In its judgment in WCI v Brown, the High Court has addressed important issues concerning abuse of process and the notice requirements applicable to a legal assignment under section 136 of the Law of Property Act 1925.
In the underlying claim, the claimant, WCI, seeks to sue as assignee of a cause of action originally vested in a different company, YZMA. It contends that the Defendant, a former director of YZMA, acted in breach of fiduciary duty by dishonestly appropriating YZMA monies for his own purposes. The claim was commenced on 15 June 2018. From 27 September 2019 until 5 July 2022, the Claimant did not take any steps to pursue the claim. In July 2022, it wrote to the Court requesting that the claim be relisted. The Defendant then issued an application to strike out the claim on the ground of abuse of process and that the assignment upon which the Claimant relied did not in fact enable it to bring these proceedings.
In relation to the first point, the Court found that abuse of process was established: see paras 41-47. This part of the judgment contains (paras 28-39) a helpful analysis of the principal authorities on abuse of process by ‘warehousing’, noting that it may be an abuse of process to warehouse the claim for a substantial period of time even if the claimant subsequently decides to pursue it. But the Court found that the appropriate sanction for the abuse was not strike out but an order that the Claimant provide security for the Defendant’s costs through to trial and to deprive the Claimant of interest during the period September 2019 to November 2022 even if it were to succeed at trial.
In relation to the second ground concerning title to sue, the Court noted that it was the subjective view of the administrators of YZMA that they had indeed assigned the cause of action to the Claimant. But the Court accepted the Defendant’s submission that, on a proper construction of the assignment agreement, the cause of action had in fact not been assigned: 78-79.
In an attempt to overcome this, the administrators – shortly before the hearing – entered into a ‘Deed of Declaration’ purporting again to assign the cause of action to the Claimant. But the Court held, agreeing with the Defendant, that the Claimant cannot sue in its own name unless the fresh assignment is a legal (as distinct from equitable) assignment under s 136 of the Law of Property Act 1925 and that an assignment under that provision does not take effect until notice is given to the debtor. The Court also held, relying on the decision of Roskill J in The Colombiana [1965] 1 QB 101, 128, that notice of an assignment under section 136 must be given to the debtor before the commencement of proceedings, which was impossible in this case as the proceedings had been commenced some four years before the 2022 ‘Deed of Declaration’. The assignment could therefore operate only as an equitable assignment. Accordingly, the Court concluded that the Claimant is not entitled to maintain the present action without applying to amend to plead the new Deed of Declaration and that ‘the assignors would probably be need to be joined to the proceedings’: paras 80-85. The Court directed that the matter be listed for a further hearing to determine the amendment application, should it be made.
Niranjan Venkatesan acted for the defendant, instructed by Buckles Solicitors.
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