Assignment without consent,
part one
James Watters
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Under English law, an asset finance
agreement is assignable without consent – unless it states that it
is not assignable or only assignable with the lessee’s consent.
It would be unusual for any lease,
especially in the middle or small ticket area, to be non-assignable
but it is not unusual for big ticket leases and leases to local
authorities, NHS trusts and similar bodies only to assignable with
consent.
What if consent is not given when
the assignment occurs and is given later, or never given? These
issues were most considered by the courts in the case of
Barbados Trust Co Limited vs Bank of Zambia [2007] 1 C.L.C.
434.
For this article, the relevant
facts are simple. Masstock was due debt from Bank of Zambia (BoZ),
which it sold to Bank of America (BofA). Prior consent to assign
was required but deemed to be given if there was no response to a
request for it from BoZ within 15 days.
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By GlobalDataConsent to the assignment to BofA
was applied for on 2 December 1999 and BoZ failed to respond, which
meant that it was deemed to consent to the assignment on 17
December. In the meantime, Masstock entered into an assignment with
BofA on 10 December, before the deemed consent was given. Would the
assignment be effective when consent to it was only given after its
date?
The first judge’s response to this
was practical. He simply said that the giving of deemed consent on
17 December was effective to complete the acquisition by BofA: the
assignment took effect on the date of actual or deemed consent so
that consent could be properly treated as being given prior to the
assignment.
His decision was appealed. In the
Court of Appeal, one judge, Waller LJ, agreed with the first judge
but the remaining two judges did not. Waller LJ said it made no
commercial sense that, years after the event, BoZ could resist the
claim on the grounds that consent was not given when BoZ
appreciated that their consent had been “deemed” to have been
given.
However, judges Rix and Hooper LJJ
took the simple view that, at the date of assignment, consent had
not been given and as a consequence the assignment to BofA was
invalid and it could not be said that prior consent had been given
when it was actually received subsequently.
It is not unusual for it to be
assumed that because consent is given after an assignment, this
somehow makes the assignment valid retrospectively.
This case makes it clear that this
view is wrong and, in legal terms, no assignment has occurred. Next
month we look at the rights of an assignee in such
circumstances.
The author is a partner at
Watson, Farley & Williams
