Estate Management and Business Development Company v Junior Sammy Contractors [2024] UKPC 33
Robert Strang, led by David Thomas KC of Keating Chambers, acted for the successful respondent Junior Sammy.
Junior Sammy carried out a major housing development for EMBD, a state owned company, pursuant to a contract in FIDIC Red Book 1999 form. The development was completed to EMBD’s satisfaction but in circumstances where no final payment certificate was issued, and where a number of interim certificates remained unpaid. Eventually, after a long delay, Junior Sammy sued on the IPCs. EMBD raised two defences: first, that Junior Sammy had no right to sue, having assigned the certificates absolutely to a bank under a factoring arrangement; second, that it had reason to believe that the certificates overstated the work done by Junior Sammy and had been fraudulently obtained.
Junior Sammy obtained summary judgment on the certificates at first instance, the judge finding that the defence of fraud had not been adequately pleaded and lacked substance, and that the assignment was equitable (and not an absolute, legal assignment) with the result that Junior Sammy retained the right to sue. The Court of Appeal agreed with the judge.
EMBD’s appeal to the Judicial Committee was dismissed. The Board found that the defence of fraud, which had not been fully pleaded, lacked any substance and did not entitle EMBD to obtain specific disclosure or to defend the claim.
As for the question of assignment, the Board reviewed the authorities on the distinction between legal and equitable assignments and approached the matter by considering all the relevant instruments. There were many indicators – in particular the description of the assignment as “absolute” and the parties as “buyer” and “seller” of the certificates – which supported a conclusion that the assignment was absolute.
But there were other material terms in the instruments which demonstrated that the certificates had not been sold absolutely under a factoring agreement, but were the subject of an equitable assignment as security for a loan. In particular: the overall arrangement was described as a facility and interest was payable on the sum advanced; on a proper reading of the instruments, only part of the value of the certificates had been assigned; and in the event that any certificate was disputed EMBD, Junior Sammy would be liable to pay the bank in full, which was inconsistent with the proposition that the bank had simply bought the certificates outright for a discounted price.
Further, a very strong indicator in favour of an equitable assignment was that Junior Sammy and the bank had agreed that Junior Sammy retained the right to sue EMBD. Having reviewed the authorities, the Board did not find that they went so far as to say that the retention of that right would alone be enough to conclude that an assignment was not absolute. In the current case there were a number of other provisions indicating that the assignment was by way of only and so it was unnecessary to express a concluded view on the matter. However, the Board said that if the matter does arise for decision, much may be said in favour of the proposition that the retention of the right to sue does entail that the assignment is by way of charge only.
Share:
