HT-2023-000306 - [2025] EWHC 385 (TCC)

Under s.136(1) of the Law of Property Act 1925, there are three requirements for a valid legal or statutory assignment:

It is not argued on behalf of Kazu 1 that those three conditions have not been met. The only question for the Court is whether, on its proper construction, clause 16.2 of the PM Appointment precludes the assignment of the MPA Claim to the Claimant.

The Claimant relies upon three arguments:

The Claimant’s first argument is that because the Project had been abandoned by the date of execution of the Deed of Assignment, the only interest which Kazu 1 had in the Project was the right to claim damages. Having taken the assignment, Mr Goldkorn became a “person…acquiring the Claimant’s interest in the Project”, within the meaning of clause 16.2. Hence the assignment was not caught by the prohibition.

The difficulty with that argument, as MPA points out, is that it ignores the meaning of “the Project”. “The Project” is defined in the PM Appointment (clause 1.1) as “the construction works at the site as identified in the Proposal”. The Proposal Letter is headed “Endo, 61-63 Beak Street, London W1”, thus the Project is defined as the construction works at the Premises. It is only a person who acquires Kazu 1’s interest in the construction works themselves who is a permitted assignee under clause 16.2.

The Claimant says that what is contemplated by this aspect of clause 16.2 is a situation where a third party “takes over” as the beneficiary of MPA’s Services in connection with the Project (or whatever might be left of it). The Claimant has effectively taken over the Project, because all that remains of it is the MPA Claim. However, the reality is that the Claimant has not acquired any interest in the construction works at the Premises. Indeed, the lease of the Premises was disclaimed by Kazu 1, following which any such interest which remained would have reverted to the Landlord.

The Deed of Assignment defines the “MPA Claim” as:

“all other claims, causes of action and/or choses in action ... against MPA and/or any other party ... arising out of or in connection with their performance as project manager, quantity surveyor and contract administrator in relation to the design and fit-out of the Premises at 61-63 Beak Street, London W1F 9SL”

But the definition of the “MPA Claim” only extends to cover claims against other parties insofar as they arise out of, or in connection with MPA’s performance as project manager, quantity surveyor and contract administrator. It would not cover such claims which had no connection with MPA’s performance, such as an unrelated final account dispute with the Main Contractor, or any dispute with the Landlord. Such claims would, even on the Claimant’s own case, constitute at least part of Kazu 1’s remaining “interest in the Project”.

The Claimant’s second argument is based on the wording of clause 16.2 which prohibits assignment of the “benefit of this Appointment”. He relies upon the definition of the “Appointment” in clause 1.1 of the PM Appointment which reads:

“The Client appoints the Consultant to provide the Services and the Consultant accepts such appointment upon and subject to these Conditions.”

It is said that the “benefit of this Appointment” refers to Kazu 1’s right to MPA’s performance of the Services, but not to Kazu 1’s right to the fruits of performance, including the accrued rights of action in respect of MPA’s breaches of its past obligations (which were the subject of the Deed of Assignment). Thus, the Claimant alleges that the purported assignment falls outside the prohibition in clause 16.2 in any event.

As the Claimant points out, it is in principle open to parties to a contract to agree to prohibit a creditor from assigning the benefit of the contract to another person. In Linden Gardens Trusts Ltd v Lenesta Sludge Disposal Ltd [1994] 1 AC 85, the House of Lords was asked to determine the proper construction of a clause in a Standard Form Building Contract which provided that:

“(1)

The employer shall not without the written consent of the contractor assign this contract

(2)

The contractor shall not without the written consent of the employer assign this contract ...”

Lord Browne-Wilkinson held that, on its proper construction, that clause prohibited the assignment of the benefit of the contract in question, including the assignment of accrued rights of action. Importantly, for the purposes of this dispute, Lord Browne-Wilkinson recognised:

On the matter of contractual interpretation, the Claimant reminded me of the now well-settled principles of contractual construction which include:

The Claimant argues that it is clear that the Deed of Assignment does not contravene clause 16.2 of the PM Appointment for 3 reasons.

First, as summarised at paragraph 19 of his skeleton argument, the assignment of the MPA claim for damages after the determination of the PM Appointment cannot be said to amount to an assignment of the “benefit of this Appointment” within the meaning of clause 16.2. Lord Browne Wilkinson expressly contemplated a scenario whereby a contractual term might render invalid the assignment of rights to future performance under a contract, but not the fruits of performance. On the facts of Linden Gardens, the clause in question has prohibited the assignment of “the Contract”, and it was clear that the parties intended to prevent the assignment of both the right to future performance and the fruits of performance.

However, clause 16.2 of the T&Cs purports to restrict assignment of the “benefit of this Appointment”. “Appointment” is defined in clause 1.1 as “the Client appoints the Consultant to provide the Services and the Consultant accepts such appointment upon and subject to these conditions”. Thus, what is contemplated by the use of the phrase “benefit of this Appointment” is that there shall be no assignment of the benefits of the provision of the “Services”, being the primary obligations to render future performance by MPA, not the secondary obligations, to pay damages in respect of past obligations, which fall outside the scope of clause 16.2.

