Security for a solicitor debts - Sears Tooth Agreements - financial provision

In 'financial provision' litigation, one or other party may not have sufficient money/funds to pay for their legal advice/legal representation, upfront[1]. One option would be for that party to seek credit from their legal advisor (solicitor/lawyer[2]), in respect to the professional legal fees (including disbursements) that party will incur to their solicitor/lawyer ('solicitor'). That party's solicitor may be content to extend credit to that party (their client), but that solicitor may want to have some form of security, to increase the chances that the solicitor, will, eventually, be paid, the money due to the solicitor, as professional legal fees. 

One 'form' of security is the Sears Tooth Agreement. This article will consider this 'type' of security, in light of the cases of:

(1) Sears Tooth v Payne Hicks Beach [1997] 2 FLR 116 [1998] 1 FCR 231 ('Sears Tooth'), High Court (Wilson J) on 17.1.97;

(2) S v S [2010] EWHC 1415 (Fam); [2011] 1 FLR 607 ('SvS'), High Court (Macur J) on 18.6.10; 

As will be apparent, the name of this 'type' of security agreement, came from the first case listed above: Sears Tooth, which was the case that determined they are lawful. 

SUMMARY

As more fully set out below, at its core, a Sears Tooth Agreement involves an assignment, from a party, to that party's solicitor, of the future 'fruits' of the litigation (that party's right interest benefit and advantage in the financial provision and costs orders and interest thereon) up to the sum owed by that party, to that party's solicitor. The Sears Tooth Agreement is a contract to assign future choses in action (note 'choses in action', not 'causes of action'). They do not involve a legal assignment nor equitable assignment of a cause of action. Sears Tooth Agreements are lawful. They are not: (a) champertous or maintenance; nor (b) contrary to public policy. Nothing passes, even in equity, until the property comes into present existence and comes 'into the hands of the assignor’. Only when this happens can the assignment 'attach' to the property in question, and an interest pass. What is assigned are the 'fruits' of that claim, rather than the claim itself. More precisely, the assignment 'attaches' to the fruits of the litigation, upon quantification of the fruits of the litigation. It is at that moment, that they are deemed to have ‘come into the hands of the assignor’ (albeit the order might not be for the asset/money to be payable forthwith).

‘A contract for valuable consideration to assign a future chose in action if and when it comes into existence and comes into the hands of the assignor is, however, valid and a purported present assignment of such a chose in action will be construed and given effect to as such a contract in equity, provided valuable consideration is present. It will bind the conscience of the assignor, and bind the subject matter of the contract when it comes into existence, provided that the subject matter is of such a nature and so described as to be capable of being identified. The rights of the assignee do not rest merely in contract. The property is bound in equity directly it is acquired by the assignor, automatically and without any further act on his part.’

The understanding of the assignor and assignee, must be that the assignee will be at liberty to serve the Sears Tooth Agreement on the financial provision payer (typically the husband) and, once the assignment 'attaches' to a particular asset/money, require him to account to the assignee, rather than to the assignor, for that particular asset/money (Sears Tooth, at 134).

Clashes can arise between the Sears Tooth assignee and: (a) the financial provision payer's right of set off; and/or (b) a fourth party, holding a different form of security (third party debt order), over, in effect, the same fruits of the litigation (or some part thereof).

LABELS 

In both Sears Tooth, and SvS, it was the wife, in financial provision litigation with her husband, who entered into a Sears Tooth Agreement, with her solicitors. Adopting this, for consistency, this article will assume that:

(a) it is the wife who enters into the Sears Tooth Agreement with her solicitors, and

(b) the financial provision litigation is against her husband (obviously); and

(c) it is the husband who is likely, at the conclusion of the financial provision litigation, to be ordered to pay to the wife, a sum of money/assets (more than just periodic payments). 

This then provides, a tripartite situation:

(1) Husband - party to the financial provision litigation; likely payer of money/assets to the wife (pursuant to a financial provision litigation order);  

(2) Wife - party to the financial provision litigation; likely payee of money/assets, from the husband (pursuant to a financial provision litigation order); Sears Tooth Agreement contractant; the Sears Tooth Agreement assignor) 

(3) Wife's Solicitors (a Sears Tooth Agreement contractant; the Sears Tooth Agreement assignee). 

There are therefore 2 principal (a) relationships; and (b) products of those relationships:

(i) marriage / financial provision - and an order to pay being the likely outcome of that; and

(ii) the Sears Tooth Agreement contractual relationship - and, a key assignment, from the Wife, to the Wife's Solicitors. 

