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authorities similar to the one in question. Neither
they nor other firms with whom they have discussed
the matter appreciated that an authority can in fact
amount to an equitable assignment, and it is thought
therefore that the point is of sufficient importance
to warrant a note in the Gazette.
When a firm of solicitors hold money on behalf
of a client, they owe him a debt which is a chose in
action capable of assignment by the owner (the
client) either at law or in equity. But in the case
in question, the fund had not yet come into the
hands of the solicitors so that any purported assign
ment could only have been an equitable assignment
and could not have been a legal assignment under
s. 136 of the Law of Property Act, 1925.* (See
Joseph
v. Lyons
(1884), 15 Q.B.D. 280, and cases therein
cited). Again, even if the fund had already been in
the hands of the solicitors, any purported assignment
of part of the fund could have operated only in
equity and not as a legal assignment
(Forster v. Baker
(1910) 2 K.B. 636 ;
Re Steel Wing Co.
(1921) i Ch.
349;
Williams v. Atlantic Assurance Co.
(1933)
i
K.B. 81).
The essentials of an equitable assignment of part
of a fund are set out in
tianbury's Modern Equity
(Seventh edition) at pages 71,
et seq.,
and are :—
(i) There must be a specified fund out of which
payment is to be made.
A good example of a case in which a transaction was
held not to amount to an equitable assignment for want
of this requirement is
Percival v. Dunn
(1885), 29
Ch. D. 128. There A owed money to B and B to C.
B handed to C an order signed by himself and
addressed to A which read " Please pay C the
amount of his account, £42
145.
6d. for goods
supplied." A had notice of the order, but it was
held that there was no assignment of any part of
the fund owed by A to B, as the order did not
specify any fund out of which the payment was to
be made. The transaction was described by Bacon,
V.-C., as being merely a polite note by B asking A
to pay his deist.
It will be noted that in
Percival v. Dunn
the order
was given by the first creditor to a third party, or,
to equate the parties with the case which prompted
the present inquiry, given by the client to the third
party. This will be the normal procedure in making
assignments.
The point, therefore, arises as to
whether an order given by the client to the solicitor
direct (i.e., by the original creditor to his debtor),
telling him to pay a sum to a third party out of the
fund held by the solicitor (the debtor) for the client
can be an equitable assignment of the fund. The
old case of
Morrell v. Woatten
(1852), 16 Beav.,
*Corresponding Irish section is Judjcatui-e (Ir.) Act 1877,
s. 28
(b).
"...
.
"
...
.
shows that it can, as also does
Alexander v. Steinhardt,
Walker & Co.
(1903), 2 K.B. 208. Therefore, there
is nothing to prevent the transaction from amounting
to an assignment, merely because
the effective
document* is delivered to the debtor instead of as
is more usual to the assignee.
(ii) There must be a clear intention on the part
of the assignor to assign.
This is a question of construction of the instrument
and
Morrell v. Wootten
and
A/exande v. Steinhardt,
Walker & Co.
show that this intention may be
provided by the order given directly by the creditor
to the debtor that the debtor shall pay to a third
person the fund or part which the debtor owes to
or holds for the creditor.
(iii) Notice of the assignment should be given
to the debtor.
The point of notice is that the assignment is
complete as between the creditor and the third
party once there is the intention expressed to assign
the specific fund in whole or in part. The absence
of notice to the debtor does not affect the validity
of an equitable assignment but notice of the assign
ment is normally given to the debtor for three
reasons—
(a)
so that the debtor shall pay the assignee and
not the original creditor;
(&) to prevent the assignee from being subject
to equities arising between the debtor and the
creditor after the assignment; and
(e)
to preserve priority.
In the kind of assignment with which we are
here concerned, namely, that effected by the creditor
giving the order directly to the debtor, there is no
question of the debtor not having notice. Further,
the client (the creditor) had informed the third
party of the transaction.
It is clear that once a
debtor or fund holder has received notice of an
equitable assignment of the debt or fund he must
withold payment to the assignor (or persons claiming
through him) unless made with the consent of the
assignee and if he pays to or for the assignor without
such consent, he will have to pay over again to the
assignee
(Jones v. Farrell
(1857), i de G. & J. 208)
To sum up :
if the authority given by the client
to the solicitor is a mere mandate to pay as in
Percival
v. Dunn,
not specifying any fund out of which
payment is to be made and not showing any intention
to assign that fund, then it does not amount to an
assignment by the creditor, who can countermand
his directions and give fresh directions when he
pleases.
An example of such a mere authority
would be :
"I hereby authorise you to pay £x
to ————."
On the other hand, if the so-called
authority is a direction to the solicitor to pay a
*The instrument appears to attract
ad valorem
duty at T. ..
: 77