between A and C—B could not normally recover the price from C for failure of consideration in the event of non-delivery of the ship because this would undermine the contractual relationship between A and C: A. Burrows, “Restitution from Assignees” [1994] R.L.R.52 at pp. 53–54. See also, P. Watts, “Does a Subcontractor Have Restitutionary Rights Against the Employer” [1995] L.M.C.L.Q. 398.
67 As to the efficacy of such clauses see, Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd [1994] 1 A.C. 85; Hendry v. Chartsearch Ltd, The Times, Sept 16, 1998. See also, R.M. Goode, “Inalienable Rights?” (1979) 42 M.L.R. 554. Cf. Unidroit Convention on International Factoring, Article 6.
68 See generally, P. Finn, “Unconscionable Conduct” (1994) 8 J.C.L. 37.
69 Cf., A. Burrows, “Restitution from Assignees” [1994] R.L.R. 52 at pp. 53–54 and D. Friedman, “Restitution from an Assignee” [1994] 110 L.Q.R. 521. See also, P. Watts, “Does a Subcontractor Have Restitutionary Rights Against the Employer” [1995] L.M.C.L.Q. 398.
70 [1903] A.C. 414.
71 Bovis International Construction Inc v. The Circle Partnership (1995) 49 Con L.R. 12 at p. 22, c.f., Millett L.J. at p. 31.
72 The more usual construction is such that a “contract that A will build a house for B, and follow his instructions cannot be converted by assignment into an obligation to follow the instructions of C”, Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd (1992) 57 B.L.R. 57 at p. 77 per Staughton L.J. (on appeal [1994] 1 A.C. 85) citing Kemp v. Baerselman [1906] 2 K.B. 604. See also, Bovis International Inc v. The Circle Ltd Partnership (1995) 49 Con L.R. 12 at p. 22 per Staughton L.J.
73 See, Dawson v. Great Northern and City Railway Company [1905] 1 K.B. 260, GUS Property Management Ltd v. Littlewoods Mail Order Stores Ltd, 1982 S.L.T. 533. Moreover, given the assignee owns the relevant right, he or she may in this case keep the full sum recovered even if that amounts to a greater sum than that paid in settlement to the assignor, see Compania Colombiana De Seguros v. Pacific Steam Navigation Co. [1965] 1 Q.B. 101 and British Union & National Insurance Co. v. Rawson [1916] 2 Ch. 476.
74 Darlington Borough Council v. Wiltshire Northern Ltd [1995] 1 W.L.R. 68 at p. 72 per Dillon L.J. There has been a spate of recent cases suggesting that where an assignee or third party suffers substantial damages but is not privy to the relevant contract, the assignor, although not suffering substantial damages (in fact) may bring an action for the recovery of such damages: see Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd [1994] 1 A.C. 85; Darlington Borough Council v. Wiltshire Northern Ltd [1995] 1 W.L.R. 68; Bovis International Construction Inc v. The Circle Partnership (1995) 49 Con. L.R. 12; Alfred McAlpine Construction Ltd v. Panatown Ltd (1998) 58 Con. L.R. 46.
75 This may appear at odds with the law of contract but it must be kept in mind that an assignment involves a dealing in personal rights of property. The rules governing the transfer aspect of the transaction are rules of personal property. Contract doctrine is important in determining the characteristics of the assigned right and informing remedial consequences. A possible example may be where there is a re-assignment of an interest originally assigned by way of mortgage and where the breach occurred during the period of the mortgage, see Bovis International Construction Inc v. The Circle Partnership (1995) 49 Con. L.R. 12. In the context of actions in tort, see, Masters v. Brent London Borough Council [1978] 1 Q.B. 841.
76 (1995) 49 Con. L.R. 12 at p. 31.
77 Cf., National Carbonising Co Ltd v. British Coal Distillation Ltd (1936) 54 R.P.C. 41 at p. 46 per Clauson J. It may be added, that if the potential for increased liability was an impediment, equity may have never upheld the assignment of part of a debt. In such a case, arguably the obligor's liability is increased even though there are procedural safeguards in place to prevent that occurring in fact.
78 See, Mangles v. Dixon (1852) 3 H.L.C. 702; 10 E.R. 278.
79 Cf., [1994] 1 W.L.R. 161 at p. 166 per Lord Goff, and at p. 171 per Lord Woolf.
80 See above.
81 For example, in the recent decision in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 W.L.R. 896 at p. 915, Lord Hoffmann said, “Assignment of a “debt or other thing in action” was made possible at law by section 136 of the Law of Property Act 1925. In each case, however, what is assignable is the debt or other personal right of property. It is recoverable by action, but what is assigned is the chose, the thing, the debt or damages to which the assignor is entitled.”
82 See e.g., Unidroit Convention on International Factoring, Article 10, which limits the recourse a debtor has against the factor to situations where the factor has not discharged an obligation to make payment to the supplier in respect of the receivable or where the factor has made such a payment but at the time knew of the supplier's non-performance or defective or late performance as regards the goods to which the debtor's payment relates. See further, UNCITRAL, Draft Convention on Assignment in Receivables Financing, Article 12.
83 See generally, Smith, Lionel D., The Law of Tracing, (1997) pp. 48–57Google Scholar.