Perils of Power: Be aware of the risks for individuals executing documents by way of Power of Attorney

Frischmann v Vaxeal Holdings SA [2023] 2698 

In this High Court decision the Court was asked to consider the validity of the assignment of two loan agreements and a guarantee. In doing so the Court considered the legal requirements of a legal assignment as set out in s136 Law of Property Act 1925 (LPA). Master McQuail handed down her judgment on 3rd November 2023 and held that signature by an attorney on behalf of the assignor was not sufficient to be a valid legal assignment under the provisions of the LPA. The assignment had to be signed by the assignor himself. 

Summary of the facts 

Mr Frischmann’s father, Dr Frischmann, had loaned monies to a company IDM Ventures Limited to support a salvage project to recover precious metal cargoes from two shipwrecks. In June 2020 all of Dr Frischmann’s rights, title, interest and benefits in and to the loans and the guarantee were purportedly assigned in writing to his son, the Claimant, Mr Frischmann. The assignment was executed by Mr Frischmann “for and on behalf of Dr Frischmann by way of a lasting power of Attorney”. Mr Frischmann also executed the assignment on his own behalf as assignee.  

Decision 

Master McQuail held that an effective assignment under s136 LPA requires that it be in writing “under the hand of the assignor” and that the purported assignment in this case did not satisfy that requirement given that it was not under Dr Frischmann’s own hand. The judge rejected an argument that section 7(1) of the Powers of Attorney Act 1971 deemed the legal assignment as valid as if it had been executed by Dr Frischmann. She said that to hold that the LPA permitted signature by an agent would be “to rewrite its terms”.  The Court did however hold that the assignment did take effect as an equitable assignment. 

Ramifications 

The decision can be distinguished in the case of a body corporate assignor which can rely on s47 of the Companies Act 2006 which clearly permits a body corporate to empower a person as its attorney to execute deeds and documents on its behalf. The case does however have ramifications for the assignment of intellectual property. Whilst the Copyright Designs and Patents Act 1988 (CDPA) and the Trade Marks Act 1994 (TMA) both provide for assignment of rights by way of a power of attorney the same cannot be said for the often related assignment of certain ancillary rights such as the right to bring an action in relation to past infringements. Such an assignment as a “chose in action” would fall under s136 of the LPA and as such would be affected by this decision. 

Whilst the decision has caused some controversy it is worth noting that the predecessor legislation to the LPA, the Conveyancing and Law of Property Act 1881 (CLPA) (which still applies in Northern Ireland where the LPA is not applicable) specifically deals with execution by a lawfully appointed attorney. This is contained in s46 of the CLPA and reads: 

“The donee of a power of attorney may, if he thinks fit, execute or do any assurance, instrument, or thing in and with his own name and signature and his own seal, where sealing is required, by the authority of the donor of the power; and every assurance, instrument, and thing so executed and done shall be as effectual in law, to all intents, as if it had been executed or done by the donee of the power in the name and with the signature and seal of the donor thereof.” 

It is therefore not unreasonable to assume that the authors of the LPA had reason not to include such a clause in the LPA. 

Conclusion 

Until such time as there is further judicial clarification on the point it would be prudent to ensure that any legal assignment by an individual be executed personally by the assignor and not by way of a power of attorney.