Suing For Book Debts After Assignment: Who Can Bring Proceedings?

The subject of who can sue for book debts following their assignment was recently addressed by the Court of Appeal in the case of Bexhill (UK) Ltd v Razzaq [2012] EWCA Civ 1376. Specifically, the Court of Appeal considered whether (i) a particular assignment of book debts was absolute or operated by way of charge only, (ii) who could sue for recovery of book debts following an assignment of such book debts in favour of a lender and (iii) whether the lender as assignee of the book debts could authorise the borrower to bring an action for recovery of the book debts in the borrower's sole name.

Background

The borrower provided premium credit funding to insurance brokers, enabling insurance brokers to offer to their clients the facility to pay their annual insurance in instalments rather than in an annual lump sum. The borrower did not itself fund the sums it advanced to the insurance brokers but entered into a facility agreement with a lender to fund these premium funding arrangements. As security for the obligations owed by the borrower to the lender, the borrower entered into a debenture in favour of the lender pursuant to which it "assigns and agrees to assign absolutely in favour of [the lender] all of [the borrower's] rights, title, interest and benefit in "receivables" and it assigns and agrees to assign absolutely in favour of [the lender] all of [the borrower's] right, title, interest and benefit in each "relevant contract". The receivables comprised all present and future book and other debts, money claims and other amounts recoverable or receivable by the claimant. It also extended to the benefit of all rights and remedies relating to claims for damages and other remedies for non-payment.

Under the terms of the debenture entered into in favour of the lender, the borrower undertook that all payments received by it pursuant to the arrangements it entered into with the insurance brokers were to be paid directly into a collection account and all other receivables were to be collected by the borrower in the ordinary course of trading as agent for the lender and upon receipt paid into the collection account.

A customer of the borrower had given a legal charge over a commercial property as security to the borrower for amounts advanced under a premium credit funding arrangement. When the borrower's customer defaulted, the borrower sought possession of the property pursuant to the charge. The customer argued that the borrower had no right to...