Taking into account the background evidence a judge had erred in ruling that an assignment between a company and a shareholder had been for the proceeds of the company's claim for defective goods and not an assignment of the right of action itself.

 

The appellant (B) appealed against a decision on a preliminary issue that there had not been an assignment to B of a right of action against the first respondent (J). B had been a shareholder in a company (S) that had obtained roofing supplies from J. S claimed that the materials were defective and sought damages. Nearly two years later, at a time when S was selling its assets with a view to solvent winding-up, S made an assignment to B of "any sums of money recoverable from the dispute with J". B subsequently opened a credit account with J in his own name and ordered building supplies. S was later dissolved. J issued proceedings against B claiming the balance of the purchase price for goods sold to him. B served a defence and counterclaim for the defective roofing materials. J denied that B had any cause of action against it. On a preliminary issue it was concluded that the proceeds of S's claim against J, and not the right of action itself had been assigned to B and accordingly B could not rely on the assignment for the purposes of set-off and counterclaim. B contended that the aim of the assignment was that he would have the right to pursue J for the unsatisfied claim made by S and to recover from J the sums due to S. B submitted that the transaction between him and S necessarily involved him acquiring the right to sue J in case S was wound-up before doing so.

 

HELD: When examining the background facts it was obvious that the transaction between S and B had a practical aim in a commercial setting. On the evidence it was reasonably clear that the purpose of the document was to ensure that B was to have the benefit of S's right of action against J. If S was to be wound-up there was no point in S retaining the right of action while transferring to B the proceeds of a successful outcome to the action. The whole of the brief text of the assignment had to be read in context and, on that approach, the language was at the very least capable of applying to the dispute. The assignment was not worded so as to exclude its application to S's right of action by which the sum of money in dispute was recoverable. The judge was wrong in construing the assignment so as to confine it to the fruits of an action by S. By simply looking at the wording of it the judge had failed to have sufficient regard to the evidence before him of the practical purpose for making the assignment and its relevant background. The counterclaim would accordingly be restored and the matter remitted.

Appeal allowed

Counsel for the appellant: Brent McDonald