SEARS TOOTH AGREEMENT

The Sears Tooth Agreement is, typically, a written document, in the form of a deed (and executed as a deed), containing, as its central provision, an assignment, from the Wife, to Wife's Solicitors of: that part of her right interest benefit and advantage in the financial provision and costs orders and interest thereon, as will settle any lawful claim for payment the Wife's Solicitors may make against the Wife.

Accordingly, the key assignment provision may read:

'In consideration of the legal services provided and to be provided to [the Wife] by [Wife's Solicitors] in the action ... (as [the Wife] hereby acknowledges) [the Wife] as beneficial owner assigns unto [Wife's Solicitors] that part of her right interest benefit and advantage in the financial provision and costs orders and interest thereon as will settle any lawful claim for payment they may make against her.'

The assignment then, is an assignment of future chose(s) in action (Sears Tooth, 123F to 125G). Looking at: (a) the nature of assignment; (b) to what it applies to; and (c) when property falls into the scope of the assignment mechanism (when the assignment 'attaches' to an asset/money), Macur J in SvS said the following, at paragraph 15:

'...it is pertinent to remind oneself of the nature of the Deed of Assignment when executed in these circumstances as a contract to assign a future chose in action, defined in Halsbury's Laws and cited with approval by Wilson J, as he then was, in giving judgement in [Sears Tooth] as: ‘A contract for valuable consideration to assign a future chose in action if and when it comes into existence and comes into the hands of the assignor……It will bind the conscience of the assignor, and bind the subject matter of the contract when it comes into existence, provided that the subject matter is of such a nature and so described as to be capable of being identified….The property is bound in equity directly it is acquired by the assignor, automatically and without any further act on his part…”'

A few points:

(1) If properly executed in the form of deed, there does not need to be the exchange of valuable consideration[3];

(2) the assignment (if worded as above) is limited to enough as will settle any lawful claim for payment the Wife's Solicitors may have against the Wife. 

(3) the assignment, in respect to particular asset/money, occurs if and when, it comes into existence and comes into the hands of the assignor, provided that:

(a) the subject matter is of such a nature; and

(b) so described,

as to be capable of being identified.

(4) the effect is automatic, requiring no further action (like execution of a conveyancing document). 

(5) the effect is to bind, in Equity:

(a) the conscience of the assignor (here, the Wife)

(b) the subject matter of the contract (the Sears Tooth Agreement) - that is, the fruits of her right interest benefit and advantage in the financial provision and costs orders and interest thereon.

So, where a Wife has entered into a Sears Tooth Agreement, subject to any other claims to it, the Wife's Solicitors will be entitled to claim, that which is covered by the words of the assignment, which comes into the hands of the Wife, from the financial provision proceedings (including any costs orders made against the Husband, and in favour of the Wife, in the financial provision proceedings, + interest thereon). 

CLASH OF CLAIMS

Subject to any other claim to it (in the paragraph above) - indicates that it is possible for there to be a clash over who has first 'entitlement' to what the Husband is to pay the Wife (financial provision, costs orders, interest). 

The clash may be between Wife's Solicitors and:

(a) the Husband's claim to a right of set off - a claim to be able to off set, sums due from the Wife, to the Husband, thereby reducing the net/actual sum, the Husband must pay the Wife; or 

(b) the claims of a fourth person - a creditor of the Wife, who holds and asserts a different form of security, over the same fruits of the litigation (for instance, another firm of solicitors, the wife owes money to)

This is not a exhaustive list. Other scenarios may arise in the future. 

The first scenario above (Husband's claim to a right of set off) involves simply the Wife, Wife's Solicitors and the Husband. It is a tripartite situation. This situation arose in SvS. 

Where there is a 4th party, who asserts some right, there will be a quadripartite situation. 

Taking these in turn. 

Tripartite and SvS 

In SvS:

(1) the Wife ('W') brought financial provision proceedings (then called 'ancillary relief proceedings') against the Husband ('H'); the Wife had solicitors ('LP') (retainer ended 5.3.09)

(2) on 18.9.08, just prior to judgment being handed down in the financial provision proceedings (see below), the Wife entered into a Sears Tooth Agreement (deed of assignment) with LP, with the key assignment, in standard wording[4]. 

(3) On 16.10.08, judgment in the financial provision was handed down, wherein (paragraph 1):

(a) W would retain 1 property (the 'French Property')(called Isola Victoria);

(b) H would retain assets in his name; and

(c) the former matrimonial home (called Newlands) ('FMH') was to be sold, and the proceeds be divided to achieve overall parity between W and H. 

