Debt – reasons in respect of application by the plaintiff to amend
particulars of claim and answer.
[2016]JRC060
Royal Court
(Samedi)
11 March 2016
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Before :
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Advocate Matthew John Thompson, Master of
the Royal Court
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Between
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Stephen Hill (t/a Hillbury
Collection Services as assignee) (Defendant by Counterclaim)
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Plaintiff
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And
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Susan Anne Meyer (nee Foxhall)
(Plaintiff by Counterclaim)
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Defendant
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Advocate J. N. Heywood for the Plaintiff.
Advocate J. D. Kelleher for the Defendant.
CONTENTS OF THE JUDGMENT
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Paras
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1.
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Introduction
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1-2
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2.
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Background
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3-14
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3.
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Decisions and
Observations
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15-33
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4.
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Costs
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34
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judgment
the master:
Introduction
1.
This
judgment represents my detailed written reasons in respect of an application by
the plaintiff to amend its particulars of claim and reply and answer to the
counterclaim by substituting Messrs Le Gallais & Luce for Mr Stephen Hill (trading as Hillbury
Collection Services) (“the plaintiff”). There was no disagreement between the
parties that I had power to grant the amendments sought nor was there a dispute
as to the applicable legal principles on an application to amend. There was a dispute on whether Le Gallais and Luce could replace Mr
Hill as plaintiff.
2.
The
background to these proceedings concerns a debt for unpaid fees of Le Gallais and Luce, alleged, to be
owed by the defendant (who has since passed away) and whose husband as executor
will become defendant on behalf of her estate. Following issue of proceedings to
recover the debt, a counterclaim was filed by the defendant alleging negligence
and breach of contract with respect to advice provided by Le Gallais and Luce in its
representation in relation to a boundary dispute and a Vue
de Vicomte.
Background
3.
Following
service of a simple summons by the plaintiff, on 9th July, 2013, the
matter was placed on the pending list.
4.
Particulars
of claim were served and filed on or around 12th August, 2013. The particulars of claim pleaded that
the plaintiff initiated the action and claimed the unpaid fees as assignee of
Le Gallais & Luce.
5.
Between
August 2013 and March 2014 correspondence passed between Carey Olsen, Le Gallais & Luce, the plaintiff
and David Benest Law in relation to documents held on Le Gallais
& Luce’s client file concerning advice
given to the defendant and the reasonableness of Le Gallais
& Luce’s fees.
6.
The
defendant passed away on 12th March, 2014, and therefore the
proceedings were held in abeyance until probate was granted.
7.
On 1st
December, 2014, David Benest Law wrote to Mr Meyer in his capacity as executor
of the defendant’s estate to progress the plaintiff’s claim.
8.
On 22nd
December, 2014, an answer and counterclaim was filed by the defendant which
counterclaim raised the allegations of negligence and breach of contract
against Le Gallais & Luce.
9.
On the 16th
January, 2015, a reply and answer to counterclaim was filed by the
plaintiff. The answer to
counterclaim filed was a full answer and the plaintiff did not at any time
argue that the plaintiff was not the proper defendant to the counterclaim.
10. On 9th February, 2015, the defendant
filed a rejoinder and reply to the reply and answer to counterclaim. At that stage the defendant did not
contend that Le Gallais & Luce
should be joined to the proceedings.
11. On 22nd January, 2016, the plaintiff
issued a summons for directions which ultimately was heard before me on 1st
March, 2016.
12. While the directions proposed were otherwise
agreed, Carey Olsen for the defendant objected to Le Gallais
& Luce being substituted for the plaintiff. The basis for this objection was that as
assignee of the debt said to be due to Le Gallais
& Luce, it was unlawful to re-assign the debt
back to Le Gallais & Luce
as the right to claim the debt was a chose
en litige. The basis of this objection was that the
reassignment was contrary to the provisions of the 1771 Code as considered in Re
Valetta Trust [2012] JLR 1 and Barclays Wealth Trustees (Jersey) Limited
v Equity Trust & others [2013] (2) JLR 22. Advocate Kelleher therefore contended
that the right way to proceed was for Le Gallais
& Luce to be joined as a third party to the
present proceedings. In his
skeleton argument Advocate Kelleher also complained, notwithstanding that the
plaintiff had not referred to the assignment in his pleadings that no copy of
the assignment had been provided to the defendant when asked for.