In Linden Gardens, the Court of Appeal (by a majority) drew a distinction between an assignment of the right to require future performance of a contract by the other party, on the one hand, and an assignment of the benefits arising under the contract (including to enforce accrued rights of action for breach of the building contract), on the other. It held that only assignment of the former, and not the latter, was prohibited by clause 17(1) of the contract in that case.

That distinction was rejected by the House of Lords. Lord Browne-Wilkinson held at [105B-C] that while it is “at least hypothetically possible that there might be a case in which the contractual prohibitory term is so express as to render invalid the assignment of rights to future performance but no so as to render invalid assignments of the fruits of performance”, the question in each case must turn on the terms of the contract in question.

InLinden Gardens, Lord Browne-Wilkinson found it “impossible to construe clause 17 as prohibiting only the assignment of rights to future performance, leaving each party free to assign the fruits of the contract”. He said, at [105D-G]:

“The reason for including the contractual prohibition viewed from the contractor’s point of view must be that the contractor wishes to ensure that he deals, and deals only, with the particular employer with whom he has chosen to enter into a contract. Building contracts are pregnant with disputes: some employers are much more reasonable than others in dealing with such disputes. ... I cannot believe that the parties every intended to permit such a confused position to arise.”

At [106A-C], Lord Browne-Wilkinson said:

“... parties who have specifically contracted to prohibit the assignment of the contract cannot have intended to draw a distinction between the right to performance of the contract and the right to the fruits of the contract. In my view they cannot have contemplated a position in which the right to future performance and the right to benefits accrued under the contract should become vested in two separate people. I say again that that result could have been achieved by careful and intricate drafting, spelling out the parties’ intention if they had them. But in the absence of such a clearly expressed intention, it would be wrong to attribute such a perverse intention to the parties ...”

As MPA argues, the critical question is whether the reference in clause 16.2 to the “benefit of this Appointment” is sufficient to establish the parties’ clearly expressed intention to distinguish the right to future performance from the right to benefits accrued under the PM Appointment.

I bear in mind the principles of contractual construction, summarised at paragraph 39 above, however, in my judgment it is plain that the language used in clause 16.2 comes nowhere near the “careful and intricate drafting” referred to by Lord Browne-Wilkinson.

In Linden Gardens, clause 17(1) referred to the assignment of the “Contract”. Lord Browne-Wilkinson pointed out at [103A] that the clause was in this respect “unhappily drafted” as it was in any event impossible to assign “the contract” as a whole, i.e. including both burden and benefit.” That is because the burden of a contract can never be assigned without the consent of the other party to the contract. He decided that what the parties had meant was that clause 17(1) “prohibited the assignment by the employer of the benefit of the contract”, thus Lord Browne-Wilkinson concluded that the phrase “assign this contract” was in fact to be read as equivalent to “assign the benefit of this contract”. That latter phrase was found wide enough to encompass both the right to future performance and the right to fruits of performance with no distinction intended to be drawn between the two.

I accept, as argued by MPA, that the use of the phrase “the benefit of this Appointment” in clause 16.2 is intended to draw an appropriate contrast with the burden of the Appointment (which is not assignable). It does no more than that, and certainly does not provide for an express distinction between the right to future performance, and the right to the fruits of performance.

Thus, the first argument summarised at paragraph 19 of the Claimant’s skeleton argument fails.

The second argument (see paragraph 20 of the Claimant’s skeleton argument) is that if the restriction on assignments of the “benefit of this Appointment” prevents Kazu 1 from assigning the fruits of the PM Appointment to Mr Goldkorn, Kazu 1 has a separate and independent claim against MPA in the tort of negligence. That falls outside the scope of clause 16.2 entirely.

To counter that argument, the Defendant refers to Burleigh House (PTC) v Irwin Mitchell LLP [2021] EWHC 834 (QB) at [33-36].

The Claimant says that that decision of the Deputy Master in that case has not been followed in this jurisdiction and, further, that it has been disapproved in the High Court of Singapore, Re Ocean Tankers (Pte) Ltd (in liquidation) [2023] SGHC 330.

I do not need to engage in that debate.

Paragraph 18 of the Particulars of Claim pleads:

“Further or alternatively, in circumstances where MPA owed a contractual duty to exercise reasonable skill and care, Kazu relied upon MPA to perform that duty properly and MPA was or should have been aware that Kazu would so rely, MPA owed Kazu a concurrent duty of care in tort, such duty extended to protection Kazu from pure economic loss.”

As Mr Cook, for MPA, pointed out, the tortious duties are identical therefore to the contractual duties. They form part of the “benefit of this Appointment”, and thus are barred by clause 16.2 unless within the express permission. In my judgment, the prohibition encompasses all claims advanced by the Claimant in these proceedings.

The third argument maintained by the Claimant, at paragraph 21 of its skeleton argument is that Mr Goldkorn, through the Deed of Assignment, has acquired Kazu 1’s interest in the Project. But, the Project is defined as the construction works at the Premises. It is only a person who acquires Kazu 1’s interest in the construction works themselves who would fall within clause 16.2.

I, therefore, decide that the Claimant has no title to bring this claim as Assignee of Kazu 1’s rights pursuant to the Deed of Assignment, and that the prohibition in clause 16.2 extends to all claims advanced by the Claimant be in contract or in tort.