(4) on 14.11.08, H's solicitors were notified of LP's Sears Tooth Agreement with W (paragraph 4);

(5) After the FMH was sold (5.11.09), the calculation to achieve overall parity was made. The result was that H was due to pay W, to achieve overall parity, the sum of c.£47,140 (paragraph 3) (the 'Parity Payment'). 

(6) However, H contended that H was entitled to set off, against this Parity Payment, costs orders which had been made against W and in favour of H. These costs orders, made by the Family Court in the financial provision proceedings, numbered 5 in total, and amounted to £39,250 (paragraph 3):

(a) £4000 - ordered 13.10.07 - assessed 27.2.09; 

(b) £18,750 - ordered 24.3.09 

(c) £7500 - ordered 19.6.09 

(d) £4000 - ordered 27.10.09;

(e) £5000 - ordered 2.12.09

(7) LP conceded H held a right of set off, but contended that LP held a prior and preferential claim, arising from the Sears Tooth Agreement (paragraph 4). 

(8) after: (a) summarising H's and LP's submissions[5], and (b) paragraph 15 (quoted above), Macur J considered when, exactly, the Sears Tooth Agreement assignment, 'attached' to the fruits of the financial provision litigation (which is the same time as it is deemed to ‘come into the hands of the assignor’):

(a) at paragraph 16, Macur J deduced from Sears Tooth that:

'...the assignment attached upon quantification of the “fruits” of the litigation and were deemed to have ‘come into the hands of the assignor’ at that point albeit that the order for a lump sum was not payable forthwith.'

The key moment therefore, was 'upon quantification of the “fruits” of the litigation'. 

Macur J said that she would '...adopt this approach in considering the date/s when the assignment attached in this case.' (paragraph 17)

(b) held that, the relevant dates in SvS were:

(i) 5.11.09 for the Parity Payment - since it was only at this point, that the quantum of the Parity Payment could be known (paragraph 18). Prior to this point, it was incapable of precise quantification (paragraph 18). 'The judgement of [the first instance judge] had provided the mechanics to seek to achieve equal division but not specified the quantum to do so.' (paragraph 18)

(ii) 16.10.18 for the French Property (for completeness - this was not the subject matter of the dispute). 

(iii) 27.2.29 for the 1st costs order (for £4000) - relevant to when H's right of set off arose, in respect to this costs order. Macur J said 'On the approach taken by Wilson J this would not ‘crystallise’ for the purpose of set off until the date of assessment on [27.2.09].' (paragraph 23)[6]

(c) held that H was correct as to when the particular “fruits” of the Sears Tooth Agreement arose (paragraph 20)

(d) the result was that:

'...at the date of the relevant ‘financial provision’ coming into existence against which LP seeks to attach the assignment, namely [5.11.09], orders for costs and interest totalling £35,630.32 had been made and comprised the wife's debt to the husband. The husband's right to set off existed and was asserted implicitly in correspondence between his solicitors and LP in letters and enclosures dated [16.7] and [5.11.09].' (paragraph 21). 

(9) However, LP argued '...that the date of notice of the deed of assignment is the date which determines the rights of the parties not the assignment itself. This appears clearly established in the extract upon which he relies from Snell's Equity (31st Ed) paragraph 3-22. I accept his argument on this particular point.' (paragraph 22). But, Macur J in SvS reasoned, at paragraphs 24 and 25:

'Nevertheless, at the date of notification of the deed of assignment the rights of the parties incorporate the principle that the assignee can be in no better position than the assignor. This principle survives the context of matrimonial litigation despite the implicit suggestion ... that solicitors should be protected from the risk of clients, past or present, who may embark upon ‘frolics of their own’ beyond the control of their erstwhile professional advisor and, as in this case, embark upon behaviour which is subsequently defined as litigation misconduct attracting adverse cost orders. The solicitor cannot take the gain of the arrangement without the associated risk. It is illogical to suggest that they fall into an exceptional category of assignees, immune from long established equitable doctrine.'

Reviewing the authorities on assignments “subject to equities”, Templeman J in BUSINESS COMPUTERS LTD V ANGLO-AFRICAN LEASING LTD [1977] 2 ALL ER 741 concluded that “a debt which accrues due before notice of an assignment is received, whether or not it is payable before that date, or a debt which arises out of the same contract as that which gave rise to the assigned debt, or is closely connected with that contract, may be set off against the assignee..”.

I consider it unarguable but that [H's] debts are closely connected with the contract which gives rise to the debt assigned to LP. His debts arise by virtue of the orders for costs made in the proceedings to secure the wife's financial provision. [Counsel for LP's] valiant attempts to distinguish the principle as applicable only to “commercial” transactions on the basis of the public interest in maintaining the viability of a Sears Tooth agreement in matrimonial proceedings is inherently flawed... He has been unable to point to any modification of the “equities” rule by statute or contract between the husband and the wife.'

On a separate point, perhaps unique to the drafting in SvS, Macur J in SvS said, at paragraph 27:

'I do not regard the drafting of the Order at paragraph 3(vii) or its omission to deduct the husband's costs from the proceeds of sale to be capable of prioritising LP's claim or precluding the husband's right of set off or else modifying the “equities” rule. The Court Order does not comprise a contract between husband and wife, assignor and assignee, or between debtor and assignee. The provision in brackets at 3(vii) is questionable to say the least unless inserted with the specific consent of the wife in the absence of LP's locus within the ancillary relief proceedings, and the more so in this case since LP had ceased to act for the wife at the time of drafting the order. The prospect for dispute between client and solicitor was in fact real as evidence given before me indicates. The order could not possibly determine such a dispute in advance. In any event it must implicitly be read as subject to outstanding ‘equities'.

For good measure, in the very edition and chapter of Snell's Equity upon which [counsel for LP] relies, at paragraph 3-24, the husband finds support for his case that as ‘debtor’ he has the same right of set off against the assignee as against the wife as ‘original creditor’. The case of Re KNAPMAN (1881) 18 Ch.D 300, mentioned there appears directly on the point arising here. Legatees bringing an action in the Probate Division against an executor who thereafter assigned their rights under the will or intestacy pending action did not shield the assignee from the executor's right to set off costs subsequently ordered against the legacies they had assigned.'

In conclusion, Macur J in SvS said:

'In these circumstances I conclude that [H's] orders for costs which may be “set off” against the debt he owes to his wife comprise an equity which is good against the assignee whenever notice of the assignment was given.' (paragraph 27)

'I dismiss LP's application for payment of the lump sum otherwise due to the wife and give effect to the “set off” claimed by [H].' (paragraph 33)

Fortifying her position, Macur J in SvS said, at paragraph 30:

'This outcome is ‘equitable’ in every sense of the word. The proceedings commenced prior to the execution of the deed. The assignee obviously knew of the proceedings, their long running nature, the parameters of likely award and previous ‘difficulties' created by their client's litigation conduct which had already resulted in an order for costs to be assessed against her, and was able to assess the risks of entering into the agreement with their client.'

The dispute in SvS was as to the priority/clash of LP's 'security' and H's right to set off, in relation to the Parity Payment (the only payment H was to make to W). The right of set off could not be deployed against the French Property. But that French Property, was a property within the scope of the Sears Tooth Agreement. On this, Macur J in SvS noted, at paragraph 31: 

'I find the right of ‘set off’’ in this case is established against assignor and assignee. The only fund against which [H] may “set off” the debts his wife owes to him is the money otherwise payable to her/LP following the sale of Newlands. In the circumstances of this case it becomes unnecessary to consider whether LP has right of election against particular parts of the ‘financial provision’ to attach since [H's] set off extinguishes the capital payment otherwise due. LP is left to charge the French property or otherwise seek to enforce their agreement by other means.'

Two points:

(1) Macur J said in the above passage - '...[H's] set off extinguishes the capital payment otherwise due'. This is curious, and perhaps a misspeak, as it is not clear how H's right to set off of £39,250, against the Parity Payment, can have extinguished (presumably meant, in its entirety) H's obligation to pay c.£47,140 as the Parity Payment.

(2) Macur J did later deal, obiter, with how she would have held, if she had found that H's costs order, did not arise directly, nor were closely connected, 'with the fund in purview' (paragraph 32)[7]

Quadripartite - Fourth Participant holding rival security over the same asset 

The above dealt with the situation where the clash of claims is between the husband, and the Wife's Solicitors (Sears Tooth Agreement contractant solicitors). But the Wife's Solicitors rights may clash against the rights of a fourth participant ('4P')(i.e. somebody other than the Husband or the Wife) - where a 4P has obtained a security interest over an asset, also subject to the Sears Tooth Agreement. 4P's acquisition of that security interest, may have been with, or without, the consent of the Wife. 4P will be somebody who the Wife owes money to. There are obviously many ways that the Wife's debt to 4P may have arisen. In essence, the situation is: the Wife owes 2 different creditors money, and both seek to secure their respective debts, over the same asset(s). Which of the two different creditor's securities, takes precedence?

