deed of assignment of loan plc

Assignment of loan | Practical Law

Assignment of loan

Practical law uk standard document 9-500-4767  (approx. 31 pages).

• Insights & events

Assigning debts and other contractual claims - not as easy as first thought

Harking back to law school, we had a thirst for new black letter law. Section 136 of the Law of the Property Act 1925 kindly obliged. This lays down the conditions which need to be satisfied for an effective legal assignment of a chose in action (such as a debt). We won’t bore you with the detail, but suffice to say that what’s important is that a legal assignment must be in writing and signed by the assignor, must be absolute (i.e. no conditions attached) and crucially that written notice of the assignment must be given to the debtor.

When assigning debts, it’s worth remembering that you can’t legally assign part of a debt – any attempt to do so will take effect as an equitable assignment. The main practical difference between a legal and an equitable assignment is that the assignor will need to be joined in any legal proceedings in relation to the assigned debt (e.g. an attempt to recover that part of the debt).

Recent cases which tell another story

Why bother telling you the above?  Aside from our delight in remembering the joys of debating the merits of legal and equitable assignments (ehem), it’s worth revisiting our textbooks in the context of three recent cases. Although at first blush the statutory conditions for a legal assignment seem quite straightforward, attempts to assign contractual claims such as debts continue to throw up legal disputes:

• In  Sumitomo Mitsui Banking Corp Europe Ltd v Euler Hermes Europe SA (NV) [2019] EWHC 2250 (Comm),  the High Court held that a performance bond issued under a construction contract was not effectively assigned despite the surety acknowledging a notice of assignment of the bond. Sadly, the notice of assignment failed to meet the requirements under the bond instrument that the assignee confirm its acceptance of a provision in the bond that required the employer to repay the surety in the event of an overpayment. This case highlights the importance of ensuring any purported assignment meets any conditions stipulated in the underlying documents.
• In  Promontoria (Henrico) Ltd v Melton [2019] EWHC 2243 (Ch) (26 June 2019) , the High Court held that an assignment of a facility agreement and legal charges was valid, even though the debt assigned had to be identified by considering external evidence. The deed of assignment in question listed the assets subject to assignment, but was illegible to the extent that the debtor’s name could not be deciphered. The court got comfortable that there had been an effective assignment, given the following factors: (i) the lender had notified the borrower of its intention to assign the loan to the assignee; (ii) following the assignment, the lender had made no demand for repayment; (iii) a manager of the assignee had given a statement that the loan had been assigned and the borrower had accepted in evidence that he was aware of the assignment. Fortunately for the assignee, a second notice of assignment - which was invalid because it contained an incorrect date of assignment - did not invalidate the earlier assignment, which was found to be effective. The court took a practical and commercial view of the circumstances, although we recommend ensuring that your assignment documents clearly reflect what the parties intend!
• Finally, in Nicoll v Promontoria (Ram 2) Ltd [2019] EWHC 2410 (Ch),  the High Court held that a notice of assignment of a debt given to a debtor was valid, even though the effective date of assignment stated in the notice could not be verified by the debtor. The case concerned a debt assigned by the Co-op Bank to Promontoria and a joint notice given by assignor and assignee to the debtor that the debt had been assigned “on and with effect from 29 July 2016”. A subsequent statutory demand served by Promontoria on the debtor for the outstanding sums was disputed on the basis that the notice of assignment was invalid because it contained an incorrect date of assignment. Whilst accepting that the documentation was incapable of verifying with certainty the date of assignment, the Court held that the joint notice clearly showed that both parties had agreed that an assignment had taken place and was valid. This decision suggests that mistakes as to the date of assignment in a notice of assignment may not necessarily be fatal, if it is otherwise clear that the debt has been assigned.

The conclusion from the above? Maybe it’s not quite as easy as first thought to get an assignment right. Make sure you follow all of the conditions for a legal assignment according to the underlying contract and ensure your assignment documentation is clear.

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Assignment Of Loan

Jump to section, what is an assignment of loan.

Under an assignment of loan, a lender (the assignor) assigns its rights relating to a loan agreement to a new lender (the assignee). Only the assignor's rights under the loan agreement are assigned. The assignor will still have to perform any obligations it has under the facility agreement.

The debtor, the recipient of the loan, must be notified when a debt is assigned. When there is an assignment of a loan, a Notice of Assignment (NOA) is sent out to the debtor informing them that a new party is now responsible for collecting any outstanding amount.

Assignment Of Loan Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.14 5 dex1014.htm ASSIGNMENT OF LOAN DOCUMENTS , Viewed October 21, 2021, View Source on SEC .

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• Publications
• Mortgage Claims by Assignee Mortgagees: Evidencing the Right to the Mortgagee’s Remedies

Mortgage Claims by Assignee Mortgagees: Evidencing the Right to the Mortgagee’s Remedies 02 September 2020

It has long been a known problem in mortgage law that s.114 of the Law of Property Act 1925, which automatically transfers the right to the mortgage debt when the mortgage is transferred by deed, does not apply to registered land. That has been clear since at least Paragon Finance Plc v Pender [2005] EWCA Civ 760 by reference to the Land Registration Act 1925. Thus, for registered land, the debt must be assigned separately . Pender, however, also makes clear that the registered proprietor of a legal charge has the right to possession, even if no right to the debt.

Despite these long-standing principles, mortgage cases brought by an assignee of the mortgage often face defences that they  are not  entitled to the relief they have sought. One solution, to produce the deed of assignment, can raise issues about redaction of non-relevant parts, when one deed transfers many mortgages.

