Notice of Assignment – It is usual for an assignee bank to require a notice of assignment to be served on the debtor to perfect the assignment. An acknowledgment of the notice of assignment is usually also required as evidence of the service of the notice of assignment. Contractual rights may be varied depending on the terms of the notice of assignment and acknowledgment as illustrated in the recent case involving Natixis (NY), BNP Paribas and Hontop (Energy) Singapore Pte Ltd.
The Case – Hontop assigned to BNP a SBLC from Natixis. Hontop served a notice of assignment on Natixis which included an instruction to pay BNP without any set-off. Natixis acknowledged the notice of assignment. Natixis subsequently tried to set-off its payment obligations under the SBLC against loan outstanding from Hontop. The US Court disallowed the set-off as Natixis had waived its rights to set-off by its acknowledgment of the notice of
assignment which directed payment without set-off.
Learning Points – This case is a timely reminder to banks of their rights and obligations in relation to a notice of assignment and acknowledgement. The acknowledgement may serve more than an evidentiary purpose depending on the terms of the notice of assignment and acknowledgment. In addition to the waiver of set-off rights as in the present case, it is also common for the assignee to request the debtor via the notice of assignment and acknowledgement to (a) consent to the assignment to avoid any issues relating to a prohibition against assignment and (b) confirm that the debtor has not received any notice of other third party interest to avoid any competing claims.
For further information, please contact:
Liew Kai Zee, Partner, Shooklin & Bok
kaizee.liew@shooklin.com