One scenario where the Wife owes money to 2 different creditors, is where the Wife owes money to 2 different solicitors. If the solicitors were engages in the same financial provision proceedings, then the solicitors will have been instructed sequentially/successively (i.e. the Wife instructed a first set of solicitors, dis-instructed them, and then instructed a second set of solicitors). The Wife may have run up a credit on unpaid legal fees, with both sets of solicitors; each set of solicitors, having obtained a different form of security:

(1) one firm of solicitors entered into a Sears Tooth Agreement with the Wife; 

(2) the other firm of solicitors, obtained another form of security over the Wife's assets. Most obviously, a third party debt order (formerly called a Garnishee Order), a type of security granted first, on an interim basis (formerly known as 'nisi') and then, if the Court holds appropriate, on a final basis (formerly known as 'absolute')

Sears Tooth 

Such a scenario arose in Sears Tooth - the quadripartite was:

(1) Husband  - respondent to the financial provision litigation; likely payer of money/assets to the wife (pursuant to a financial provision order);  

(2) Wife - applicant to the financial provision litigation; likely payee of money/assets, from the husband (pursuant to a financial provision order); a Sears Tooth contractant; the Sears Tooth assignor) 

(3) Wife's former solicitors - PHB ('PHB Sols') - judgment creditor; third party debt order applicant; 

(4) Wife's subsequent solicitors - ST ('ST Sols') - a Sears Tooth Agreement contractant; the Sears Tooth Agreement assignee 

Sears Tooth facts

The facts in Sears Tooth were that:

(1) the wife instructed PHB Sols, who undertook work on her financial provision proceedings; later, the wife dis-instructed PHB Sols, without paying off all the legal fees due to PHB Sols.

(2) on 30.6.94, the husband was ordered to pay the wife's costs of certain interim applications (interlocutory applications), to be the subject of a detailed assessment (then called 'taxation') (at 122);

(3) the wife instructed ST Sols. As unpaid legal fees to ST Sols grew, ST Sols invited the wife to enter into, what would later be called, a Sears Tooth Agreement. The Sears Tooth Agreement, Operative Parts - paragraphs 1 and 2, read[8]:

'1. In the deed the following expression[s] shall have the following meanings:

“Financial provision” means any property or money recovered or payable to [the wife] as a result of the action including property adjustment orders and lump sum orders but excluding payments pursuant to a periodical payments order.

“Costs orders” means orders made or to be made by the courts in the action for the payments by [the husband] of the whole or part of the legal costs of [the wife].

2. In consideration of the legal services provided and to be provided to [the wife] by [ST Sols] in the action and otherwise (as [the wife] hereby acknowledges) [the wife] as beneficial owner assigns unto [ST Sols] that part of her right interest benefit and advantage in the financial provision and costs orders and interest thereon as will settle any lawful claim for payment they may make against her.'

(4) on 2.2.95, the wife executed the Sears Tooth Agreement (at 120).

(5) on 13.10.95, in the financial provision proceedings, Wilson J ordered the Husband to pay the Wife:

(a) a lump sum of £85,000, on or before 13.1.96; and

(b) periodic payments, £15,600 for 1 years, thereafter, £9,600 per year, during joint lives (until remarriage or further order)

(c) the wife's costs (essentially), on a standard basis.

(6) on 27.10.95, the detailed assessment was finalised, with the quantum of the interim applications 30.6.94 costs orders, fixed at c.£16,000, to be paid by the husband, to the wife, on or before 10.11.95;

The husband failed to pay: (a) the lump sum; and (b) the 27.10.95 costs order sum;

(7) separately, PHB Sols issued a claim against the wife, for judgment on the wife's unpaid legal fees ('PHB Sols' Claim'). On 16.11.95, the County Court upheld PHB Sols' Claim, and entered judgment against the Wife, in favour of PHB Sols, for the Wife's unpaid legal fees (at 122), the quantum of which, to be taxed (meaning, in modern parlance 'assessed') if not agreed. 'The fees of [PHB Sols] were not agreed so pending taxation an order was made on [28.2.96] that the wife make an interim payment to [PHB Sols] of £11,000 within 48 hours.' (at 122)

(8) 'On [8.3.96], in default of such payment, [PHB Sols] obtained the garnishee order nisi attaching whatever was owing from the husband to the wife up to £11,025. On about [12.3.96] the order was served on the husband. Soon afterwards [ST Sols] applied to set the order aside.' (at 122)

