Make sure you read the restriction print
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Market Insight 25 March 2025 25 March 2025
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UK & Europe
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Expertise
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Projects & Construction
A recent judgment of the TCC has interpreted a fairly typical restriction on assignment clause, together with an exclusion of third party rights provision, in a professional consultant’s appointment, to prevent a director of an insolvent company from making a claim against the consultant following a purported assignment of the benefit of the appointment. The decision will be of interest to construction professionals who regularly see these types of clause.
In the case, Mr Benjamin Goldkorn v MPA (Construction Consultants) Ltd and Kazu Restaurants 1 Ltd (in liquidation) [2025] EWHC 385 (TCC), Kazu Restaurants 1 Ltd (Kazu 1) had employed MPA (Construction Consultants) Ltd (MPA) to carry out various services in connection with a restaurant fit-out. The project was terminated part way through, and Kazu 1 subsequently entered liquidation.
Kazu 1 maintained that it had a potential claim against MPA in relation to the services, and purported to assign its benefit in the appointment by a deed of assignment to Mr Benjamin Goldkorn (a former director of Kazu 1) in 2020. Mr Goldkorn gave notice of the assignment to MPA in 2022, shortly after Kazu 1 entered into a declaration of trust, holding its right to claim against MPA on trust for the benefit of Mr Goldkorn, and declining to bring the claim in its own name and allowing Mr Goldkorn to bring the claim in his name.
Mr Goldkorn sought to bring the claim against MPA and the issue of whether he was permitted to do so, either as an assignee, or as the beneficiary of the trust applying something known as the Vandepitte procedure, fell to be decided as a preliminary issue by the TCC.
Was the right to bring the claim validly assigned to Mr Goldkorn?
The restriction on assignment in the MPA appointment (clause 16.2) was a fairly typical one seeking to restrict assignments to two occasions only without further consent (or otherwise to funders):
“The benefit of this Appointment may be assigned by the Client by way of an absolute legal assignment to any person providing finance or refinance to the Client in connection with the Project or to any person (A1) acquiring the Client’s interest in the Project and by (A1) to another person (A2) acquiring A1’s interest in the Project. No further or other assignment is permitted and, in particular, A2 is not entitled to assign this Appointment”
The Client was defined as the:
“person or organisation to whom the Proposal has been addressed and/or by whom the Proposal has been accepted” (and it was accepted that was a reference to Kazu 1)
and the Project was defined as:
“the construction works at the site as identified in the Proposal”
And clause 18.2 of the appointment provided that:
“Nothing in this Appointment confers or purports to confer any right to enforce any of its terms on any person who is not a party to it. Only the Client (and the Client’s permitted assignees) and the Consultant can take action to enforce the terms of this Appointment”
Mr Goldkorn put forward a number of arguments that the 2020 deed of assignment to him was not prohibited by the terms of the appointment, all of which were rejected by the court, for the reasons summarised in the table below:
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Argument |
Rejection |
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Mr Goldkorn was a “person acquiring [Kazu 1’s] interest in the Project” (and therefore was not excluded by clause 16.2) on the basis that once the Project was abandoned, Kazu 1’s only remaining interest in the Project was the right to claim damages. |
The definition of the Project was the construction works at the restaurant premises, and the reality was that Mr Goldkorn had not acquired any interest in those works, and the lease of the restaurant had been disclaimed by Kazu 1 and any such interest would have reverted to the landlord. |
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The restriction on assigning the “benefit of the appointment” only referred to the right to the performance of the services, and did not refer to the “fruits of the performance”, in this case being the right to bring a claim against MPA (which was therefore not excluded by clause 16.2). Mr Goldkorn relied on a case which acknowledged that in theory those rights could be split and assigned or retained accordingly. |
The case referred to (Linden Gardens Trusts Ltd v Lenesta Sludge Disposal Ltd [1994] 1 AC 85) made clear that in order to split the rights in that way, there would need to be “careful and intricate drafting” and a “clearly expressed intention”. In this case the TCC found that the language of the MPA appointment “came nowhere near the careful and intricate drafting referred to…”. It went on to say that the reference in the clause to the “benefit of the appointment” was simply intended to distinguish it from the burden. |
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Kazu 1 had a separate claim in the tort of negligence against MPA, which falls outside the scope of clause 16.2. |
The tortious duties were identical to the contractual duties and thus form part of the “benefit of the appointment”, and the prohibition encompasses all claims advanced in the proceedings. |
Did the declaration of trust entitle Mr Goldkorn to bring the claim in his own name?
Mr Goldkorn relied on the declaration of trust in his favour and on a mechanism known as the Vandepitte procedure, which says that when a party constitutes itself as a trustee of a right for a beneficiary, it can take steps to sue for performance of that right for the benefit of the beneficiary, and that if the trustee refuses to sue, the beneficiary can do so itself, joining the trustee as a defendant in the claim.
In this case Mr Goldkorn relied on the express declaration in the declaration of trust that Kazu 1 had “declined to bring the MPA Claim” to entitle him to bring the claim himself using the Vandepitte procedure.
The court drew a line under this argument though by looking again to the terms of the contract, which (i) prevented the assignment of claims for damages in the current circumstances and (ii) prevented anyone other than Kazu 1, or its permitted assignees from bringing a claim. As Mr Goldkorn was not a permitted assignee of Kazu 1, he could not bring the claim enforcing the terms of the appointment.
Conclusion
The judgment should be of interest to anyone who is including or negotiating restriction on assignment clauses in their contracts, and similarly anyone who might intend to assign their rights in a contract – and indeed those who might be their intended assignees, who might find themselves prevented from bringing a claim in similar circumstances. The key bit of language in this case, that an assignee of the benefit of the appointment must have acquired the Client’s interest in the Project, is not uncommon in construction appointments, and parties (including lenders and purchasers) should be aware of its effects on the ability to deal with the appointment. Whilst in theory it may be possible to distinguish between the rights to performance of the services and the rights to the “fruits of the performance” in the context of how each could be assigned, very precise drafting would be needed to achieve this and there would need to be a good commercial rationale to do so.
End
