When a 3rd party to a contract “jumps out of the woodwork” and says the debt is “now owed to me” complications can arise. For instance there may be issues about whether the assignment of the debt was valid so that it was: -
- In writing;
- Absolute & unconditional;
- Done on notice to the debtor
If the above requirements are not met there could be questions about whether there was a valid equitable assignment because the requirements in s 12 to the Conveyancing Act were not met. That section provides that: -
12 Assignments of debts and choses in action Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor: Provided always that if the debtor, trustee, or other person liable in respect of such debt or chose in action has had notice that such assignment is disputed by the assignor or anyone claiming under the assignor, or of any other opposing or conflicting claims to such debt or chose in action, the debtor, trustee or other person liable shall be entitled, if he or she thinks fit, to call upon the several persons making claim thereto to interplead concerning the same, or he or she may, if he or she thinks fit, pay the same into court under and in conformity with the provisions of the Acts for the relief of trustees.
Assignment Subject to Equities
An assignment may be subject to the equities and infirmities of the assignor’s title so that the assignee cannot be in a better position than the original assignor. This could generate arguments about the original debt including set-off and the like. In some cases the original assignment could be illegal and that could potentially be a complete defence to the debt.
Litigant has helped its clients successfully defend and settle cases involving large debts that were assigned to third parties by carefully looking into the underlying debts and also raising set-off and breach of contract type arguments where they are available. If you are an accomplished private person or a successful business who needs to deal with a debt that has been assigned and you wish to dispute it and can fund such a case contact our commercial litigation lawyers on +61 2 8644 0663 to find out more.