In proceedings conducted by our law firm, the Princely Supreme Court ruled on the issue of a prohibition on the assignment of claims for compensation against trustees.
In the underlying case, a founder appointed a trustee to set up, adapt and manage a foundation and instructed him to carry out various legal acts. The trustee failed to implement the instructions or implemented them incorrectly, which resulted in considerable losses for the founder. As the founder no longer had the necessary financial means to enforce his claims, he assigned all of his claims for compensation to a litigation financier, who subsequently asserted the claims in his own name and for his own account. The assignment was made without the consent or knowledge of the trustee.
The trustee argued, among other things, that an assignment of the client’s claims to the litigation funder was fundamentally inadmissible.
The Princely Court of Justice ruled, with reference to a decision from 1991, that there was a prohibition on assignment, as rights and obligations under trust law principles could not be transferred to third parties without the consent of the other party to the contract due to the special mutual trust between the contracting parties and the associated protection requirements. The transfer was inadmissible due to the highly personal legal relationship between the client and the trustee.
However, the Princely High Court and also the Princely Supreme Court disagreed with the legal opinion of the Princely Court of Justice and clarified that the legal relationship between a founder and the trustee does not constitute a fiduciary relationship within the meaning of Art. 879 f PGR, but is to be qualified as a contractual relationship pursuant to §§ 1002 ABGB. Accordingly, there is no prohibition of assignment that could make the transfer of the customer’s claims for damages against a trustee inadmissible. Notwithstanding the clear decision, however, the Supreme Court has shown that in the case of genuine fiduciary relationships pursuant to Art. 879 f PGR, assignment prohibitions could actually exist, which could stand in the way of an assignment of claims against the fiduciary to a litigation funder.
Accordingly, caution is required when assigning claims to a litigation funder for monetization.
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