Equity & Trusts 1 - EQUITABLE ASSIGNMENT PDF

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EQUITY & TRUSTS 1SECTION 2LAW 3710Title: ​WRITTEN ASSIGNMENT (EQUITABLEASSIGNMENT)Lecturer: ​ ASST. PROF. DR NOOR SHUHADAWATI BINTIMOHAMAD AMINNAME MATRIC NO.MOHAMMAD SYAFIQ SAMRY 1720141MUHAMAD HAFIZAN SHAFUAN BKAMARULZAMAN1720693Question 2 In May 2002, under Hire Purchase Agreement, Mesra ...

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EQUITY & TRUSTS 1 SECTION 2 LAW 3710 Title: WRITTEN ASSIGNMENT (EQUITABLE ASSIGNMENT) Lecturer: ASST. PROF. DR NOOR SHUHADAWATI BINTI MOHAMAD AMIN NAME

MATRIC NO.

MOHAMMAD SYAFIQ SAMRY

1720141

MUHAMAD HAFIZAN SHAFUAN B

1720693

KAMARULZAMAN

Question 2 In May 2002, under Hire Purchase Agreement, Mesra Finance Bhd (Mesra) leased to Handal Concept Sdn Bhd (Handal) several exercise equipment for Handal’s Fitness Centre under the said Hire Purchase Agreement. Handal was to pay Mesra the amount due in monthly instalment of RM 3000 until December 2003. In 2003, Mesra assigned all benefits, rights, title and interest to Acer Corporation Bhd (Acer). This was done by way of a letter dated on 8 January 2003 from Mesra to Handal stating that all payments due under Hire Purchase Agreement beginning February 2003 forthwith was to be paid into the account of Acer. Handal never made any payment to Acer. Acer now brings an action to repossess the exercise equipment, claiming the amount due and owing under the Hire Purchase Agreement. Handal avers that Acer has no Locus Standi to bring such action. Acer contends that it is a valid assignee under a legal assignment of all Mesra benefits, rights, title and interest in the Hire Purchase Agreement to Acer in January 2003. With reference to decided cases, discuss the validity of Acer’s contention.

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Based on the above question we can derive several issues pertaining to the assignment, the first issue is whether there is a valid legal assignment made by Mesra to Acer corporation Bhd. In order to decide the validity of assignment, it is a must to discuss the definition of assignment itself. Assignment refers to an act of transferring of ownership of rights from the assignor to the assignee, or in a simpler word a creditor gives rights for the assignee to collect debt from the debtor, but subject to certain conditions based on type of assignment. There are two types of assignment, the first one is legal assignment and equitable assignment, but in the first issue we will discuss the validity of legal assignment as Acer, argue that the assignment made by mesra is considered legal Assignment.

In order to decide the validity of legal assignment, it can be refer in section 4 (3) Civil law Act, as it stated, any absolute assignment, by writing, under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, shall be, and be deemed to have been, effectual in law, subject to all equities which would have been entitled to priority over the right of the assignee under the law as it existed in the State before the date of the coming into force of this Act, to pass and transfer the legal right to the debt or chose in action, from the date of the notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor. 1

The provision in civil law act thereof, indicates the requirements that need to be fulfilled in order to constitute a valid legal assignment, it can be divided into four. The first one is assignment is in respect of a debt or other legal chose in action. Next, assignment must be in writing and signed by the assignor, it must be absolute and not by way or charge only and lastly there must be notice in writing to the debtor. Based on the fact of the case, another sub issue arose which is whether there was a written proof of assignment between assignor and assignee, if we look closer to the facts there is no written deed of assignment made by mesra to acer to transfer the right as required in section 4 (3) of Civil Law Act. Thus, it does not fulfill all the requirements and the assignment cannot be considered as a valid legal assignment. 1