(9) Following the husband's failure to pay the lump sum, the wife issued a judgment summons ('Summons'). In 0.4.96, the Summons '...was compromised upon revised terms for its payment, plus interest, with which belatedly the husband complied, subject to withholding £11,025 in the hands of his solicitors pursuant to the garnishee order nisi. The compromise also swept up remaining issues as to costs: in lieu of the obligation to pay £16,184 plus interest under the order dated [27.10.95] and in lieu of a taxation of the other costs cast upon him at the end of the substantive hearing, it was agreed that he should pay £70,000 by seven instalments of £10,000, payable every 6 months beginning on [25.10.96]. The first instalment has been duly paid' (at 122)

Sears Tooth - few points

Wilson J dealt with a few points:

(1) the Sears Tooth Agreement did not displace the prior agreement between the wife and ST Sols, that the wife should be liable to pay their fees, calculated on the conventional time-cost basis (at 122)

(2) the Sears Tooth Agreement only entitled the ST Sols, to such 'fruits' of the litigation, as was sufficient to cover ST Sols properly due legal fees. Any surplus/balance that came into ST Sols hands, would have to be paid to the wife (at 122)

Wilson J said, at 122:

'In short, although the words ‘security’ and ‘charge’ are nowhere to be found in it, the deed purports to provide security to [ST Sols] for the payment of their proper costs by way of a charge over capital sums payable or property transferable to the wife under orders for ancillary relief and for costs.'

(3) the words 'and otherwise' in Sears Tooth Agreement clause 2, were prime facie ambiguous, but after consideration of extraneous evidence, it was determined that '...it should be construed as providing [ST Sols] with security in relation also to payment for services rendered to the wife in her dispute with [PHB Sols].' (this will be something unique to Sears Tooth case, the author suspects).

Sears Tooth - fundamental points

Wilson J then dealt with some more fundamental points: 

(1) the Sears Tooth Agreement did not fall foul of the general law of assignments (at 123). PHB Sols' contentions to the contrary, were incorrect. Those PHB Sols contentions were that

'...the deed purports to be an assignment of a chose in action and that it is invalid:

(a) as a legal assignment because the husband was not notified of it prior to the making of the garnishee order nisi; and

(b) as an equitable assignment because it was a future chose in action; and

(c) as a contract to assign a future chose in action because the property affected by it has at no stage been capable of being identified.

Addressing this Wilson J said that this PHB Sols contention:

(i) required analysis of precisely what was purported to be assigned by the wife to ST Sols (at 122); and 

(ii) that '[t]he key to the analysis is to be found in Glegg v Bromley [1912] 3 KB 474.'

Wilson J in Sears Tooth, at 123-124, explained the facts and decision in Glegg - particularly how the assignment did not resemble maintenance or champerty. There are some useful comments about the nature of an analogous security.

'At a time when she was pursuing an action for slander against Lady Bromley, Mrs Glegg, who was heavily in debt to her husband, assigned to him ‘all that the interest, sum of money or premises to which she is or may become entitled under or by virtue of any verdict, compromise or agreement … in or consequent upon the said action’. In due course Mrs Glegg was awarded damages against Lady Bromley. A judgment creditor of Mrs Glegg then sought to garnishee the damages but her husband intervened to claim them under the assignment. The husband’s claim was upheld in the Court of Appeal.

The Court of Appeal accepted that a cause of action for a personal wrong such as slander could not be assigned but rejected the suggestion that such was the purported effect of the deed. At 484 Vaughan Williams LJ said:

‘I think that all that was assigned was the fruits of an action. I know no rule of law which prevents the assignment of the fruits of an action. Such an assignment does not give the assignee any right to interfere in the proceedings in the action. The assignee has no right to insist on the action being carried on; in fact, the result of a compromise is actually included as a subject of the assignment. There is in my opinion nothing resembling maintenance or champerty in the deed of assignment.’

At 489–490 Parker J said:

‘It is not an existing chose in action, but future property identified by reference to an existing chose in action … Nothing passes, even in equity, until the property comes into present existence. Only when this happens can the assignment attach and an interest pass. It is clear, therefore, that no question of maintenance can ever arise. Thus, in the present case, as I construe the mortgage, the mortgagor remains at liberty to proceed or not with the slander action as she may think fit. The mortgagee has no right and is under no duty to interfere. The mortgage, therefore, is open to no objection on the ground of maintenance, nor is it open to any objection on the ground of champerty.’

