Key point

An assignee of future debts was bound by discounting and rebate arrangements concluded between the assignor and its customers despite having given notice of the assignment.

The facts

M supplied goods to customers. It factored its debts to Bibby in 2000. The Factoring Agreement provided that all future debts due to M by customers were to vest upon their creation in Bibby.

Bibby did the following to try and protect its position – ultimately the steps proved unsuccessful:

  • Sent take off letters to all of M’s customers which stated amongst other things:
    • All debts of M were assigned to Bibby who was the only party who could give good receipt;
    • Stated any right of set off from that date was not permitted; and
    • Asked all for queries on sums due to M be directed to Bibby.
  • Bibby sent invoices to customers and each invoice had a sticker on it with a shorter version of the take-off letter wording; and
  • Bibby asked customers to verify their account statement with M each year.

M went into administration in 2013 and Bibby sued the customers for the outstanding sums due.

The customers claimed they could deduct from the amount claimed by Bibby the following:

  • The amount of any debit note M had issued even though Bibby knew nothing of the debit note;
  • An annual rebate of 10% due from M to the customer – again even though Bibby knew nothing about it; and
  • A 2.5% discount for on time payment.

The decision

The Court of Appeal affirmed the first instance decision that the customers had the right to deduct from any sums due to M (and thus to Bibby as its assignee) the amount of any debit note and the 10% rebate. It left open the last issue of the 2.5% discount on the basis the first instance judge had on the facts decided this should go to trial and that portion of the decision was not appealed.


Bibby had argued that as it had been dealing with M’s customers for 13 years and none of them had mentioned the above deductions – indeed they had verified balances on statements each year – that it was neither equitable to allow set off of those claims or in the alternative that the customers should be estopped from raising those claims. The Court of Appeal held there was no obligation on the customers at all to inform Bibby of the possibility of the deductions arising. Verification on an annual basis was administrative and did not constitute a clear and unambiguous representation to Bibby that there were no claims capable of set off. The Court considered Bibby’s argument that the take-off letter, stickers on invoices and statement verification amounted to notices which prevented equitable set off claims being asserted by customers in relation to the relevant debts and held that they did not. The Court considered that Bibby could be in no better position on these issues than its assignor M.

Bibby Factors Northwest Limited v HFD Limited