Civil Law Act 1956

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The case that we can refer for the issue and sub issue is in the case of Wong Kim Wah (Trading as Syarikat Binaraya) v Government of the state of Pahang,2 In this case the assignor made an assignment to the plaintiff, to collect debt from the defendant, there was a deed of assignment, between the assignor and plaintiff and also notice to the defendant, but the defendants refuse to pay the debt. The plaintiff brings this matter to the court but the defendants argue that the plaintiff does not have the locus standi , but the plaintiff counter argues that they have the locus standi since the assignment is considered legal assignment as it fulfilled all the requirements in section 4(3) Civil Law Act . Defendant further contended that the assignment does not fulfill the requirements as it is not absolute due to one of the provisions in deeds of assignment that the amount is provisional. The court held in favor of the defendants, as the defendants cannot determine the actual amount of debts, due to the provision, thus it is not absolute and does not fulfill requirements of legal assignment.

Another case that can be refer, is in the case of UMW industries Sdn Bhd v Ah Fook . 3

the case was brought at the high court level, where the high court held that the assignment

between the plaintiff and assignor was equitable assignment as it does not giving the notice to debtor within reasonable time thus does not comply with the requirements.Then the plaintiff made an appeal and the federal court held that the judge in High Court erred in law as the provision in Civil Law Act does not mention any time limit pertaining to the notice, but it must be in reasonable time and in this case the notice was within reasonable time, therefore the assignment is considered as legal assignment due to fulfilling the requirements.

Applying both cases in current case, it is a mandatory for all the requirements in Section 4(3) in Civil Law Act to be fulfilled in order to constitute a valid legal assignment, unfortunately in this case the requirement of, assignment must be in form of writing under the hand of assignor is absence as there is no evidence stated in the fact to show that there is any form of writing. Thus it can be concluded that there is no valid legal assignment, then it needs to be proven under equitable assignment.

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[2004] 7 MLJ 335 [1996] 1 MLJ 365

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The second issue arose here is whether there is a valid equitable assignment. There are three requirements in order to constitute a valid equitable assignment. First, Intention to assign. Second, some form of assignment. Third, property assigned is identifiable.

For the first requirements, intention to assign. The sub-issue is whether there is an intention to make an assignment between Mesra and Handal?

By referring to the case of Malaysian International Merchant Bankers Bhd v Malaysian Airlines System Bhd 4. The judge held that in order to constitute an intention, No particular form of words is required. Only necessary to make the meaning plain. Which in this case, there is a clear intention when the assignor agreed to give its right and benefit under the contract between assignor and debtor. In return, the assignor will get the loan in exchange for the assignment. In other words, the clear intention is formed when both party, understand the terms and condition of the assignment. And the assignor intends and understands that by assigning to the assignee, it will lose all the benefit. Assignee on the other hand, they need to give something in exchange. Therefore, the intention is clear.

To apply in the present situation. By following the referred case, there was an intention and understanding on Mesra to assign all benefits, right, title and interest under Hire-Purchase Agreement (with Handal) to Acer. Therefore, there is an intention to make assignment between Mesra and Handal

For the second requirements, some form of assignment. The sub-issue is whether there are some forms of assignment between Mesra and Handal.

In the case of Malayawata Steel Bhd v Government of Malaysia & Anor 5. the court must be able to identify from the communications or correspondence between the parties that their intention was the assignee will take over the assignor to exercise the right in relation to a debt or chose in action”. Another case is, Wong Kim Wah v The Government of The State of

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[1982] 2 MLJ 59 [1977] 2 MLJ 215

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Pahang & Anor 6. The court said,“An equitable assignment (of debt) does not always take the form of regular assignment. It may be express in the language of command. It may be a courteous request. It is able to assume the form of mere permission.” Then, in the case Sri Sekamat v Kerajaan Malaysia & Anor. 7 The issue is whether the letter dated 3 April 2008 was an absolute assignment. Initially, there was an agreement between D1 and D2 to perform some construction projects with D2 appointed Plaintiff as contractor. Later the contract was terminated by D1. Plaintiff asked for payment from D1. And, D1 contended that the plaintiff needed to ask from D2, as all the payment had already been made to D2. However D2 contended that there was an assignment being made based on a letter dated 3 April 2008. D1 contended the reference to a ceiling amount rendered the assignment not absolute. Ceiling amount was not provisional but only certified amount. As a result, the court held letter dated 3 April 2008 is a valid instrument for this assignment and D1 is liable to pay the plaintiff the amount due under previous agreement between D1 & D2.