13. Advocate Heywood, in response, contended that
the re-assignment was not caught by the 1771 Code. By reference to the Barclays Wealth
case, in particular the Court’s exploration of the legislative background
to the 1771 Code at paragraphs 30 to 41, what the 1771 Code was designed to
prevent was an abuse of process. It
could not be an abuse of process for an assignee to transfer back a claim in
debt to the original assignor. In
the alternative he also contended if the re-assignment was technically caught
by the 1771 Code, the amendment should be allowed because the re-assignment
could not in any way be said to be contrary to the public interest. Indeed, it was in the public interest
for these proceedings to reach a conclusion between the real parties to the
dispute i.e. Le Gallais & Luce,
whose fees had not been paid and the estate of the defendant who were critical
of the service provided by Le Gallais & Luce.
14. To be fair to Advocate Kelleher he did not
contend that there were any public policy arguments which would prevent me from
allowing the amendment if I concluded that the right to claim the debt was a chose en litige.
Decision and Observations
15. The short answer to the application before me
is found in the alternative ground advanced by Advocate Heywood namely, that
the assignment back from the plaintiff to Le Gallais
& Luce is not an abuse of process and that no
abuse of process has occurred. I
therefore agree that in this case that change of plaintiff from Mr Hill to Le Gallais & Luce will not
affect the purity of justice.
Indeed, it will ensure that the real parties to the dispute are before
the court. Accordingly I ordered
that Le Gallais & Luce
were substituted as plaintiff for Mr Hill.
I decided the application on this basis because I concluded that the
re-assignment technically fell within the 1771 Code as it was a contract
relating to a chose en
litige and it had been executed significantly
after the commencement of proceedings.
The reassignment therefore was a “cession”
or “transport” of a
matter in litigation - (see paragraph 34 of Barclays Wealth). This is notwithstanding the fact that
there is no abuse of process by the reassignment which was the mischief the
1771 Code and before that the 1635 Ordinance were designed to address for the
reasons explored by Birt, Bailiff in the Barclays Wealth case.
16. However, I did not regard it appropriate to let
matters end there because what underpinned the dispute between the parties
concerned the validity of the assignment between Le Gallais
& Luce and the plaintiff. Although Carey Olsen had asked for a
copy of the assignment, none had been provided. Shortly before the hearing I therefore
asked for both a copy of the assignment and any terms and conditions pursuant
to which the plaintiff operated. I
made this request because another way of approaching the issue raised open to
me was that, if in fact the original assignment was not valid, then this would
be another basis to allow the application to replace the plaintiff with Le Gallais & Luce as plaintiff,
because the plaintiff was never a valid assignee.
17. Having received now both the assignment and the
terms and conditions the plaintiff agreed with Le Gallais
& Luce, the terms of these documents give rise to
matters of general importance which is appropriate to set out in this decision,
even though I have decided the application on a different basis.
18. In response to my request for the instrument of
assignment agreed between Le Gallais & Luce and the plaintiff, the executed assignment could not
be found. I was however provided
with an undated instrument of assignment dated 7th June, 2013, the
material parts of which provide as follows.
“NOW THIS INSTRUMENT WITNESSETH that the Assignor as beneficial
owner herewith assigns the said sum of £19,347.33 due and owing by the
Debtor to the Assignor and the right to claim, recover, enforce the Debt (and
all or any interest accrued and accruing thereon and costs and expense) to the
Assignee absolutely to hold the full benefit and advantage thereof.
AND THE ASSIGNOR COVENANTS WITH THE
Assignee that:
(a) The said sum of £19,347.33 is still due
and owing in full to the Assignor from the Debtor as at the date of assignment;
(b) The Assignor will do all such things as may be reasonably
necessary to enable the Assignee to prove the said Debt whether in Court
proceedings or howsoever otherwise;
(c) The Assignor hereby indemnifies the Assignee
against any contingent claims which may be brought by the Debtors either by
counterclaim or with regard to legal costs as the result of any material
non-disclosure or breach of covenant in respect of paragraphs (a) and (b) as
hereinbefore set out.”