Two recent cases discuss these issues. On procedure, the court has considered the more general question of when a party can redact parts of a document which the court is asked to construe on the basis that such parts are irrelevant. On substantive law, the courts have recently considered which documents are necessary to evidence an assignment of a debt secured by mortgage. In this paper, we consider issues of evidence in light of those cases and discuss the practical implications for practitioners, particularly in the context of mortgages.

Production of Documentary Evidence

The first part of this paper looks at redaction of documents in the context of disclosure.

Standard disclosure, under CPR 31, that is the production of documents on which a party relies or which may adversely affect or support a parties case, is an intrinsic part of the way civil ligation operates. Trials are not to be conducted by ambush thus each party must have an adequate opportunity to deal with the other side’s evidence fairly. That said, there are a number of rules of both law and procedure which can operate to prevent the production of relevant documents in a given case; litigation privilege is one obvious example. But what about the redaction of documents adduced as evidence by one party on the ground of confidentiality or irrelevance?

The practice of blanking out parts of documents is not a new one. Practitioners have routinely done so where part of the document is privileged or contains what they consider to be irrelevant material. In  GE Capital v Bankers Trust  [1995] 1 W.L.R. 172, CA, just before the introduction of the Civil Procedure Rules, Hoffmann LJ said:

“It has long been the practice that a party is entitled to seal up or cover up parts of a document which he claims to be irrelevant … In my view, the test for whether on discovery part of a document can be withheld on grounds of irrelevance is simply whether that part is irrelevant. The test for whether part can be withheld on grounds of privilege is simply whether that part is privileged. There is no additional requirement that the part must deal with an entirely different subject-matter from the rest.”

Redaction within the CPR has been discussed in the more recent case of Atos Consulting v Avis Plc [2007] EWHC 323 (TCC). In that case, Ramsey J gave guidance as to the correct judicial approach to be taken where the documents disclosed by one party were redacted and another party, by application, sought to challenge the redactions, either on the ground of lack of privilege or on the ground that the redacted text was relevant. At 37 the following 5 helpful principles as to redaction were outlined:

“(1)  The Court has to consider the evidence produced on the application.

(2)  If the Court is satisfied that the right to withhold inspection of a document is established by the evidence and there are no sufficient grounds for challenging the correctness of that asserted right, the Court will uphold the right.

(3)  If the Court is not satisfied that the right to withhold inspection is established because, for instance, the evidence does not establish a legal right to withhold inspection then the Court will order inspection of the documents.

(4)  If sufficient grounds are shown for challenging the correctness of the asserted right then the Court may order further evidence to be produced on oath or, if there is no other appropriate method of properly deciding whether the right to withhold inspection should be upheld, it may decide to inspect the documents.

(5)  If it decides to inspect then having inspected the documents it may invite representations.”

There is, however, a distinction between application to redaction of the rules which apply when a party is giving disclosure of documents in the ordinary course of litigation, and the separate question of the relevance of redaction in the process of construction of a document which a court has to embark upon when considering the meaning or legal effect of a document. Since the process of construction requires the document as a whole to be considered, the starting point must always be that the entire document should be made available to the court, and any redactions to it on grounds of irrelevance should either be forbidden or, if permitted at all, convincingly justified and kept to an absolute minimum. This situation, where the redacted document needs to be construed, is the precise issue raised in the recent Court of Appeal decision of Hancock v Promontoria (Chestnut) Ltd [2020] EWCA Civ 907.

Hancock v Promontoria (Chestnut) Ltd [2020] EWCA Civ 907

In Hancock, Promontoria Chestnut sought to recover the payment of an undisputed debt of approximately £4.09 million by serving a statutory demand. The debt represented the unsecured balance due under loans originally made to Mr Hancock by Clydesdale Bank PLC. Promontoria Chestnut claimed to have acquired title to the loans by assignment, and in the Statutory Demand, Promontoria Chestnut claimed to be entitled to all of the Bank’s rights by virtue of a deed of assignment.

Proceedings were brought by Mr Hancock to set aside the statutory demand. In them, Mr Hancock sought to challenge Promontoria Chestnut’s title to the debts on the basis that the copy of the Deed of Assignment, which Promontoria Chestnut had put in evidence, had been redacted heavily. Promontoria Chestnut’s solicitor had produced a witness statement explaining the reasons for the redactions, pointing in the main to the irrelevance of the materials redacted to the issue to be determined. However, Mr Hancock argued that the redacted deed of assignment was insufficient to prove Promontoria Chestnut’s title and its corresponding status as a lawful assignee. He said that part of the redactions related to the very clauses which the court was required to construe.

Notwithstanding the arguments of principle advanced, Mr Hancock was unable to produce any credible evidence casting doubt on the title of Promontoria Chestnut to the debts. The Court highlighted the fact that this was not a case where Promontoria Chestnut was required to prove its title to sue Mr Hancock and viewed in context, the redactions to the deed of assignment faded into relative insignificance. It was held that the unredacted parts of the deed were sufficient to show that title to Mr Hancock’s debts indeed had been assigned by the Bank to Promontoria Chestnut.

However, in reaching its decision the Court of Appeal considered the scope of the law on this issue of redaction more generally and the basis on which a party to proceedings could rely on redacted documents.

When Can Redacted Documents be Relied On?

It is settled law that a written contract has to be construed as a whole, in the light of admissible evidence of the relevant background facts (or surrounding circumstances) known to both parties at or before the time when the contract was made, but excluding evidence of prior negotiations. In Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173, per Lord Hodge JSC (with whose judgment the other members of the Supreme Court agreed) at [10], it was said:

“The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning.”

