- Common law assignable without notice
- A contract may expressly or impliedly authorise the assignment of rights that would not otherwise be assignable.
- Conversely, the contract may expressly or impliedly prohibit the assignment of rights that are otherwise on their face assignable
- An attempted assignment of contractual rights in breach of a prohibition on assignment is ineffective: ‘if the law were otherwise, it would defeat the legitimate commercial reason for inserting the contractual prohibition, viz, to ensure that the original parties to the contract are not brought into direct contractual relations with third parties‘
- However, an assignment in breach of a contractual prohibition may still have an effect as between the assignor and the assignee.
- In particular, ‘[i]f the obligor or promisor, after the purported assignment, performs the contract in favour of the assignor, the assignor may hold the fruits of such performance upon trust for the assignee, by analogy to the treatment in equity of contracts to assign afteracquired property’
- However, a contract may (also) prohibit one or both parties from declaring themselves to be a trustee of the benefit of the contract.
- It is important to point out that one must use the correct terminology when drafting assignment clauses in financing documents.
- So when wish to document a novation provision it could be fatal to use the term assignment.
7 What rights can be assigned?
- The first stage in determining whether a contractual right can be assigned is whether it is characterised as a chose in action.
- A right that is a chose in action is a personal proprietary right that can be transferred to a third party at law or in equity according to the formal rules governing the transfer of such rights.
- The relevant (and assignable) chose may be the benefit of the contract as such; that is, the bundle of rights, powers, privileges and immunities created by the contract rather than a particular right conferred by a term of the contract.
- Some individual rights may be considered separately for the purpose of assignment because they are sufficiently discrete and independent of other provisions of the contract
6 What is an Absolute assignment?
- In Austino Wentworthville Pty Limited v Metroland Australia Limited [2013] NSWCA 59 Barrett J summed up what he considered to constitute an absolute assignment:
- An “absolute” assignment is one that is unconditional and does not attempt to affect part only of the chose in action.
- The fact that an assignment otherwise absolute is accompanied by an express proviso for redemption, an implied right of redemption or the creation of a trust in respect of future proceeds does not deprive it of its absolute character.
- An assignment by way of charge is one the effect of which is to give a right of payment out of the subject matter assigned without outright transfer of that subject matter. Such an assignment occurs when, for example, there is a transfer of a right to be paid out of a particular fund or of so much of a debt as is sufficient to satisfy a future indebtedness.
- The character of the assignment must be ascertained from the terms and effect of the instrument, according to the construction of it as a whole.
5 Equitable assignment
- An assignment may be effective as an equitable assignment even if the formalities required by s 12 of the Conveyancing Act have not been satisfied.
- Pending the giving of notice, the assignment takes effect in equity only: Norman v Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9 at 28 per Windeyer J.
4 s 12 of the Conveyancing Act
- Section 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.”
3 What can be assignment ?
- Benefits not burdens
- a contractual obligation cannot be assigned without the consent of the other contracting party; that is, it is not possible to transfer the burden of a contract to a third party other than by novation.
- When we speak of assignment we are talking about assigning the benefits as we cannot assign burdens – we can only do this by novation
- NB: Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 referred to – assignment of “the contract“ – we know now that it is trite law that it is impossible to assign “the contract” as a whole, in the sense that phase ie ‘including both burden and benefit’.
2 What is assignment?
- Under general law, a debt or other chose in action may be assigned by two methods:
- legal assignment or equitable assignment.
- A legal assignment is absolute if the requirements of s 12 of the Conveyancing Act have been satisfied. Several steps must be taken before s 12 of the Conveyancing Act causes an assignment of the kind it describes to be “effectual in law”.
- There must be a written instrument. It must be executed by the assignor.
- And express notice of the assignment must be given to the debtor.
1. Parties transfer property in financing transactions in a number of ways
- sale of a specific loan by a lender such as a syndicated loan.
- reasons:
- to realise capital or take advantage of new lending opportunities;
- change the dynamics of its loan portfolio ie diversifying its portfolio;
- reduce its capital requirements (ie banks have to maintain a certain percentage of capital to cover for its existing loan obligations);
- may wish to crystalise a loss on the loan where the borrower runs into difficulties (ie a distressed debt where there is an active market).
- to insulate payments on the issued debentures from the claims of entities, including the transferor/originator of the assets, that are either unrated or have credit ratings lower than the desired credit rating on the debentures
- transfer of property such as a portfolio of receivables eg. residential loans, credit card debt, aircraft leases and other types of receivables to be used to generate cash flow in a securitisation transaction (such as by the issue of debentures).
- reasons:
- to legally isolate the underlying assets from the insolvency of the transferor/originator of those assets, enabling purchasers of the debentures to consider the creditworthiness of the underlying assets independent of the creditworthiness of the transferor/originator.