Although none of the three judgments speaks in terms of Mrs Glegg’s assignment being one of a future chose in action, that is how it is described in, for example, Halsbury’s Laws (Butterworths, 4th edn), vol 6, para 33. The description is apt for the thrust of the judgments is that, upon the return of the verdict in favour of Mrs Glegg, her husband became entitled to require Lady Bromley to pay the damages to himself.' [bold added]

Drawing a parallel between Glegg and the facts in Sears Tooth, Wilson J said, at 124:

'I find that the subject matter of the assignment between the wife and [ST Sols] is akin to that between Mrs Glegg and her husband. The wife’s right to claim ancillary relief and, consequentially, costs against the husband was not purportedly assigned to ST Sols; indeed any such assignment of a right so personal to her would be contrary to public policy and unenforceable. What were purportedly being assigned were the fruits of that claim.'

(2) the Sears Tooth Agreement assignment did not all have to occur at one moment. The Sears Tooth Agreement assignment could 'attach' to assets falling into its scope, as an when an asset fell into its scope. There could be a series of 'attachments' which occurred on a series of dates. In Sears Tooth itself, Wilson J said there were 3 separate attachments:

(a) 13.10.95 - the first attachment occurred - 'when the husband was ordered to pay to the wife, albeit not immediately, a lump sum of £85,000' 

(b) 27.10.95 - the second attachment occurred - when the husband was '...ordered to pay her £16,184 in respect of the costs awarded against him on [30.6.94]'

(c) 0.4.96 - the third attachment occurred - 'upon the agreement of the figure payable by the husband for the costs over all'

Wilson J said that this '...purportedly took place after the date of the garnishee order nisi and subsumed the second attachment'

(3) the Sears Tooth Agreement assignment, Wilson J concluded[9], at 125, was not:

(a) a legal assignment (it did not, in any event, purport to assign existing cause of action); nor

(b) an equitable assignment (even Equity assign a chose in action which is not yet in existence).

Rather, the Sears Tooth Agreement is a contract to assign future choses in action (note 'choses in action', not 'causes of action'). As to such contract, Wilson J recorded, at 125,  that:

'It is agreed that the law in relation to contracts to assign future choses in action is accurately stated in Halsbury’s Laws (Butterworths, 4th edn), vol 6, para 323 as follows:

‘A contract for valuable consideration to assign a future chose in action if and when it comes into existence and comes into the hands of the assignor is, however, valid and a purported present assignment of such a chose in action will be construed and given effect to as such a contract in equity, provided valuable consideration is present. It will bind the conscience of the assignor, and bind the subject matter of the contract when it comes into existence, provided that the subject matter is of such a nature and so described as to be capable of being identified. The rights of the assignee do not rest merely in contract. The property is bound in equity directly it is acquired by the assignor, automatically and without any further act on his part.’

On the facts, PHB Sols:

(1) conceded that ST Sols gave consideration for the assignment, in the form of legal services to be provided (not of course in the legal services already provided); but

(2) argued, however, that the property affected by the contract has at no time been able to be identified.

As to this second point, Wilson J disagreed with PHB Sols. Wilson J said, at 125: 

'There are two strands in what needs to be identifiable: the property assigned by way of charge and the amount of the charge. The property assigned, namely the wife’s rights under specified orders that might be obtained against the husband, is plainly identifiable. And the amount of the charge, namely [ST Sols'] outstanding fees in respect of the proceedings against the husband and [PHB Sols], as quantified in the first instance in their bills as delivered but subject to adjustment by agreement or, importantly, taxation, together with interest thereon, seems to me to be as plainly identifiable. It is to be noted that for this purpose nothing has to have been identified.'

The result was that the Sears Tooth Agreement between ST Sols and the wife, was '...valid as a contract to assign a future chose in action.' (at 125).

(7) The law takes a different approach as to the assignability of: (a) lump sums; and (b) periodic payments. In short:

(a) periodic payments are not assignable; whereas,

(b) lump sums are assignable.

The reason is that periodic payments have been held to be '...of a personal nature and payable, in the words of the statute, ‘for her maintenance and support’.' (at 126)[10]. Whereas,

(i) 'The essence of a lump sum is that it carries all the incidents of outright ownership, in particular alienability.' (at 126); and

(ii) a lump sum are not sums paid by way of maintenance, nor always linked to periodic payments (at 126).

The result is that, in respect to a lump sum, '...the wife can assign her rights to it under the order before it passes into her hands just as she can dissipate it all upon the day that it passes into her hands.' (at 126). In other words, it is an assignable future chose in action. 

Wilson J then dealt with the final point: was the Sears Tooth Agreement champertous or, had savours of champerty, and is invalid as a matter of public policy

After going through the law on maintenance and champerty, and some policy consideration (including the public good in enabling wives to access credit from solicitors, to fund their financial provision litigation), Wilson J said, at 131:

'...[ST Sol’s] deed does not come within striking distance of the general definitions set out above of what is left of the doctrines of maintenance and champerty...'