How can such a task can be properly undertaken by the court where part of the document has been redacted so that the court does not have before it the entirety of the relevant contract? Construction of a written document is a matter of law for the court, and questions of relevance require an evaluative judgment which it is for the court, not the solicitor of one of the parties, to perform. Thus, in Hancock , Mr Hancock argued that as a matter of principle, it was no answer to an objection to production of a redacted document only to say that the redactions were certified by an experienced solicitor as being irrelevant to the question which the court has to decide.

However, Mr Hancock’s submission that the court should simply refuse to engage with the construction of the deed of assignment in its redacted form because it is not in a position to construe it as a whole went too far. There could be no such rigid rule which admitted no exceptions. For example, there can be no reasonable objection to redaction, on the grounds of irrelevance, of the details of third party loan assets and title numbers in the schedule to the deed of assignment or the personal details of signatories and/or attesting witnesses. Those details were unlikely to have any bearing on the construction of the operative clauses of the Deed, particularly, in relation to the personal details of signatories and witnesses, where there was no issue in the case concerning its due execution.

However, even in such a clear case  a clear explanation must be provided of the nature and extent of the omissions, and the reasons for making them. Where it was obvious that the provisions in question would on any reasonable view be completely irrelevant to the issue of construction, and if the reasons for taking that view can be clearly and fully articulated by a solicitor acting for the party seeking the redaction, the court will be more inclined to accept that the redaction may be defensible.

In Hancock , it was held that, in general, irrelevance alone cannot be a proper ground for redaction of part of a document which the court is asked to construe, and there must be some additional feature, such as protection of privacy or confidentiality, relied upon to justify the redaction.

Conversely, however, it is seldom, if ever, that it would be appropriate for one party unilaterally to redact provisions in a contractual document which the court is being asked to construe, merely on grounds of confidentiality, where there is no irrelevance in the text redacted. Confidentiality alone cannot be a good reason for redacting an otherwise relevant provision in a contractual document which the court has to construe, and where there are other ways in which problems of that nature can be addressed, by allowing the unredacted document to be available to a ‘confidentiality ring’: the court and a limited number of the parties’ lawyers for example.

Thus, where a redacted document is to be construed, redactions, to be defensible, must be on the grounds of irrelevance and privacy, or irrelevance and confidentiality, not on one of irrelevance, privacy, or confidentiality alone.

The Emmanuel Decision

Just prior to the Court of Appeal decision in Hancock , the High Court (Marcus Smith J) had considered the issue of a redacted assignment of a mortgage in Promontoria (Oak) Limited v Nicholas Michael Emanuel and Nicola Jane Emanuel [2020] EWHC 104 (Ch) (“ Emanuel I ”) but in the different situation of the assignee mortgagee’s claim.

This case involved another company within the Promontoria group, Promontoria (Oak) Limited. Promontoria Oak brought possession proceedings against the defendants, Mr and Mrs Emanuel, owners of residential property in Cornwall charged as security for business loans to Clydesdale Bank. Promontoria sought possession and a money judgment as the assignee of the Bank, relying on a deed of assignment as evidence of the same.

Similar to the position in the Hancock case, in Emanuel, Promontoria put in evidence a significantly redacted version of the assignment, alleging that the redactions contained commercially sensitive material which had no bearing upon the existence and effectiveness of the assignment. Again as in the Hancock case, written notice of the assignment had been given to the Emanuels.

At first instance it was held that Promontoria Oak was entitled to possession of the property and a money judgment was given. The judge at first instance had made his decision with only a redacted version of the deed of assignment, plus some additional evidence, before him. This decision was appealed by the Emanuels on various grounds, including, as ground 1, that, as a matter of evidential rules, the judge had been wrong in exercising his discretion to admit the redacted version of the assignment into evidence. He could not be satisfied, as he had to be to allow the redacted version to be admitted, that the redacted passages were of confidential and irrelevant material because he could not be satisfied on the evidence that they were irrelevant.

This first ground of appeal was successful. The judge at first instance was wrong to admit the redacted assignment deed into evidence. He had failed to have regard to the implications of the evidence that was not before him, and ought to have seen the unredacted assignment. Marcus Smith J said that there was a significant probative difference between the primary evidence that was not before the court and the secondary evidence that was before the court. Even if the judge could conclude on the adduced evidence that the debt had been assigned, it did not follow that evidence not adduced, for example the redacted material, was irrelevant. The evidence not adduced could undermine the conclusion based on the adduced evidence. The judge had failed to pay proper regard to this important factor. 

This was in the context of some uncertainty in the correspondence with the Emanuels as to who, of various Promontoria entities, the assignee for this mortgage was to be. What was said in the correspondence did not sit easily with what the redacted assignment deed showed, and it was unclear that Promontoria Oak had had the mortgage assigned to it via a chain of assignments through the Promontoria entities. In saying that no other documents were needed to prove Promontoria Oaks title to commence proceedings he was simply wrong. He was thus wrong to conclude that the redacted material was irrelevant, and thus wrong to conclude that there was sufficient justification for redaction to allow the redacted assignment to be admitted into evidence. Promontoria Oak had not thus done enough to prove its claim.

What did the Court of Appeal in Hancock make of this earlier decision about redaction in Emanuel I? Since there was a pending application for permission to appeal in Emanuel I, it limited its comments. It did however make three observations.

First, it was noted that the High Court in Emanuel I had rejected grounds 2 and 3, that the redacted deed if admitted into evidence was not enough to prove Promontoria Oak’s title. Marcus Smith J concluded in Emnauel I  that the trial judge had clearly been entitled, on the redacted assignment adduced before him, to reach the conclusion that the mortgage and debt had been assigned to Promontoria Oak. Nevertheless, the appeal succeeded on ground 1, that there should have been no admission of the redacted assignment into evidence, as the trial judge’s decision to permit Promontoria Oak to rely on the redacted deed “was so flawed that it must be set aside”.