- to insulate payments on the issued debentures from the claims of entities, including the transferor/originator of the assets, that are either unrated or have credit ratings lower than the desired credit rating on the debentures.
- reasons:
Engineer who studied fluid mechanics and thermodynamics expert enough !
Hatziandoniou v Ruddy [2015] NSWCA 234
Accident – Truck versus motorbike
Issue whether contact between truck and bike occurred in truck lane or motorbike lane, which would determine liability of truck or motorbike.
AT trial evidence of engineer rejected as not expert evidence; overruled on appeal.
Expert evidence not admitted
- Given that the central question in the trial was the location of the point of impact, and that that could be explicated by reference to the fluid discharge, solicitors acting for the appellant retained an expert, Mr William Bailey, to provide a report. Mr Bailey is a mechanical and biomedical engineer. He appended to his report a detailed curriculum vitae. At the commencement of his report he set out those aspects of his specialist knowledge and experience specifically relevant to his investigation of this accident. Included in that list was:
“conduct and interpretation of crash tests and other physical testing of vehicles and components which is applicable to the assessment of vehicles/component damage, especially regarding pre-impact vehicle manoeuvres, crash causation and injury mechanisms”.
- He then provided a summary of his conclusions. Those relevant are:
“7. The most compelling physical evidence of the crash was a trail of fluid from the motorcycle that commenced after the impact and ran along the roadway in the southbound lane (ie the plaintiff’s correct lane of travel) and approximately 0.5 m from the centreline and essentially parallel with it.
8. Because:
– The bike was not deflected at an acute angle from the side of the truck after initial contact but continued along a path parallel with the side for several metres
– When fluid from a downward directed pipe located on the offside of the radiator began to be deposited on the roadway, the bike was travelling approximately parallel with the centreline and approx 0.5 metre within the southbound lane.
– Coolant under pressure would commence flowing almost immediately after the hose was disconnected.
– Engagement of the rotating wheel nuts on the truck had forcefully contacted metal parts on the offside of the bike including the radiator and the engine at a location consistent with the hose being disconnected on impact.
it is concluded that the motorcycle was probably on its correct side of the roadway when the impact with the offside front wheel occurred.”
- The remainder of Mr Bailey’s report was an explanation of his reasons for reaching these conclusions. Under a heading “Nature and distribution of debris post impact, including fluid discharge from the bike” appears the following:
“a) The debris recorded on the roadway is the fluid discharge from the dislodged hose and radiator pipe on the offside [of] the motorcycle. Using permanent features of the site that were visible in police photographs it was earlier determined that the fluid trail commenced approx 8 metres south of the line where the seal changed on the roadway. The fluid trail was located in the southbound lane approximately 0.5 metres from the centreline. The fluid trail is obscured by absorbent material added by road authorities and the lateral location may be a little closer or further than 0.5 metres.
b) Because:
� Coolant is maintained under pressure of approx 10psi and the pressure will cause it egress [sic] at any break in the system (eg disconnected hose)
– The outlet pipe is located below mid height within the header tank, so coolant will flow by gravity
– The engine was running and the water pump will continue to pump coolant from the engine to the radiator even after coolant can no longer be drawn into the engine from the radiator.
– The coolant was hot and would have minimal viscosity (ie resistance to flow)
discharge from at least the downturned pipe end and probably the hose end, would begin immediately upon disconnection.
The pipe is located approx 0.6 metres above the roadway when the bike is upright and it was probable the deposit on the roadway began shortly after the hose was disconnected.
c) The fluid trail on the roadway appears to continue along a path approximately parallel with the roadway, indicating that the bike was travelling approximately parallel with the roadway when fluid began to be deposited.
d) Scape [sic] visible approximately half way along the truck indicates the bike was travelling approximately parallel with the truck for at least several metres.” (Blue 423-4)
Mr Bailey restated his conclusion that the motorcycle was probably on its correct side of the roadway when the impact with the truck occurred.
- At the trial, objection was taken to the admissibility of Mr Bailey’s report. The basis of the objection lay in Mr Bailey’s qualifications. A voir dire was conducted. In his evidence in chief Mr Bailey was asked if he had studied “anything in relation to fluid dynamics”. He replied:
“Yes, it was a requirement that all engineers taking a BE in mechanical or industrial completed courses in fluid mechanics and also in thermodynamics which were relevant to this particular report.”
- When asked how central to his study the science of physics was, he replied:
“In a sense mechanical engineering is the application of physics to the real world. It’s at the core of mechanical engineering. Taking physics in its broadest context.”
- In cross-examination, the following questions were asked and answers given:
“Q. … Have you any training or expertise or experience in dealing with the flow of liquids from a motorcycle engine?
