Assigning a claim or interest
Legal proceedings, whether they be a litigation claim in Court or any other type of dispute or negotiation, can be both expensive and extremely distracting for an individual or company. Whilst such matters are the business of solicitors, who are employed to deal with these types of issue, the client will almost inevitably have to spend substantial time assisting with the provision of factual information and the solicitor’s instructions.
One option available to a client is to try and dispose of any claim or interest wholly and either sell it in its entirety, with the benefit of having no further involvement in otherwise arduous proceedings or paperwork, or partially with the resultant benefit of not having to instruct solicitors, deal with complicated disputes or time-consuming litigation proceedings.
By assigning rights to an interest, claim or any other legal rights you may liquidate such rights and convert them to a monetary sum or, alternatively, allow someone else to take over the rights and recover on your behalf, with the cost that you may have to share with them the proceeds arising from any such matter.
What type of matter can be assigned?
Almost any legal right can be assigned, subject to certain legal exceptions and/or restrictions. This can include property rights, shareholdings, contractual rights and rights to issue and prosecute legal claims and litigation proceedings.
The circumstances are dependent on your individual situation and where such rights require your heavy involvement, in terms of evidence or for any other reason, then assignment of any such claim may not always free you of the “distraction” of such proceedings.
Equally, in almost all circumstances where a right or claim is assigned then the assignee will require your ongoing involvement as and when required.
However, the advantage of assignment may be that you do not need to take on the cost of solicitors and you do not need to take on the risk (for litigation proceedings) that a legal costs order may be granted against you by the Court.
What are the risks of assigning such legal rights or a claim?
An assignment of property or asset rights is usually easier than the assignment of a claim or rights of action. Where the asset is identifiable and is only assigned by reason of the lack of an immediate cash or alternatively to relieve the assignor from an obligation (for example with a lease) then it should be a relatively straightforward legal transfer of such rights.
Where a claim is assigned, removal from the matter may not be so easy if you (or any employee) is required to assist with background matters, factual references, documentation or witness evidence.
In addition, there remains the risk that the proceedings may not be run in the matter you would have preferred, there is an incorrect interpretation of the claim or a settlement is reached below that which you would have negotiated. Whilst this is of no concern when the claim is assigned in whole, if you retain an interest in the outcome then the assignment of the claim will not remove the need to keep “half an eye” on what is going on.
Simply put, the risk of assigning a legal interest or claim (in whole or in part – see our comments below) is that you lose control and the ability to make decisions on important aspects.
How is an assignment structured?
An assignment is structured usually on the basis of a legal contract assigning all or limited rights to the interest or claim. The document will usually provide, as the contract price, a payment or some other consideration and this is quite a common solution for claims that may lie with appointed Liquidators, Administrators or Trustees In Bankruptcy. More information about the assignments of claims and other types of legal funding arrangement available to Insolvency Practitioners can be found here.
For litigation claims, a claim can be assigned for a value in whole (but subject to the risk that you may need to stay involved to a limited extent as described above) or partially.
Quite often a litigation funder may acquire a claim in its entirety or in part by paying a premium and agreeing to share the proceeds with you in a similar way to a Damages Based Agreement, by taking a percentage share of the claim.
Where the Third party funder has taken control of such a claim (and the associated litigation proceedings) they will usually be named as the party, which protects you against any risk of a legal costs order against you as original beneficiary.
However, the percentage share taken of any claimed assigned in part will almost certainly be higher than would occur in any Third Party Funding arrangement to fund legal costs associated to a claim or by use of a Damages Based Agreement.
At Francis Wilks & Jones we are extremely familiar with working with assigned claims and litigation funders, particularly in an insolvency context, and we are always willing to discuss such options on an initial no obligation basis.
Please call any member of our commercial litigation team for your consultation now on 020 7841 0390. Alternatively e mail us with your enquiry and we will call you back at a time convenient to you.