19. Advocate Kelleher observed in submission that
in the summons the assignment is said to be dated 9th July, 2013,
rather than 7th June, 2013, but in my judgment nothing turns on this
difference in dates. Where Advocate
Kelleher’s criticisms were justified, notwithstanding asking for a copy
of the assignment none was provided until I asked for a copy for the purposes
of the hearing before me.
20. In relation to the terms and conditions of the
plaintiff these were executed on 2nd May, 2013, by Le Gallais & Luce and signed by
the Plaintiff on 8th May, 2013.
They therefore pre-date the assignment, whether the latter was signed in
June or July 2013. The material
parts of the terms and conditions are as follows:-
“These terms and
conditions set out the basis upon which Hillbury
Collection Services (“Hillbury”), will
provide services to you the client.
Debt Recovery
It is the sole responsibility
of the Creditor/Client to prove that the debt is legally owed before Hillbury will commence any Legal Steps to obtain
payment from the debtor. Our client
will therefore need to provide us with a copy of the overdue invoice detailing
the original account or agreement, together with a balance statement.
In order to increase our
chances of recovery it would be useful for any correspondence between our
Client and their Debtor, including a copy of the 7-day letter, to be submitted
to Hillbury with the debt placement form. It is always useful to tell us before we
commence any action whether it is likely or not for the debt to be disputed.
Hillbury will initially cover all costs generated in serving a Summons on a
debtor; ordering their appearance and the tabling of any action in the Petty
Debts Court for claims under £10,000.00, and the Royal Court for claims
over £10,000.00 however, due to the increase in Stamp Duty which is
payable to the Courts once a Summons is served, we reserve the right to charge
any Stamp Duty and Viscount fees to our client in advance.
Hillbury will take all reasonable steps in order to recover all monies owed,
including any costs and accrued default interest. Any costs incurred and paid to Hillbury by the Creditor, will be added to the balance
of the debt and recovered from the debtor to allow these to be reimbursed
to the Creditor along with the balance due under the original claim.
Disbursement Fees cover any
Court costs, administrative and postage costs, the issue of a Summons, and all
representations in Court to obtain judgment, through to enforcement stage and
will only be charged to our client if we are unable to secure settlement from
the debtor.
Viscount Costs
Viscount costs are also added
to the balance of the debt and can be recovered from the debtor, should
enforcement of the action prove successful.
Appointment – Legal Services
In order for a client to
appoint Hillbury as their debt recovery agents, the
client will need to authorise Hillbury to act on
their behalf in the Petty Debts and Royal Court of Jersey.
In cases where our client is a
Limited Company, a mandate letter on the clients headed paper must be signed by
a Director of the Company appointing Stephen Hill of Hillbury
as Litigation Manager of the said company.
A sample mandate letter is provided within these Terms.
In instances where Hillbury Collection Services is instructed to recover a
debt for an Unincorporated Professional
or Sole Trader, then a Deed of Assignment is required. Hillbury will
draw up all assignments.
A fee of £40.00 per hour
will be charged to the client for any work undertaken including attendance at
the Court Mediation hearing. If no
settlement is agreed at Mediation and the dispute is taken to trial, Hillbury will advise their client to seek the services of a
Lawyer to proceed onto a trial.
Terms of Payment
Invoices will be raised and
submitted to our clients on the first day of each month for all works completed
throughout the previous month.
All cleared funds paid to Hillbury by the debtor will be paid out to our client as a
gross payment after deductions of any commissions and costs due unless
otherwise requested.” (Underlining added in each case).”