Secondly, there are significant differences between the facts in the Emanuel case and that of Hancock. Promontoria Oak had to establish its title to sue, as the claimant in Part 55 proceedings for possession and a money judgment. By contrast, Mr Hancock was seeking to set aside a statutory demand, and the burden was on him to show the existence of a substantial dispute. In addition, in Emanuel I, unlike in Hancock , there was little evidence from Promontoria Oak’s solicitors to explain the commercial background to the assignment, reasons for the redactions, and informing the court that he had inspected an unredacted version of the assignment so as to verify it’s irrelevance to the issues in dispute as there was in Hancock.

Finally, the parties to the litigation and the assignment relied upon in the two cases were of course different, though the Court of Appeal in Hancock noted that the redactions appeared to be rather similar.

In light of these key differences, the outcome of any Emmanuel I appeal is far from a forgone conclusion. Indeed the tone of the Court of Appeal’s commentary in Hancock does not suggest that those particular Justices of Appeal at least agreed with Marcus Smith J. It appears that they might happily have concluded that it was enough that the redacted assignment proved Promontoria Oak’s title. That does seem a likely more practical outcome. The Emanuels’ appeals do appear likely to be simply a delaying tactic.

Evidencing Assignment

A further aspect of the Hancock case related to the effect in law of the notice of the assignment from the Bank to Promontoria Chestnut, given to Mr Hancock. Section 136 of the Law of Property Act 1925 (“ LPA 1925 ”) provides that an absolute assignment by writing of any debt or thing in action, of which express notice in writing is given to the debtor, is effectual in law to pass and transfer the legal right to the debt, all legal and other remedies and the power to give a good discharge without the concurrence of the assignor.

Thus, in Hancock , if the deed of assignment did assign the benefit of Mr Hancock’s debts to the Bank to Promontoria Chestnut, then the giving of express written notice of that assignment to Mr Hancock would transfer the legal title to the debts, together with all remedies for them. There was no evidence in that case that the Bank had ever disputed the validity of the assignment to Promontoria Chestnut or that Mr Hancock had ever asked the Bank to confirm that it no longer had any claims against him in respect of the debts. Mr Hancock would be fully protected by section 136 if he were to make payment to Promontoria Chestnut because the effect of s.136 was to prevent the Bank making a separate claim for the debt. Because of s.136, Promontoria Chestnut could give good receipt for any payments of his debt that Mr Hancock made. In the context of his application to set aside Promontoria Chestnut’s statutory demand, Mr Hancock’s assertion that the debt was disputed on substantial grounds had a correspondingly hollow ring.

The operation of s.136 LPA 1925, and the contrast of its role in assignment of a debt to the role of registration of an assignment of a charge in passing a mortgagee’s proprietary rights, has also been given recent consideration by the High Court in yet another piece of Promontoria litigation, Promontoria (Oak) Limited v Nicholas Michael Emanuel and Nicola Jane Emanuel [2020] EWHC 563 (Ch) (“ Emanuel II ”).

In a hearing of the order to be made given the Emmanuel I decision, Promontoria Oak successfully argued that the first instance orders for possession and a money judgment should be upheld, despite its inability to rely on the redacted deed of assignment, but on the alternative ground that it had title to sue and recover possession in its capacity as registered proprietor of the legal charge granted by the Emanuels over their property.

Marcus Smith J agreed. He held that as the registered proprietor of charge on property, Promontoria Oak had title and therefore standing to claim possession. The claim based on the proprietary interest succeeded simply because of the company's registration of its assigned mortgage pursuant to the Land Registration Act 2002 (“ LRA 2002 ”). This is simply the Paragon Finance Plc v Pender [2005] EWCA Civ 760 point: the right to possession goes with registration of the legal owner of a legal charge.

What about the money claim? Under s.114 LPA 1925 a deed purporting to transfer a mortgage carries with it a right to sue for the mortgage money or any unpaid part of it. Yet s.114 does not apply to registered land. One must thus make a distinction between the remedies of an assignee of a mortgagee’s rights in its guise as registered proprietor, and reliance on the deed of assignment. Thus Promontoria Oak could not rely on the deed of assignment and s.136 LPA 1925 because there was no evidence as to the deed in evidence before the court. However it could succeed on its possession claim as registered proprietor of the charge over the Emanuels’ land.

Moreover, Marcus Smith J concluded, though without much detail in reasoning, that ‘by analogy with section 114’ and pursuant to s.51 LRA 2002, Promontoria Oak had a right to claim any outstanding debt as the holder of the proprietary interest, even though it could not rely on the deed of assignment to show assignment of the right to the debt. This appears to be a strengthening of the position. Post Paragon Finance it appeared that the debt had to be assigned separately in cases of registered land if a money claim was to succeed. Nevertheless the minimal reasoning on this issue in Emanuel II should be noted. Marcus Smith J made reference to s.51 LR 2002. However, unlike s.114 LPA 1925, s.51 LRA 2002 does not explicitly refer to the transfer of the right to sue.

This judgment in Emanuel II , however, is also subject to an outstanding application for permission to appeal. If permission is given, it will be useful to see what the Court of Appeal makes of the long vexed question of assignment of the mortgage debt and whether it is a result of registeration as legal owner of a mortgage despite the lack of application of the useful machinery of s.114 of the 1925 Act. If there is no equivalent of s.114, then the registered proprietor of a mortgage, who took as assignee of the charge, can require the debt secured, plus interest and costs, to be paid to it as a condition of redemption, since that is inherent in a mortgage. Yet that assignee may have to account to the original lender, and, subject to the decision in Emanuel II , may not be able to sue for the debt. An odd position.

