An assignment of a cause of action by a company in liquidation was valid, even though the dominant purpose was to avoid having to give security for costs, and to get legal aid. In dismissing the argument that the transactions were a device to defeat the purpose of statutory provisions: ‘It is not that the statute has a penumbral spirit which strikes down devices or stratagems designed to avoid its terms or exploit its loopholes. There is no need for such spooky jurisprudence.’
Judges:
Lord Hoffman, Lord Browne Wilkinson, Lord Lloyd of Berwick, Lord Nolan, Lord Clyde
Citations:
Gazette 17-Dec-1997, Times 01-Dec-1997, Gazette 18-Feb-1998, [1997] 3 WLR 1177, [1997] UKHL 51
Links:
Statutes:
Jurisdiction:
England and Wales
Citing:
Appeal from – Norglen Ltd (In Liquidation) v Reeds Rains Prudential Ltd and Others; Etc CA 6-Dec-1995
An assignment of a cause of action in order to be eligible to apply for Legal Aid is not against public policy. An assignment of a cause of action was not invalid solely on the ground that its purpose was to enable the action to be prosecuted on . .
Cited – Guy v Churchill 1888
There could be no objection to an assignment by the trustee in bankruptyc of a cause of action in return for a share of the proceeds, which ‘apart from the bankruptcy law . . is plainly void for champerty.’ . .
Cited – Seear v Lawson CA 1880
‘If the trustee gets a right of action, why is he not to realise it? The proper office of the trustee is to realise the property for the sake of distributing the proceeds among the creditors. Why should we hold as a matter of policy that it is . .
Appeal from – Circuit Systems Ltd (In Liquidation) and Another v Zuken Redac (Uk) Ltd CA 5-Apr-1996
The assignment of a debt by a company in liquidation to a significant shareholder, in order to allow him to make an application for legal aid, and to avoid having to give security for costs and to allow the action to proceed was not unlawful, but . .
Wrongly decided – Advanced Technology Structures Ltd v Cray Valley Products Ltd CA 1993
An assignment of the cause of action should not be recognised or given effect because it was a ‘sham’.
Hirst LJ said that the assignment was: ‘a mere stratagem or device to enable the company to carry on the proceedings, with the support of Mr. . .
Cited – Inland Revenue Commissioners v Duke of Westminster HL 7-May-1935
The Duke’s gardener was paid weekly, but to reduce tax, his solicitors drew up a deed in which it was said that the earnings were not really wages, but were an annual payment payable by weekly instalments.
Held: To find out what the true . .
Cited – Commissioners of Inland Revenue v McGuckian HL 21-May-1997
Steps which had been inserted into a commercial transaction, but which had no purpose other than the saving of tax are to be disregarded when assessing the tax effect of the scheme. The modern approach to statutory construction is to have regard to . .
Cited – Furniss (Inspector of Taxes) v Dawson HL 9-Feb-1983
The transfer of shares to a subsidiary as part of a planned scheme immediately to transfer them to an outside purchaser was regarded as a taxable disposition to the outside purchaser rather than an exempt transfer to a group company. In defined . .
Cited – Snook v London and West Riding Investments Ltd CA 1967
Sham requires common intent to create other result
The court considered a claim by a hire-purchase company for the return of a vehicle. The bailee said the agreement was a sham.
Held: The word ‘sham’ should only be used to describe an act or document where the parties have a common intention . .
Cited – Wallersteiner v Moir (No 2) CA 1975
The court was asked whether Moir would be entitled to legal aid to bring a derivative action on behalf of a company against its majority shareholder.
Held: A minority shareholder bringing a derivative action on behalf of a company could obtain . .
Cited – Regina v The Law Society, Ex parte Nicholson 22-Feb-1985
A legal aid committee could not refuse legal aid under this provision solely on the ground that the applicant had acquired the cause of action by assignment from an insolvent company, without having regard to the other circumstances of the case. . .
Cited – Ramsey v Hartley CA 1977
The court considered the sale of a cause of action by the trustee in bankruptcy: ‘Now, the sale of a cause of action by a trustee can only be effected by an assignment. It vests in the trustee in the first place because it is deemed to have been . .
Cited – Freightex Ltd v International Express Co Ltd CA 15-Apr-1980
Dunn L.J: ‘I do not think that a liquidator or an assignee from a liquidator should be put on terms either by way of security for costs or otherwise as a condition of enforcing an assigned claim.’ the other court members thought it was inappropriate . .
Cited – Eurocross Sales Ltd and Another v Cornhill Insurance Plc CA 5-Sep-1995
The company was in financial difficulties but not yet in liquidation. It sold its assets, including a claim against the defendant insurance company, to its principal shareholder Mr. Sood. The company’s action against the defendant was proceeding in . .
Cited by:
Cited – Regina v Braintree District Council ex parte Halls Admn 2-Jul-1999
Where a local authority had sold a property to a tenant, and the tenant later came back to request the release from one of the covenants given on the sale, the council was free to charge an appropriate sum for that release. It was not a covenant . .
Cited – Hendry v Chartsearch Ltd CA 16-Sep-1998
An assignment of the benefit of a contract without the consent of the contractor and in breach of contract was effective between assignor and assignee but not as against the original contract other party.
The modern practice for the allowing of . .
Lists of cited by and citing cases may be incomplete.
Legal Aid
Updated: 19 May 2022; Ref: scu.84325