After asking himself 'But does jurisprudence exist which is more specific to this case?' (at 131). After going through some authorities, Wilson J concluded 

'I have come to the clear conclusion, by reference not only to modern general principle but also to such specific jurisprudence as exists, that the deed between [ST Sols] and the wife is not champertous or otherwise contrary to public policy and is valid. Far from striking at public justice, the main tendency of such a deed is to promote it by securing proper advice and representation for a significant constituency of wives seeking to assert their rights against more powerful husbands.' (at 133)

Wilson J raised 2 riders to the above conclusion (at 133-134):

(1) 'The first is that the solicitors must, as [ST Sols] clearly did, advise the wife to seek independent legal advice before entering into it. If after due consideration she declines to do so or, as in this case, elects to take only informal other advice, the transaction can validly proceed.' 

(2) 'The second is designed to cater to some extent for the increased conflicts between the wife and her solicitor, if any, to which such a deed could give rise. The court should be alerted to the existence of such a deed. In this case the wife was in error not to bring it to the court’s attention at the substantive hearing; in reality I presume that the error was that of [ST Sols] in failing to advise her to do so. The schedule of costs required by the Practice Direction of 1988 customarily includes not just what each spouse is projected to owe in respect of costs but what each has paid on account: that is the obvious place for the recital of such a deed. But I would go further. I consider that the deed is a discoverable document. The understanding of both parties must be that the solicitors will be at liberty to serve it on the husband and require him to account to them rather than to the wife for sums owing under the orders. No confidentiality can attach in those circumstances; and in my view the assignment is a relevant transaction on her part. Accordingly the deed should be disclosed to the husband at the discovery stage, ie at the time of the delivery of the wife’s questionnaire, or, if it is executed thereafter, should be disclosed forthwith.'

On the facts in Sears Tooth

On the facts in Sears Tooth, ST Sols' Sears Tooth Agreement was found to be valid.

But ST Sols' appeal against the first instance judge's refusal to set aside, on ST Sols' application, the garnishee order nisi in favour of PHB Sols (and so, enabling, in due course, a garnishee order absolute to be made)(at 118), was dismissed (at 135). This dismissal may seem surprising, given that ST Sols' Sears Tooth Agreement was found to be valid. However, the reason what that ST Sols Sears Tooth Agreement, did not, on the figures, actually give ST Sols a ground for objecting to the PHB Sols obtaining a garnishee order. This was, essentially, PHB Sols fall back position, on which PHB Sols won on (before Wilson J). 

Wilson J summarised PHB Sols' point as follows (at 134):

'[PHB Sols] argue that, even if the assignment to [ST Sols] is valid and therefore takes priority over their rights as garnishors, [ST Sol’s] rights cannot exceed the amount of their outstanding costs and that the amount owed by the husband to the wife exceeds the costs owed to [ST Sols] by a margin well in excess of £11,025. So, say [PHB Sols], [ST Sols] cannot logically object to the garnishee order for that sum. [PHB Sols] concede that, when the further sums payable to them by the wife have been quantified and ordered to be paid, any further garnishee proceedings taken by them against the husband would require the arithmetic to be done again, as of a different date, and could produce a different result.'

The date for calculating the figures - was the 'date of service of the order nisi upon the garnishee' (at 134). That date was 12.3.96. On that date, the figures were:

(1) Husband owed the Wife £101,184 plus interest; 

(2) Wife had outstanding and unpaid legal fees due to ST Sols, of £71,720 plus interest

Wilson J in Sears Tooth said, at 135:

'It follows that ST, with rights against the husband in the sum of £71,720 plus interest, are unable to object to a garnishee order which attaches £11,025 against an indebtedness in the husband of £101,184 plus interest.'

Wilson J added, at 135:

'The issue relates to the rights of the two firms against the husband and the decision is that, although [ST Sols] already have rights, they are not so extensive as to preclude the creation of rights in [PHB Sols] in the amount currently claimed. Nothing turns on the speed or success with which the two firms each choose to pursue their rights against the husband; nor on the sequence of actual payment.'

A last point

Wilson J dealt with a point about solicitor/client privilege. Wilson J said,

'where...the wife enters into a deed of assignment which is not privileged, she must impliedly waive any privilege over the material which identifies the extent of its cover.' (at 134)

SIMON HILL © 2026*

BARRISTER 

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Simon Hill practices in the following areas: insolvency, company and business law, with some tax and property law.

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