21. The validity of an assignment of a debt was
considered by the Court of Appeal in Kells
v Cashback [2012] (2) JLR Note 16 reported in full at Kells
v Cashback [2012] JCA 140. At
paragraph 23 of the judgment the Court of Appeal cited an extract from Pothier Traité du Contrat de Vente Partie VI, Chapitre IV on the ability of a creditor to effect
an assignment of a debt due under a contract as follows:-
‘’Une
créance étant
un droit personnel du créancier, un droit inhérent à sa personne, elle ne peut pas, à ne considérer
que la subtilité du droit, se transporter a une autre personne, ni par conséquent se vendre. … Néanmoins
les jurisconsultes ont inventé une manière de transporter les créances
sans le consentement ni l'intervention du débiteur. Comme le créancier peut exercer contre son débiteur, par un mandataire
aussi bien que par lui-même, l’action
qui nait de sa créance; lorsqu'il veut transporter sa créance à un tiers, il
fait ce tiers son mandataire
pour exercer son action contre
son débiteur; et il est convenu entre eux que l’action sera exercée par le mandataire,
à la vérité au nom du mandant, mais aux risques et pour le compte du mandataire, qui retiendra
pour lui tout ce qu'il exigera du débiteur en conséquence de ce mandat, et n’en
rendra aucun compte au mandant. On tel mandataire est appelé par les jurisconsultes,
procurator in rem suam parce
qu’il exerce le mandat, non pour le compte du mandant, mais pour son propre compte. Un mandat fait le cette manière est, quant
à l'effet, un vrai
transport que le créancier fait de sa créance; et s'il ne reçoit rien du mandataire pour consentir
que ce mandataire retienne pour lui ce qu'il exigera
du débiteur, c'est une donation; s'il reçoit pour cela de l'argent du mandataire, c’est une vente qu'il lui
fait de sa créance. De là il s'est établi
dans la pratique, qu'on peut transporter les créances, les donner, les vendre,
et en disposer à quelque
titre que se soit; et il n'est pas même nécessaire que l’acte
qui en contient le
transport, exprime le mandat
dans lequel nous venons d'expliquer que ce transport consiste.’’
[Emphasis added]
22. In respect of the extracts above where I have
added emphasis, it is clear that a creditor cannot generally assign a debt as
it is a personal right. However a
creditor can do so where it is agreed between the creditor and the assignee that
the action will be carried out by the assignee in the name of the assignor, but
at the risk of the assignee who will keep for himself everything he recovers
from the debtor in consequence of the assignment and will not account for
anything recovered to the assignor. In other words ownership of the debt
passes to the assignee.
23. The extract also notes that the assignment can
either be a gift or by way of sale.
24. Why the issue of validity of the assignment
matters ultimately concerns the ability of debt collection agencies to pursue
debts as assignee. If the
assignment is valid then the relevant debt collection agency had (and has) the
right to appear in court to enforce collection of the debt that it owns. In the absence of a valid assignment, a
party can only appear in the Royal Court either in person (or as a company
through a director) or through an advocate of the Royal Court.
25. In my view, based on the documents provided to
me the assignment executed by Le Gallais & Luce and the plaintiff does not fall within the basis upon
which an assignee may sue for a debt as set out in Kells
v Cashback. I say this for the
following reasons.
26. Firstly, the terms and conditions were executed
by both parties on 2nd May, 2013, in advance of the assignment. The purpose of the assignment as noted
in the terms and conditions was for “a
client to appoint Hillbury [sic] as their debt
recovery agents, the client will need to authorise Hillbury
to act on their behalf in the Petty Debts and Royal Court of Jersey.
............................
In instances where Hillbury Collection Services is instructed to recover a
debt from an Unincorporated Professional
or Sole Trader, then Deed of Assignment is required. Hillbury will
draw up all assignments.”
27. The purpose of the assignment therefore is to
allow the plaintiff to act as debt recovery agent and to act on behalf of Le Gallais & Luce. The assignment by reference to the
plaintiff’s terms and conditions was not therefore to effect an
assignment of the debt but to allow the plaintiff to represent Le Gallais & Luce. This is illustrated further where the
terms and conditions state “In
order to increase our chances of recovery it would be useful for any
correspondence between our Client and their Debtor…..”
28. Secondly, the terms and conditions make it
clear that the plaintiff will account for any sums recovered to the
debtor. For example the agreement
states:-
“any costs incurred and
paid to Hillbury by the Creditor, will be added to
the balance of the debt and recovered from the debtor to allow these to be
reimbursed to the Creditor along with the balance due under the original
claim.”
29. These provisions are inconsistent with the
principles set out in Pothier cited in Kells
v Cashback as to when there is a valid assignment from a creditor to a
third party which includes the third party not having to render any account to
the assignor.