Pending any such appeal, Emanuel II is a useful case outlining the law under the 2002 Act and what registration as proprietor of a charge necessarily carries with it. The result of the findings made by the court was that Promontoria Oak effectively sidestepped the issues concerning its redacted documents and achieved its aims via a different route.

The Practicalities

What evidence to adduce?

When a assignee of a mortgage is claiming possession, or the other clear proprietary remedies, sale or the appointment of a receiver, it need only plead its registered title to the charge and that is sufficient to establish its right. That has long been the case, since the decision in Paragon Finance v Pender . That is so even if its registration is a mistake, unless and until that registration is unwound by a claim for rectification of the Land Register.

What if a claim for a money judgment is sought? Though the common current practice is always to seek a money judgment with a possession claim, since the registered mortgagee is entitled to the debt, interest and costs, out of the proceeds of its sale, a money judgment might only be needed if a shortfall is feared, or clarity as to what is owed is sought before sale.

However, if a money judgment is sought, at present at least, pending any appeal of Emanuel II , registration as mortgagee it appears should suffice. By s.51 of the LRA 2002, any assignee once registered is entitled to make a claim for the debt.

When to redact?

What if an assignment of a mortgage is to be produced, for example if the mortgage is not registered, or if the Emanuel II decision is overturned? What should practice be on redaction?

Where documents are redacted it is important for the other side to be able to understand the basis for it, and for the disclosing party to provide an explanation. A witness statement ought to be produced explaining the background to the redacted document, reasons for the redactions and informing the court that the complete version had inspected so as to verify it’s irrelevance to the issues in dispute. It should be prepared in quite some detail, and redactions kept to a minimum. Thus, for example, in Hancock the redactions were said to be far more extensive than needed and the evidence provided by Promontoria Chestnut’s solicitor would have been of greater assistance to the court if he had condescended to greater detail about the specific reasons for particular redactions.

As for the redactions themselves, where part of a document is irrelevant but not confidential, then it might be simpler to disclose it in its entirety. Where the issue is one of confidentiality however, then the issue of redaction arises. If the document can be separated into distinct parts, where one is confidential and the other isn’t, it may be a straightforward process. For example, if a document attaches board minutes or a schedule of third-party transactions which are irrelevant to the litigation.

In some cases there will be real issues about the admissibility of a redacted version. In such cases, another approach will be needed, for example the use of a confidentiality ring within which the document could be made available in its unredacted form to the court and/or a limited number of lawyers on each side may offer a practical solution. Another approach might be for the parties to agree for the judge alone to see the document in its unredacted form.

Cecily Crampin

Tricia hemans.

2 September 2020

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English law assignments of part of a debt: Practical considerations

United Kingdom |  Publication |  December 2019

Enforcing partially assigned debts against the debtor

The increase of supply chain finance has driven an increased interest in parties considering the sale and purchase of parts of debts (as opposed to purchasing debts in their entirety).

While under English law part of a debt can be assigned, there is a general requirement that the relevant assignee joins the assignor to any proceedings against the debtor, which potentially impedes the assignee’s ability to enforce against the debtor efficiently.

This note considers whether this requirement may be dispensed with in certain circumstances.

Can you assign part of a debt?

Under English law, the beneficial ownership of part of a debt can be assigned, although the legal ownership cannot. 1  This means that an assignment of part of a debt will take effect as an equitable assignment instead of a legal assignment.

Joining the assignor to proceedings against the debtor

While both equitable and legal assignments are capable of removing the assigned asset from the insolvency estate of the assignor, failure to obtain a legal assignment and relying solely on an equitable assignment may require the assignee to join the relevant assignor as a party to any enforcement action against the debtor.

An assignee of part of a debt will want to be able to sue a debtor in its own name and, if it is required to join the assignor to proceedings against the debtor, this could add additional costs and delays if the assignor was unwilling to cooperate. 2

Kapoor v National Westminster Bank plc

English courts have, in recent years, been pragmatic in allowing an assignee of part of a debt to sue the debtor in its own name without the cooperation of the assignor.

In Charnesh Kapoor v National Westminster Bank plc, Kian Seng Tan 3 the court held that an equitable assignee of part of a debt is entitled in its own right and name to bring proceedings for the assigned debt. The equitable assignee will usually be required to join the assignor to the proceedings in order to ensure that the debtor is not exposed to double recovery, but the requirement is a procedural one that can be dispensed with by the court.

The reason for the requirement that an equitable assignee joins the assignor to proceedings against the debtor is not that the assignee has no right which it can assert independently, but that the debtor ought to be protected from the possibility of any further claim by the assignor who should therefore be bound by the judgment.

Application of Kapoor

It is a common feature of supply chain finance transactions that the assigned debt (or part of the debt) is supported by an independent payment undertaking. Such independent payment undertaking makes it clear that the debtor cannot raise defences and that it is required to pay the relevant debt (or part of a debt) without set-off or counterclaim. In respect of an assignee of part of an independent payment undertaking which is not disputed and has itself been equitably assigned to the assignee, we believe that there are good grounds that an English court would accept that the assignee is allowed to pursue an action directly against the debtor without needing the assignor to be joined, as this is likely to be a matter of procedure only, not substance.

This analysis is limited to English law and does not consider the laws of any other jurisdiction.

Notwithstanding the helpful clarifications summarised in Kapoor, as many receivables financing transactions involve a number of cross-border elements, assignees should continue to consider the effect of the laws (and, potentially court procedures) of any other relevant jurisdictions on the assignment of part of a debt even where the sale of such partial debt is completed under English law.

Legal title cannot be assigned in respect of part of a debt. A partial assignment would not satisfy the requirements for a legal assignment of section 136 of the Law of Property Act 1925.

If an assignor does not consent to being joined as a plaintiff in proceedings against the debtor it would be necessary to join the assignor as a co-defendant. However, where an assignor has gone into administration or liquidation, there may be a statutory prohibition on joining such assignor as a co-defendant (without the leave of the court or in certain circumstances the consent of the administrator).

[2011] EWCA Civ 1083

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Assignments: why you need to serve a notice of assignment

It's the day of completion; security is taken, assignments are completed and funds move. Everyone breathes a sigh of relief. At this point, no-one wants to create unnecessary paperwork - not even the lawyers! Notices of assignment are, in some circumstances, optional. However, in other transactions they could be crucial to a lender's enforcement strategy. In the article below, we have given you the facts you need to consider when deciding whether or not you need to serve notice of assignment.

What issues are there with serving notice of assignment?

Assignments are useful tools for adding flexibility to banking transactions. They enable the transfer of one party's rights under a contract to a new party (for example, the right to receive an income stream or a debt) and allow security to be taken over intangible assets which might be unsuitable targets for a fixed charge. A lender's security net will often include assignments over contracts (such as insurance or material contracts), intellectual property rights, investments or receivables.

An assignment can be a legal assignment or an equitable assignment. If a legal assignment is required, the assignment must comply with a set of formalities set out in s136 of the Law of Property Act 1925, which include the requirement to give notice to the contract counterparty.

The main difference between legal and equitable assignments (other than the formalities required to create them) is that with a legal assignment, the assignee can usually bring an action against the contract counterparty in its own name following assignment. However, with an equitable assignment, the assignee will usually be required to join in proceedings with the assignor (unless the assignee has been granted specific powers to circumvent that). That may be problematic if the assignor is no longer available or interested in participating.

Why should we serve a notice of assignment?

The legal status of the assignment may affect the credit scoring that can be given to a particular class of assets. It may also affect a lender's ability to effect part of its exit strategy if that strategy requires the lender to be able to deal directly with the contract counterparty.

The case of General Nutrition Investment Company (GNIC) v Holland and Barrett International Ltd and another (H&B) provides an example of an equitable assignee being unable to deal directly with a contract counterparty as a result of a failure to provide a notice of assignment.

The case concerned the assignment of a trade mark licence to GNIC . The other party to the licence agreement was H&B. H&B had not received notice of the assignment. GNIC tried to terminate the licence agreement for breach by serving a notice of termination. H&B disputed the termination. By this point in time the original licensor had been dissolved and so was unable to assist.

At a hearing of preliminary issues, the High Court held that the notices of termination served by GNIC , as an equitable assignee, were invalid, because no notice of the assignment had been given to the licensee. Although only a High Court decision, this follows a Court of Appeal decision in the Warner Bros Records Inc v Rollgreen Ltd case, which was decided in the context of the attempt to exercise an option.

In both cases, an equitable assignee attempted to exercise a contractual right that would change the contractual relationship between the parties (i.e. by terminating the contractual relationship or exercising an option to extend the term of a licence). The judge in GNIC felt that "in each case, the counterparty (the recipient of the relevant notice) is entitled to see that the potential change in his contractual position is brought about by a person who is entitled, and whom he can see to be entitled, to bring about that change".

In a security context, this could hamper the ability of a lender to maximise the value of the secured assets but yet is a constraint that, in most transactions, could be easily avoided.

Why not serve notice?

Sometimes it's just not necessary or desirable. For example:

• If security is being taken over a large number of low value receivables or contracts, the time and cost involved in giving notice may be disproportionate to the additional value gained by obtaining a legal rather than an equitable assignment.
• If enforcement action were required, the equitable assignee typically has the option to join in the assignor to any proceedings (if it could not be waived by the court) and provision could be made in the assignment deed for the assignor to assist in such situations. Powers of attorney are also typically granted so that a lender can bring an action in the assignor's name.
• Enforcement is often not considered to be a significant issue given that the vast majority of assignees will never need to bring claims against the contract counterparty.

Care should however, be taken in all circumstances where the underlying contract contains a ban on assignment, as the contract counterparty would not have to recognise an assignment that is made in contravention of that ban. Furthermore, that contravention in itself may trigger termination and/or other rights in the assigned contract, that could affect the value of any underlying security.

What about acknowledgements of notices?

A simple acknowledgement of service of notice is simply evidence of the notice having been received. However, these documents often contain commitments or assurances by the contract counterparty which increase their value to the assignee.

Best practice for serving notice of assignment

Each transaction is different and the weighting given to each element of the security package will depend upon the nature of the debt and the borrower's business. The service of a notice of assignment may be a necessity or an optional extra. In each case, the question of whether to serve notice is best considered with your advisers at the start of a transaction to allow time for the lender's priorities to be highlighted to the borrowers and captured within the documents.

For further advice on serving notice of assignment please contact Kirsty Barnes or Catherine Phillips  from our Banking & Finance team.

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Deed of Assignment: Everything You Need to Know

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. 3 min read updated on January 01, 2024

Updated October 8,2020:

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. It states that a specific piece of property will belong to the assignee and no longer belong to the assignor starting from a specified date. In order to be valid, a deed of assignment must contain certain types of information and meet a number of requirements.

What Is an Assignment?