To apply in the present situation, equitable assignment can take place in any form, whether it is in command, request, or permission or in writing. There was a form of absolute assignment taking place when Mesra assigned to Acer all benefits, rights, title and interest under Hire-Purchase Agreement.

For the third requirement, the property or chose in action assigned is identifiable. some form of assignment. The sub issue is whether the property or chose in action assigned is identifiable.

Referring to the case of Hong Leong Bank Bhd (which has taken over all assets and liabilities of Hong Leong Finance Bhd) v Sum-Projects (Bros) Sdn Bhd 8. The judge said that “a chose in action is defined as 'a thing of which a person who has not the present enjoyment, but merely a right to recover it (if withheld) by action”. In that case, Clause 9 of the deed of assignment required the consent from the defendant for any transfer of title or

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[2011] 8 MLJ 856 [2016] 8 MLJ 840 [2010] 7 MLJ 39

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interest. In this case, Defendant challenged the Plaintiff action to bring this case. As the plaintiff already sold the property to the bidder through an auction. The court held, consent of the defendant is not required. This actually raised the question of why the plaintiff took action on behalf of the bidder even though it already released its burden of the property to the bidder. Plaintiff had a right to take action as an assignee under the deed of assignment and followed by the right to seek enforcement. Plaintiff as a seller had the right to ease the sale of the property to the bidder, that is to get the consent from the Defendant by virtue of clause 9 under the deed of assignment.

To apply in the present situation, the assignment had been entered between Mesra and Acer in January 2003. The subject of this assignment is identifiable under Hire-purchase Agreement between Mesra & Handal had been assigned to Acer. Acer later could obtain the property in case of default in payment by Handal, may sue and be sued by virtue of the assignment.

To conclude on the whole requirements of valid equitable assignment. Firstly, there was Intention to assign when Mesra to assign all benefits to Acer. Secondly, there is some form of assignment. There was a form of absolute assignment taking place when Mesra assigned to Acer all its benefit and right under the Hire-Purchase Agreement. Thirdly, Property or chose in action assigned is identifiable. The subject of this assignment is identifiable which means Acer later could obtain the property in case of default, may sue and be sued by virtue of the assignment.

The third legal issue arose here is whether Acer had the locus standi to bring an action against Handal. The general rule is that, under an equitable assignment, the assignee cannot sue in his own name and have to compel the assignor to join the claim.

By referring to the case of Malaysian International Merchant Bankers Bhd v Malaysian Airlines System Bhd9. The judge in this case said that, when the assignment is absolute, on the fact of the case the assignor has no more interest in the debt. The failure to join the assignor as a party is not fatal to the plaintiff’s claim. Also in the case of Sakinas 9

[1982] 2 MLJ 59

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Sdn Bhd v Siew Yik Hau & Anor 10. The judge held that when the deed of assignment was intended as security for loan or by way of charge only (unabsolute assignment) which means that the assignment did not fall within s 4 (3) of the CLA. Thus, assignee was not free to sue for the debt as he had to make the assignor the party.

To apply in the present situation, In the fact of the case, there is nothing mentioned of any instrument in exchange for the assignment. Therefore, it is an absolute assignment. So, Mesra as assignor already released all its rights and benefits to Acer and has no more interest in the contract entered between Mesra and Handal. Therefore, Acer could sue under its own name without Mesra as a joint party in the claim.

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[2002] 5 MLJ 497

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