The Commercial Law Practice Limited & Anor v Atkinson Wheller Limited
[2024] EWHC 2195 (Ch)
West 28th Street Limited & Anor v Halstead Associates Limited (trading as Halstead Associates)
3 July 2024
[2024] EWHC 1698 (TCC)
High Court
A company assigned its lawsuit to another company, even though its contract said it couldn't. The court said the company that originally had the problem should be the one suing, not the company it gave the lawsuit to. So, the lawsuit was thrown out.
Key Facts
- •West 28th Street Limited (First Claimant) and UKRP (Foxholes) Limited (Second Claimant) sued Halstead Associates Limited (Defendant) for negligence and breach of contract.
- •The Defendant was the Employer's Agent and Quantity Surveyor for a construction project.
- •The Second Claimant, the original project owner, entered administration and liquidation.
- •The Second Claimant assigned its claims against the Defendant to the First Claimant.
- •The Defendant's contract contained a clause prohibiting assignment without consent.
- •The assignment agreement included a clause declaring a trust of the assigned claims for the benefit of the First Claimant.
Legal Principles
Contractual provisions prohibiting assignment are legally effective.
Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 A.C. 85
A declaration of trust of the benefit of obligations or profits from a contract is different from an assignment and may be effective even where an assignment is prohibited.
Don King Productions Inc v Warren [2000] Ch. 291
A prohibition on assignment does not necessarily prevent the creditor from declaring a trust of his rights for a third party. The construction of the transaction as a declaration of trust would only be excluded if it was inconsistent with the wording or purpose of the contract.
Snell's Equity, paragraph 3-050
Trustees are the proper claimants in proceedings against third parties based on causes of action arising in respect of the trust; beneficiaries generally lack standing to sue.
CPR 19.10
Outcomes
The First Claimant's claim was struck out.
The First Claimant lacked standing both as an assignee (due to the contract's prohibition on assignment) and as a beneficiary under the trust (as the trustee, the Second Claimant, is the proper party to sue).
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