A. Only in so far as it’s analogous to flows from other types of engines but not – I haven’t done any studies of flow from motorcycle engines but I note a close correlation with cooling systems that are used in motor vehicles generally.
Q. The difference of course between motor vehicles and motorbikes is that on a motor bike the engine is much more exposed to the outside air or the wind passing past a bike. Would you agree with that?
A. Yet, it is, to a degree.
Q. Have you inspected or tested the flow of liquids from a motorcycle at all?
A. Not from a motorcycle, no.
Q. Have you carried out any testing on a motorcycle to confirm the way in which liquids would escape from a motorcycle?
A. Not from a motorcycle.
Q. That’s fairly central to your opinion here, is the escaping of the liquids from a motorcycle and where they would end up on the ground, isn’t it?
A. That’s correct. But I made those opinions based on the close correlation between that type of a pressure vessel and pressure vessels with which I am very familiar in motor vehicles generally.”
He rejected a proposition that there was a difference between pressure vessels in a motorcycle and pressure vessels in a motor car. He was again asked if he had done any testing to see how liquids are affected by the movement of a motorcycle through air. He acknowledged that he had not.
- Immediately following the voir dire, the trial judge delivered a judgment in which he excluded part of Mr Bailey’s report. He made reference to the decision of the High Court in Dasreef Pty Ltd v Hawchar [2011] HCA 21; 243 CLR 588 and said:
“In this case Mr Bailey has training, study and experience as an engineer. Part of that training and study obviously has something to do with hydraulics but he has never ever in his evidence tested the flow of liquid from a motorcycle engine, interpreted or tested the flow of liquids or done any testing which would enable him to express the opinions which he stated in para 8 of his report.
There is, therefore, in my opinion, no basis upon which I could conclude that the opinion which he has given in relation to pt 8 [sic] is based on his specialised knowledge, training, study or experience. Accordingly, part of Mr Bailey’s report is not admissible. Paragraph 8 is rejected, on p 4.”
- Counsel for the respondent then successfully objected also to paragraph 7 of the report, and objected to some other pages, which included that part of the report which discussed the nature and distribution of debris post impact, including fluid discharge from the motorbike.
- His Honour said:
“Any evidence that relates to a determination made on the basis of the spillage or expulsion of coolant is rejected.”
That was the extent to which the excluded aspects of the report were specified.
- The trial then proceeded with witnesses as to damages, and evidence given by the respondent.
The rejection of the expert’s report
- The starting point in considering the admissibility of Mr Bailey’s report is the identification of the fact in issue in the proceedings to which his evidence was said to be relevant: Evidence Act 1995 (NSW), s 55. In this case, that fact is easily identifiable: it is the location on The Putty Road of the point where the two vehicles collided. The evidence derived from eyewitnesses was unsatisfactory; at the very least, a greater degree of confidence as to that location could be obtained from supplementary evidence. The appellant sought to obtain that supplementary evidence through the opinion of Mr Bailey. Mr Bailey approached that fact by examining the location and source of the liquid on the road. He reached the conclusions set out above.
- Section 76 of the Evidence Act renders inadmissible evidence of an opinion to prove the existence of a fact in issue. That prohibition is subject to the exception contained in s 79(1), which provides:
“(1) If a person has specialised knowledge based on the person’s training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge.”
- For evidence to be admissible under s 79 it must satisfy two criteria: (i) the proposed witness must be shown to have “specialised knowledge based on the person’s training, study or experience”; and (ii) the opinion expressed must be wholly or substantially based on that training, study or experience: Dasreef at [32].
- The primary judge appears to have rejected the evidence of Mr Bailey as failing to satisfy both criteria: he acknowledged that Mr Bailey had training, study and experience as an engineer, but discounted his evidence of having completed courses in fluid mechanics and thermodynamics, and of the close correlation between pressure vessels on motorcycles and those in motor vehicles generally, with which Mr Bailey was very familiar. Indeed, his reference to Mr Bailey’s training having “had something to do with hydraulics” could be seen as inappropriately dismissive and certainly as failing to consider Mr Bailey’s unchallenged evidence as to that part of his training and experience.
- The finding that there was no basis upon which to conclude that Mr Bailey’s report was based on his specialised knowledge, training or experience is unsustainable on both counts. His qualifications included the conduct and interpretation of crash tests, and other physical testing of vehicles and components applicable to the assessment of damage.
- The primary judge adopted the submission of counsel for the respondent that, since Mr Bailey had not “tested the flow of liquid from a motorcycle engine”, he was not qualified to express the opinions that he had.
- This was an unduly narrow approach to the question of the qualifications of Mr Bailey to express his opinion as to the mechanism by which the fluid came to be where it was on the road. Mr Bailey had training in fluid dynamics, and expertise in cooling systems in motor vehicles; that expertise was sufficient to support an opinion about the operations of a breached cooling system in a motorcycle. One of the benefits of expertise is that it enables the person who has the relevant “training, study or experience” to extrapolate from the general to the particular. Mr Bailey had the requisite specialised training to enable him to draw conclusions about the particular circumstances of this collision. (Those conclusions would, of course, be subject to cross-examination, and to any contrary evidence adduced on behalf of the respondent.)
- It follows from the above that Mr Bailey’s evidence was wrongly excluded. The only possible consequence of that conclusion is that the verdict and judgment must be set aside and a new trial ordered. There must be a new trial because, on the exclusion of Mr Bailey’s evidence, he was not cross-examined, and counsel for the respondent forbore to tender the report obtained on behalf of the respondent. It will be necessary for the competing expert evidence to be properly evaluated in a new trial.
- Although, associated with this ground of appeal was a complaint that, having excluded parts only of the report, the primary judge failed to consider that which remained, the Court was not directed to any other relevant conclusion or opinion.
- The conclusion that Mr Bailey’s opinion evidence was wrongly excluded makes it unnecessary to resolve the other issues raised in the appeal concerning liability.
Legal Principles of an appeal in the nature of ‘rehearing’
An appeal is in nature a rehearing.
A court may in certain circumstances receive fresh evidence on the hearing of such an appeal, but no application was made to lead fresh evidence in this appeal. The nature of such an appeal was examined by the High Court in Fox v Percy (2003) 214 CLR 118, where, in a frequently quoted passage, the plurality (Gleeson CJ, Gummow and Kirby JJ) said at [22]–[23] and [25]:
The nature of the “rehearing” provided in these and like provisions has been described in many cases… The “rehearing” does not involve a completely fresh hearing by the appellate court of all the evidence. That court proceeds on the basis of the record and any fresh evidence that, exceptionally, it admits. No such fresh evidence was admitted in the present appeal.
The foregoing procedure shapes the requirements, and limitations, of such an appeal. On the one hand, the appellate court is obliged to “give the judgement which in its opinion ought to have been given in the first instance”. On the other, it must, of necessity, observe the “natural limitations” that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses’ credibility and of the “feeling” of a case which an appellate court, reading the transcript, cannot always fully share. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole.…
Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge’s reasons. Appellate courts are not excused from the task of “weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses and should make due allowance in this respect”.
[Citations omitted]
The plurality then quoted from the decision of the majority in Warren v Coombes (1979) 142 CLR 531 at 551:
[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.
In the case of Abalos v Australian Postal Commission (1990) 171 CLR 167 McHugh J, with whom Mason CJ, Deane, Dawson and Gaudron JJ agreed, said concerning the nature of such an appeal at 178:
In S.S. Hontestroom v S.S. Sagaporack [1927] A.C. 37 at p. 47, Lord Sumner pointed out that:
“not to have seen the witnesses puts appellate judges in a permanent position of disadvantage as against the trial judge, and, unless it can be shown that he has failed to use or has palpably misused his advantage, the higher Court ought not to take the responsibility of reversing conclusions so arrived at, merely on the result of their own comparisons and criticisms of the witnesses and of their own views of the probabilities of the case. The course of the trial and the whole substance of the judgment must be looked at, and the matter does not depend on the question whether a witness has been cross examined to credit or has been pronounced by the judge in terms to be unworthy of it. If his estimate of the man forms any substantial part of his reasons for his judgment the trial judge’s conclusions offact should, as I understand the decisions, be left alone.”
Consequently, where a trial judge has made a finding of fact contrary to the evidence of the witness but has made no reference to that evidence, an appellate court cannot act on that evidence to reverse the finding unless it is satisfied “that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge’s conclusion”: Watt or Thomas v Thomas [1947] A.C. 484, at p. 488.
In cases where views have been conducted. Section 54 of the Evidence Act 2011 (ACT) provides that a court may draw any reasonable inference from what it sees, hears or otherwise notices during a view. In which case a primary judge may have an advantage compared to the court hearing the appeal.
In Pledge v Roads and Traffic Authority (2004) 205 ALR 56, Callinan and Heydon JJ, with whom McHugh ACJ, Kirby and Hayne JJ agreed, said, concerning the equivalent provision in the Evidence Act 1995 (Cth) at [49]:
Even before the enactment of the Evidence Act, appeal courts customarily accorded significance to a demonstration or view at first instance.
[ELLIOT JAMES LAWRENCE STONE v THE OWNERS – UNITS PLAN 1214 & ORS
[2014] ACTCA 14 (19 May 2014)]