TOPIC 3:

EQUITABLE ASSIGNMENT
 INTRODUCTION

• Equitable assignment refers to a situation where a party must assign his

personal rights to another party.
• Assignor = the party who assigns his/her right
• Assignee = the party who receives the right
• The essence of an assignment is the transfer of ownership of rights and interest
from the assignor to assignee.
 WHAT IS AN ASSIGNMENT

• In a typical deed of assignment, the debtor owes some amount of

money to the assignor. The assignor then assigns the debt to the
assignee.
• The effect of this assignment is that instead of the debtor having to pay
the debt to the assignor, he now has to pay to the assignee.
 TYPES OF ASSIGNMENT
Legal Assignment Equitable Assignment

•recognized by statute •where an

•also called statutory arrangement falls
assignment because short of the statutory
the requirements are requirement, the
provided by statute court may uphold the
assignment to be an
equitable assignment
 1. Debtor owes money to
assignor

DEBTOR ASSIGNOR

3. Debtor must pay 2. Assignor assign the

to assignee debts to assignee
ASSIGNEE
 REQUIREMENTS FOR A LEGAL
ASSIGNMENT
• S.4(3) of the Civil Law Act 1956 provides for legal assignment.
• A deed of assignment is commonly used to create a legal assignment.
• The subject matter of assignment is either a debt or a legal chose in action.
• When an assignor assigns his debt / legal chose in action to the assignee, his
rights are transferred to the assignee.
• Effect – the assignee is put in the shoes of the assignor in regard to the said
debt or legal chose in action.
• Legal chose in action = a personal right of property which can only be
claimed or enfoced by legal action and not by taking physical possession.
• E.g. – payment of debt, right to payment under a bill of exchange, right to
benefit from shares in a company.
 REQUIREMENTS FOR A LEGAL
ASSIGNMENT
• S.4(3) Civil Law Act 1956
“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.”
 REQUIREMENTS FOR A LEGAL
ASSIGNMENT
1. The assignment is in
•Only a debt or legal chose can be legally assigned
respect of a debt or legal •Legal chose in action = right that is recoverable only by an action at law
chose in action

2. The assignment must be in •The agreement of the parties to assign the debt /legal chose in action must be
writing under the hand of evidenced in writing
•An oral agreement cannot be upheld as a valid legal assignment
the assignor

3. It must be an absolute
•Absolute = assignment of the whole debt and not part only
assignment and not by way •Not a conditional assignment, not an assignment by way of charge.
of charge only

4. Notice in writing must •Express notice in writing concerning the assignment must be given to the debtor – so he
knows to whom he must now pay the debt
have been given to the •Consent of the debtor is not required
person liable to the assignor •Notice must not be defective, it must be dated & the amount stated must be correct
 REQUIREMENTS FOR A LEGAL
ASSIGNMENT
• UMW Industries Sdn. Bhd. v Ah Fook [1996]
• This case concerned the assignment of benefits and rights under a hire
purchase agreement.
• The case highlights the importance of the third requirement for a legal
assignment – notice in writing to be given to the person liable to the assignor.
• Rights arising under a valid agreement are considered a legal chose and not
an equitable chose and thus be subject to a legal assignment.
 REQUIREMENTS FOR A LEGAL
ASSIGNMENT
• MBF Factors Sdn. Bhd. v Tay Hing Ju [2002]
• The effect of a legal assignment is to confer the same rights to the assignee
as possessed by the assignor before the assignment.
• The law allows the assignee to sue to enforce the said rights arising under the
contract, notwithstanding the fact that the assignee was not a party to the
original contract.
• The assignee can sue in his own name and would have locus standi to
enforce these rights in a court of law, without having to compel the assignor
to be named in the action as a party.
 REQUIREMENTS FOR AN EQUITABLE
ASSIGNMENT
• An assignment that does not comply with the four requirements of a legal
assignment may operate as an equitable assignment.

• The assignor must display a clear intention to assign and this may be
1. There must be an by word of mouth.
intention to assign • The words must clearly show and intention that the assignee is to
have the benefit of the chose in action.

• There must be an adequate mode of assignment.

2. There must be some • The court must be able to identify from the communication or
form of assignment correspondence between the parties that the assignee is to stand in
the shoes of the assignor in relation to the debt or chose in action

3. The property • The assignment should sufficiently identify the property or chose that
assigned must be is assigned.
• Failure to do so will defeat the assignment
identifiable
 HOW THE COURTS IN MALAYSIA
UPHOLD AN EQUITABLE ASSIGNMENT
• Malayawata Steel Bhd v Gvernment of Malaysia & Ors [1980] 2 MLJ 103, PC.
 EFFECT OF NOTICE TO THE DEBTOR
IN AN EQUITABLE ASSIGNMENT
• An equitable assignment is complete and binding even if no notice is given
to the debtor.
• However, notice to the debtor would perfect the assignment.
• With notice, the assignee has a right in rem but without notice, the assignee
only gets a right in personam.
 DIFFERENCES BETWEEN A LEGAL
ASSIGNMENT AND AN EQUITABLE
ASSIGNMENT
Legal assignment Equitable assignment
Requirements • Subject matter assigned must • Intention to assign
be a debt or legal chose • Some form of assignment
• In writing under the hand of • Property assigned must be
the assignor identifiable
• Notice to person liable to the
assignor (debtor)
• Assignment must be absolute,
not by way of charge

Effect The assignee has a legal interest The assignee has an equitable
in the property assigned and can interest and may only claim in
sue in his own name to enforce personam remedies.
the interest.
 ASSIGNMENT OF EXPECTANCIES
(FUTURE PROPERTY)
• Expectancies are future interests in a subject matter whether tangible or
intangible.
• E.g. – the right to inherit property under a will
• Common law - Assignment of expectancies is not recognized. Rationale –
such property does not exist and one may not assign something that does
not yet exist.
• Equity – such assignment is effective if the assignment was made in lieu of
valuable consideration.
• Equity will treat the assignment as an agreement to assign future property.
The assignment is perfected only at the point of time that the property
comes into existence
 ASSIGNMENT OF EXPECTANCIES
(FUTURE PROPERTY)
• Conditions for a valid assignment of expectancies:
1. There must be a valuable consideration
2. It would not be contrary to public policy

• Effect – the beneficial interest in the property passes to the assignee

immediately after the property is acquired
 EXERCISE
In May 2002, under a 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 HPA, Handal was to pay Mesra the
amounts due in monthly instalments of RM 3000 until December 2003. In
January 2003, Mesra assigned all its benefits, rights, title and interest in the HPA
to Acer Corporation Bhd („Acer‟). This was done by way of a letter dated 8
January 2003 from Mesra to Handal stating that „all payments due under te
HPA 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 amounts due and owing
under the HPA. 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‟s benefits, rights, title and interest in the HPA to Acer in January 2003.
With reference to decided cases, discuss the validity of Acer‟s contention.