Question

Janice borrows $4,000 from Best Buy Auto Sales to buy a car. When Janice does not pay the loan or return the car, Best Buy wants to transfers the right to the payment to Speedy Collection Agency. Speedy agrees to pay Best Buy for this right, but for a price that is less than the amount owed. Can Best Buy transfer this right to Speedy without Janice’s consent? If so, and Best Buy committed fraud in the deal with Janice, could Janice legitimately refuse to pay Speedy? Explain.

Answer 1

This is a case of assignment of debt.

It is decided in the case of Mascarene Pty Ltd Vs Slater [2016] VSC 395 that a creditor can assign the right to receive the payment to a third party without the consent of Debtor. The creditor is hence called assignor and the third party is called assignee. The assignee has the same rights as that of assignor i.e., the original creditor.

In this case Best buy can transfer its right to receive from Janice to Speedy collection Agency. It is recommended that Janice can be informed about about the assignment but its not mandatory.

So the answer for the first question is Best Buy can transfer this right to Speedy collection agency without Janice's consent.

If Best Buy transferred the right to Speedy Collection Agency and it is subsequently known that Best Buy committed a fraud in deal with Janice it is established that Janice can legitimately refuse to pay Speedy as he is not bound to pay in case of fraud either to creditor and assignor. Assignor has same rights as that of creditor. So Speedy collection agency cannot demand in a case where Best Buy commits fraud.

So the answer to second question is Janice could legitimately refuse to pay Speedy Collection Agency if Best Buy commits a fraud.