30. My view of the present assignment does not
necessarily mean that an assignor and assignee cannot agree as part of the
cause for a creditor selling a debt that the creditor will receive payment for
the debt, but deferred and was contingent upon the assignee receiving payment
from the debtor. The validity of
such an arrangement appears to me to depend on whether a distinction can be
drawn between the assignee owning the debt, with a separate personal obligation
to pay the assignor a sum of money either equivalent to the debt or part of
it. An assignor in such
circumstances would only have a claim as creditor and would no longer own the
debt.
31. That is not however how the agreement was
structured in this particular case.
The whole tenor of the terms and conditions is that Mr Hill was
appointed as agent of Le Gallais and Luce to collect the debt due to them. The assignment was merely a device to
allow him to appear in Court as the terms themselves record. The relationship between the parties was
therefore governed by a contract as I have set out above for which the
plaintiff was providing services for which it received a fee. I accept in relation to this arrangement
that there was some risk for the plaintiff either because Le Gallais & Luce might refuse
to pay any disbursements incurred by the plaintiff or in theory Le Gallais & Luce, or indeed any
assignor, might default on the indemnity given that the debt was recoverable. However the arrangements agreed went much
further. The real arrangement was
that of the plaintiff acting as a debt collection agency for Le Gallais & Luce. In setting out this view I am conscious I
have only seen written documents and have not received any affidavit evidence
which might shed a different light on how the arrangements worked and my
observations are qualified accordingly.
32. However, on the basis of the terms and
conditions and the assignment produced, had it been necessary, I would have
concluded that no valid assignment had taken place in the present case that
fell within the principles set out in Kells as
cited by Pothier, for the reasons set out above.
33. Notwithstanding these observations, it would be
wrong of me not to record that debt collection agencies provide an important
service. They allow organisations or
other legal personas to collect debts where law firms who otherwise have rights
of audience to represent individuals do not generally provide such a service in
practice. The costs of such agents
also appear to be significantly below charge out rates of law firms as far as I
am aware. The practice of such
agents appearing as assignee in the court or as mandataire for companies has also
carried on for many years without any apparent difficulty. What this judgment indicates is that the
basis upon which such organisations appear may not necessarily have a sound
legal foundation as it is not straightforward for such arrangements to comply
with the principles of Pothier as set out in Kells. This leads me to conclude that the
services provided by debt collection agencies should be put on a proper legal
footing, both in terms of their ability to represent organisations in respect
of undisputed debts and with some form of regulation system in place. I observe that in England and Wales,
debt collection agencies are regulated by the Financial Conduct Authority. If individuals or businesses are to be
permitted to represent others before the Courts of Jersey in relation to debts,
it may be appropriate to give consideration to requiring some equivalent system
of regulation for such businesses. I
stress however that no criticism is intended of those who at present provide
such services, which I have noted above is an important service to the
community. Nonetheless the ability
to represent others to collect debts before the Courts is a serious
responsibility which would justify regulation. For the sake of completeness I add that,
to the extent the debt collection agencies already hold monies for clients, in
part they are already subject to the obligations of the Money Laundering
Order 2008, but such obligations are more limited than the scope of
regulatory systems that exist elsewhere.
Costs
34. Finally, in terms of costs in respect of the
plaintiff’s application I made no order as to costs. This is because firstly, while the
plaintiff succeeded in his narrower argument, the assignment, and his terms and
conditions were only provided when the Court wished to see them, despite them
being asked for on previous occasions.
Secondly, there are real issues with the assignment as I have set out in
this judgment. Equally I did not
consider it appropriate for the defendant, having wrongly refused to agree to
Le Gallais & Luce being
joined as plaintiff, as I have found, to recover costs of the present
issue. This could have occurred if
I had ordered costs in the cause. I
therefore concluded that each party bearing its own costs best reflected the
justice of the application before me.
Authorities
Re
Valetta Trust [2012] (1) JLR 1.
Barclays
Wealth Trustees (Jersey) Limited v Equity Trust & others [2013] (2) JLR
22.
Kells v Cashback [2012] (2) JLR Note 16.
Kells v
Cashback [2012] JCA 140.
Pothier Traité du
Contrat de Vente Partie VI,
Chapitre IV.
Money Laundering Order 2008.