An assignment is similar to an outright transfer, but it is slightly different. It takes place when one of two parties who have entered into a contract decides to transfer all of his or her rights and obligations to a third party and completely remove himself or herself from the contract.

Also called the assignee, the third party effectively replaces the former contracting party and consequently assumes all of his or her rights and obligations. Unless it is stated in the original contract, both parties to the initial contract are typically required to express approval of an assignment before it can occur. When you sell a piece of property, you are making an assignment of it to the buyer through the paperwork you sign at closing.

What Is a Deed of Assignment?

A deed of assignment refers to a legal document that facilitates the legal transfer of ownership of real estate property. It is an important document that must be securely stored at all times, especially in the case of real estate.

In general, this document can be described as a document that is drafted and signed to promise or guarantee the transfer of ownership of a real estate property on a specified date. In other words, it serves as the evidence of the transfer of ownership of the property, with the stipulation that there is a certain timeframe in which actual ownership will begin.

The deed of assignment is the main document between the seller and buyer that proves ownership in favor of the seller. The party who is transferring his or her rights to the property is known as the “assignor,” while the party who is receiving the rights is called the “assignee.”

A deed of assignment is required in many different situations, the most common of which is the transfer of ownership of a property. For example, a developer of a new house has to sign a deed of assignment with a buyer, stating that the house will belong to him or her on a certain date. Nevertheless, the buyer may want to sell the house to someone else in the future, which will also require the signing of a deed of assignment.

This document is necessary because it serves as a temporary title deed in the event that the actual title deed for the house has not been issued. For every piece of property that will be sold before the issuance of a title deed, a deed of assignment will be required.

Requirements for a Deed of Assignment

In order to be legally enforceable, an absolute sale deed must provide a clear description of the property being transferred, such as its address or other information that distinguishes it from other properties. In addition, it must clearly identify the buyer and seller and state the date when the transfer will become legally effective, the purchase price, and other relevant information.

In today's real estate transactions, contracting parties usually use an ancillary real estate sale contract in an attempt to cram all the required information into a deed. Nonetheless, the information found in the contract must be referenced by the deed.

Information to Include in a Deed of Assignment

• Names of parties to the agreement
• Addresses of the parties and how they are binding on the parties' successors, friends, and other people who represent them in any capacity
• History of the property being transferred, from the time it was first acquired to the time it is about to be sold
• Agreed price of the property
• Size and description of the property
• Promises or covenants the parties will undertake to execute the deed
• Signatures of the parties
• Section for the Governors Consent or Commissioner of Oaths to sign and verify the agreement

If you need help understanding, drafting, or signing a deed of assignment, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Mortgage Assignment Laws and Definition

(This may not be the same place you live)

  What is a Mortgage Assignment?

A mortgage is a legal agreement. Under this agreement, a bank or other lending institution provides a loan to an individual seeking to finance a home purchase. The lender is referred to as a creditor. The person who finances the home owes money to the bank, and is referred to as the debtor.

To make money, the bank charges interest on the loan. To ensure the debtor pays the loan, the bank takes a security interest in what the loan is financing — the home itself. If the buyer fails to pay the loan, the bank can take the property through a foreclosure proceeding.

There are two main documents involved in a mortgage agreement. The document setting the financial terms and conditions of repayment is known as the mortgage note. The bank is the owner of the note. The note is secured by the mortgage. This means if the debtor does not make payment on the note, the bank may foreclose on the home. 

The document describing the mortgaged property is called the mortgage agreement. In the mortgage agreement, the debtor agrees to make payments under the note, and agrees that if payment is not made, the bank may institute foreclosure proceedings and take the home as collateral .

An assignment of a mortgage refers to an assignment of the note and assignment of the mortgage agreement. Both the note and the mortgage can be assigned. To assign the note and mortgage is to transfer ownership of the note and mortgage. Once the note is assigned, the person to whom it is assigned, the assignee, can collect payment under the note. 

Assignment of the mortgage agreement occurs when the mortgagee (the bank or lender) transfers its rights under the agreement to another party. That party is referred to as the assignee, and receives the right to enforce the agreement’s terms against the assignor, or debtor (also called the “mortgagor”). 

What are the Requirements for Executing a Mortgage Assignment?

What are some of the benefits and drawbacks of mortgage assignments, are there any defenses to mortgage assignments, do i need to hire an attorney for help with a mortgage assignment.

For a mortgage to be validly assigned, the assignment document (the document formally assigning ownership from one person to another) must contain:

• The current assignor name.
• The name of the assignee.
• The current borrower or borrowers’ names. 
• A description of the mortgage, including date of execution of the mortgage agreement, the amount of the loan that remains, and a reference to where the mortgage was initially recorded. A mortgage is recorded in the office of a county clerk, in an index, typically bearing a volume or page number. The reference to where the mortgage was recorded should include the date of recording, volume, page number, and county of recording.
• A description of the property. The description must be a legal description that unambiguously and completely describes the boundaries of the property.

There are several types of assignments of mortgage. These include a corrective assignment of mortgage, a corporate assignment of mortgage, and a mers assignment of mortgage. A corrective assignment corrects or amends a defect or mistake in the original assignment. A corporate assignment is an assignment of the mortgage from one corporation to another. 

A mers assignment involves the Mortgage Electronic Registration System (MERS). Mortgages often designate MERS as a nominee (agent for) the lender. When the lender assigns a mortgage to MERS, MERS does not actually receive ownership of the note or mortgage agreement. Instead, MERS tracks the mortgage as the mortgage is assigned from bank to bank. 

An advantage of a mortgage assignment is that the assignment permits buyers interested in purchasing a home, to do so without having to obtain a loan from a financial institution. The buyer, through an assignment from the current homeowner, assumes the rights and responsibilities under the mortgage. 

