Snell contains several pages on equitable assignment. From my reading of these and Practical Law, I am 99% certain that this is one such.
It does not matter that there is no notice to the debtor, the company, but if now given it would convert to a legal assignment. Is it too late? Can mother’s PR give it? A moot point I think. No formality is required, not even writing, though an oral assignment must be evidenced somehow. Even a legal assignment only needs writing, not a deed. The intended subject-matter of it is clearly identified here.
Paul rightly draws attention to the ambiguous wording but I think the second sentence in the present tense (" I relinquish all rights to these funds or to making any claims against the company in this regard.") could be construed by a court, equity prioritising substance over form, as being a current rather than future action. This is critical because although a valid equitable assignment does not require consideration an agreement to do so between mother and son, which possibly preceded this letter, does need it and a mere intention to act only in the future is not offer and acceptance nor even a valid gift.
The wording is plainly not a declaration of trust and nor is it a transfer to a trustee so the two Milroy v Lord criteria are not met. There is always the tenuous argument, based on Lady Arden’s speech in Pennington v Waine, that while the mother arguably has not done all in her power (Re Fry as opposed to Re Rose) it would be unconscionable for her to resile. Of course she doubtless never had any such intention.
Once again, DIY and false economy may well have defeated here the intention of a lay person who, had she most implausibly known of s136 LPA 1925, could have easily couched this letter to comply with it by instructing a lawyer. £50,000 plus interest is not a mere bagatelle and probably not so in context. One of my former clients got the hump with me when I unguardedly described a sum ten times greater as “peanuts” (though in his case it was objectively a fair if clumsy comment).
So who cares? Well HMRC. It is analogous to the position they take when it matters on waiver by deed in IHTM19110. It is likely to elicit the sanctimonious view that they have a duty to collect all tax legally due and payable (see Loan Charge crocodile tears passim). They could throw a lifeline by just accepting the wording in context as a valid equitable assignment in law. A case that turns on its facts sets no precedent. But they are stony-hearted, as witness their frequent insistence that the taxpayer must obtain a decision by the Court, an absurd request here if there is no dispute among the son, the company, and the PRs. I would fess up to them that the taxpayer has adopted the analysis in his favour and let them challenge it. If you believe the LSS , which I don’t, then:
"Handling disputes
- HMRC will seek, wherever possible, to handle disputes non-confrontationally and by working collaboratively with the customer. In the majority of cases, this is likely to be the most effective and efficient approach. A collaborative approach by all parties requires them to be open, transparent, and focused on resolving the dispute. Working non-confrontationally can offer benefits in terms of effective and efficient dispute resolution in all civil cases. HMRC will foster a non-confrontational approach with the customer, but will not be deterred from efficient and effective dispute resolution by other means if collaboration is not forthcoming". Yeah, right! See especially paragraphs 16-18 and the Commentary on these at https://assets.publishing.service.gov.uk/media/65a56f8d867cd800135ae8db/HMRC_Resolving_tax_disputes.pdf
Ethically, a lawyer who has not genuinely overlooked the issue cannot be complicit in his client dealing with HMRC by suppressing it and if the client insists he should stop acting. This is a highly invidious position and I sympathise because I have made myself unpopular on many occasions by pointing out unexpectedly some abstruse fly in the ointment. This puts a premium on the salutary practice of MUF (money up front)!
Jack Harper