Latest on assignability of tortious professional negligence claims

A man tried to sue for professional negligence in his capacity as an assignee of the alleged victim of that negligence.  The case was determined on a limitations point, but in Kovarfi v BMT & Associates Pty Ltd [2012] NSWSC 1101 Justice McCallum of the Supreme Court of NSW gathered together the authorities in relation to the uncertain question of the assignability in Australia of causes of action in tort:

‘Was Kata-Lyn’s right of action in tort capable of assignment?

  1. The third ground relied upon by the defendants is that the two assignments (in so far as they purported to assign the cause of action in tort now pleaded against BMT) were ineffective because a bare cause of action in tort is not a chose in action and is not capable of being assigned at law.
  1. The defendants acknowledged that there is some divergence of opinion as to the application of that principle but submitted that the weight of authority in Australia supports their contention. The principle is often referred to (in Australia) as the rule in Poulton, having been stated in obiter dicta in the decisions of the High Court in Poulton v The Commonwealth [1953] HCA 101; (1953) 89 CLR 540 at 571.3 per Fullagar J at trial and, on appeal to the Full Court, at 602.9 per Williams, Webb and Kitto JJ, where it was described as “well-established principle” that a right of action in tort was incapable of assignment either at law or in equity.
  1. Poulton was concerned with the assignment of a cause of action in tort. The House of Lords subsequently held, in a case concerning the assignment of a cause of action in contract, that a bare right of action could be assigned where the assignee had a genuine commercial interest in the enforcement of the claim: Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 703D per Lord Roskill; see also at 694E per Lord Wilberforce. In so holding, Lord Roskill described the rule that “you cannot assign a ‘bare right to litigate'” as still a fundamental principle of law.
  1. Trendtex is sometimes referred to as the origin of an exception to that fundamental principle which came after (and thus potentially qualified) the statement of the rule in Poulton. However, instances of an exception where the assignee has “an interest in the suit” had been recognised at least as early as the decision of the English Court of Appeal in Ellis v Torrington [1920] 1 KB 399. In that case, also a case in contract, an assignment of the benefit of a covenant in a lease held to be sufficiently connected with enjoyment of the property so as not to be a bare right of action.
  1. What is unclear to me is whether the existence of a genuine commercial interest in the enforcement of the assigned claim is properly considered as the basis for an exception to the rule in Poulton (regardless of the cause of action allegedly assigned) or, conversely, whether the unassignability of a bare right of action in tort remains beyond the reach of the exception recognised in Trendtex.
  1. The existence of any sensible basis for drawing a distinction in that context between the position in tort and the position in contract has been doubted in this State: Rickard Constructions v Rickard Hails Moretti [2004] NSWSC 1041 at [42]-[61]; (2004) 220 ALR 267 at 280-285 per McDougall J. That decision sets out, comprehensively and with welcome clarity, the relevant principles and competing authorities. McDougall J concluded (at [53]) that, were it necessary to reach a concluded view, it would be that he was at liberty to depart, and should depart, from the dicta of the High Court in Poulton. It was not necessary to reach a concluded view because his Honour was not satisfied as to the existence of a sufficient interest (at [62]-[71]).
  1. Interestingly, some support for his Honour’s analysis may be found in the joint judgment of Gummow and Bell JJ in Equuscorp at [79] and the dissenting judgment of Heydon J at [157]. Gummow and Bell JJ at [79] cited the decisions in Ellis v Torrington, Trendtex and Rickard Constructions as instances of “an exception” to the rule in Poulton. Heydon J at [157] similarly noted that Trendtex may elsewhere have been understood as an exception to the principle stated in the dicta in Poulton. However, Equuscorp was not specifically concerned with the question that arises in the present case and does not resolve it. The joint judgment of French CJ, Crennan and Kiefel JJ did not analyse the relevant principles in terms that shed any light on the present question: see [48]-[51].
  1. Mr Williams, who appeared for the defendants, submitted that the weight of Australian authority supports the proposition that the rule in Poulton remains valid with respect to bare causes of action in tort. One of the decisions cited in support of that submission was Rickard Constructions at [53] but I think that overlooks the conclusion reached by McDougall J on that issue.
  1. Separately, however, Mr Williams relied upon the following decisions: Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 2) [1994] FCA 1463 (unreported, 7 November 1994) at [7]-[8] per Beaumont J; National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (No 1) [1995] FCA 1628 at [131] per Lindgren J and Salfinger v Niugini Mining (Australia) Pty Ltd (No 3) [2007] FCA 1532 at [119] per Heerey J. Those decisions reinforce the obligation of single judges not to depart from the considered dicta of the High Court. McDougall J felt at liberty to do so in Rickard Constructions, but his Honour’s enjoyment of such freedom was unclouded by the later remarks of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [130] and following, especially at [134].
  1. Had the issue arisen for decision by me, I would have felt constrained to conclude that Kata-Lyn’s cause of action in tort against BMT was not capable of being assigned and, accordingly, that Mrs Kovarfi cannot maintain the cause of action.’

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