A disadvantage of a mortgage assignment is the consequences of failing to record it. Under most state laws, an entity seeking to institute foreclosure proceedings must record the assignment before it can do so. If a mortgage is not recorded, the judge will dismiss the foreclosure proceeding. 

Failure to observe mortgage assignment procedure can be used as a defense by a homeowner in a foreclosure proceeding. Before a bank can institute a foreclosure proceeding, the bank must record the assignment of the note. The bank must also be in actual possession of the note. 

If the bank fails to “produce the note,” that is, cannot demonstrate that the note was assigned to it, the bank cannot demonstrate it owns the note. Therefore, it lacks legal standing to commence a foreclosure proceeding.

If you need help with preparing an assignment of mortgage, you should contact a mortgage lawyer . An experienced mortgage lawyer near you can assist you with preparing and recording the document.

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Prior to joining LegalMatch, Daniel worked as a legal editor for a large HR Compliance firm, focusing on employer compliance in numerous areas of the law including workplace safety law, health care law, wage and hour law, and cybersecurity. Prior to that, Daniel served as a litigator for several small law firms, handling a diverse caseload that included cases in Real Estate Law (property ownership rights, residential landlord/tenant disputes, foreclosures), Employment Law (minimum wage and overtime claims, discrimination, workers’ compensation, labor-management relations), Construction Law, and Commercial Law (consumer protection law and contracts). Daniel holds a J.D. from the Emory University School of Law and a B.S. in Biological Sciences from Cornell University. He is admitted to practice law in the State of New York and before the State Bar of Georgia. Daniel is also admitted to practice before the United States Courts of Appeals for both the 2nd and 11th Circuits. You can learn more about Daniel by checking out his Linkedin profile and his personal page. Read More

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Deed of Assignment (for Intellectual Property)

In the realm of intellectual property, a Deed of Assignment is a formal legal document used to transfer all rights, title, and interest in intellectual property from the assignor (original owner) to the assignee (new owner). This is crucial for the correct transfer of patents, copyrights, trademarks, and other IP rights. The deed typically requires specific legal formalities, sometimes notarization, to ensure it is legally enforceable.

To be legally effective a deed of assignment must contain:

• Title of the Document : It should clearly be labeled as a "Deed of Assignment" to identify the nature of the document.
• Date : The date on which the deed is executed should be clearly mentioned.
• Parties Involved : Full names and addresses of both the assignor (the party transferring the rights) and the assignee (the party receiving the rights). This identifies the parties to the agreement.
• Recitals : This section provides the background of the transaction. It typically includes details about the ownership of the assignor and the intention behind the assignment.
• Definition and Interpretation : Any terms used within the deed that have specific meanings should be clearly defined in this section.
• Description of the Property or Rights : A detailed description of the property or rights being assigned. For intellectual property, this would include details like patent numbers, trademark registrations , or descriptions of the copyrighted material.
• Terms of Assignment : This should include the extent of the rights being transferred, any conditions or limitations on the assignment, and any obligations the assignor or assignee must fulfill as part of the agreement.
• Warranties and Representations : The assignor typically makes certain warranties regarding their ownership of the property and the absence of encumbrances or third-party claims against it.
• Governing Law : The deed should specify which jurisdiction's laws govern the interpretation and enforcement of the agreement.
• Execution and Witnesses : The deed must be signed by both parties, and depending on jurisdictional requirements, it may also need to be witnessed and possibly notarized.
• Schedules or Annexures : If there are detailed lists or descriptions (like a list of patent numbers or property descriptions), these are often attached as schedules to the main body of the deed.

Letter of Assignment (for Trademarks and Patents)

This is a less formal document compared to the Deed of Assignment and is often used to record the assignment of rights or licensing of intellectual property on a temporary or limited basis. While it can outline the terms of the assignment, it may not be sufficient for the full transfer of legal title of IP rights. It's more commonly used in situations like assigning the rights to use a copyrighted work or a trademark license.

For example, company X allows company Y to use their trademark for specific products in a specific country for a specific period.  

At the same time, company X can use a Letter of Assignment to transfer a trademark to someone. In this case, it will be similar to the Deed of Assignment. 

Intellectual Property Sales Agreement

An IP Sales Agreement is a detailed contract that stipulates the terms and conditions of the sale of intellectual property. It covers aspects such as the specific rights being sold, payment terms, warranties regarding the ownership and validity of the IP, and any limitations or conditions on the use of the IP. This document is essential in transactions involving the sale of IP assets.

However, clients usually prefer to keep this document confidential and prepare special deeds of assignment or letter of assignment for different countries.

IP Transfer Declaration

In the context of intellectual property, a Declaration is often used to assert ownership or the originality of an IP asset. For example, inventors may use declarations in patent applications to declare their invention is original, or authors may use it to assert copyright ownership. It's a formal statement, sometimes required by IP offices or courts.

When assigning a trademark, the Declaration can be a valid document to function as a proof of the transfer. For example, a director of company X declares that the company had sold its Intellectual Property to company Y. 

Merger Document

When companies or entities with significant IP assets merge, an IP Merger Document is used. This document outlines how the intellectual property owned by the merging entities will be combined or managed. It includes details about the transfer, integration, or handling of patents, copyrights, trademarks, and any other intellectual property affected by the merger.

In all these cases, the precise drafting of documents is critical to ensure that IP rights are adequately protected and transferred. Legal advice is often necessary to navigate the complexities of intellectual property laws.

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Assignment of construction documents

Practical law uk standard document 5-282-1952  (approx. 14 pages).

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