Assignments are a common tool in English law to transfer rights (of “the Assignor”), particularly debts or contractual claims, to another (“the Assignee”).

A Legal Assignment

A legal assignment occurs when the statutory requirements under section 136 of the Law of Property Act 1925 (“the Act”) are satisfied. The relevant section of the Act is 136, which confirms:

“Any absolute assignment by writing under the hand of the assignor… of any debt or other legal thing 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 claim such debt or thing in action, is effectual in law.” (https://www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/136).

A basic example of a legal assignment is where Company A (the Assignor) assigns a monetary debt to Company B (the Assignee), who pursues the debtor directly. The legal right to pursue the debtor is transferred to the Assignee (who, effectively, steps into the shoes of the Assignor).

Legal assignments are a relatively straightforward concept, but the relevant provisions of the Act must be met. Where those provisions are not met, it will likely be considered an equitable assignment.

An Equitable Assignment

An equitable assignment arises where there is a clear intention to assign a claim, but the provisions of the Act are not satisfied. For example, where the debtor has not been notified pursuant to section 136 (1) of the Act.

So long as there is a clear intention to assign, a substance-over-form analysis applies. However, under an equitable assignment, the Assignor must be joined as a party to legal proceedings to protect the debtor from the potential of double liability and ensure the finality of any judgment. This is because an equitable assignment does not assign legal title but only transfers the beneficial interest in the claim.

Assignment by Operation of Law (statutory transfers)

The most straightforward assignments are those that occur by operation of law (without the need for a written, formal assignment document). So, for example, upon an individual’s death, their estate (property, cash, etc.) vests in the executors named in the will.

Assignment of a Bare Right to Litigate

A bare right to litigate exists when only the right to sue is transferred (intangible), unlike the other assignments covered in this article, which concern the assignment of property or a commercial interest/debt (tangible).

Courts have long treated such assignments with suspicion because they may constitute “trafficking in litigation” (the illegal or improper commercialisation of legal claims for profit by a party who has no legitimate interest in the original dispute), historically a form of champerty.

In Trendtex Trading Corporation v Credit Suisse [1982], Lord Roskill emphasised that the law will not enforce the assignment of a bare right to litigate unless the assignee possesses a “genuine commercial interest” in the underlying claim.

To ensure an assignment demonstrates a genuine commercial interest, the courts will consider whether there is a tangible or intangible proprietary interest (debt, contract, or property) being assigned, whether the assignee stands to benefit economically from that interest, whether the assignment forms part of a broader commercial transaction, and whether the structure avoids indicia of champerty or trafficking.

In short, the right to sue (in and of itself) should not be the main reason for the assignment. There should also be a real commercial or property interest in order for it to be valid and enforceable.

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