Slide 1

Week 7: Equity in Malaysian Land Law (Part III Equitable Assignment, Equitable charge, jual janji & equitable ownership)Muhammad Nizam Awangmnizam@usim.edu.my

Outline Definitions assignment, chose in actionEquitable assignment v. legal assignmentElements of EA

Definitions Assignment Transfer of a chose in action from one person to another

Choses in action A personal right of property, enforced/ claimed by action, not by taking physical possession.E.g. debt payment; right to payment under bill of exchange; right to benefit from shares in a company

Situation DEBTORAssignor(1) Owes money toAssignee(2) Assignor assigns debt to assignee(3) Debtor must pay to assignee

(1) Owes money toDEBTORAssignorAssignee(3) Debtor must pay to assignee

(2) Assignor assigns debt to assigneeEquitable v. legal assignment

LEGAL ASSIGMENT EQUITABLE ASSIGNMENTS. 4(3) CLA 1956In writing under the hand of assignorAbsolute (not by way of charge only)Express notice in writing given to person liable to assignor.

Intention to assignMust be some form of assignmentProperty assigned must be identifiableIs assignment of chose in action valid at law?UMW Industries Sdn Bhd v Ah Fook [1996]Assignment of benefits/ rights in a HPAHigh Court: erroneously held that this was an equitable chose and imposed the requirement of notice to the debtor within reasonable time. Federal Court: Overturned HCs decision it was a valid legal assignment of a chose in action.

Elements of equitable assignmentIntention to assignThe subject matter is identifiable Must be valuable consideration Give notice to perfect the assignment

Intention to assign No particular of words required.Malayawata Steel v. Govt of Malaysia (Federal Court, per Azmi J: to use such words as to make the meaning plainthe intimation to assign must be addressed either to the debtor or the assignee.Show an intention that the assignee is to have benefit of the chose in action.

subject matter is identifiableThe assignment must recognise the chose that is assigned.Malayawata the chose was progress payments from the government that was due to the NKHC.

Assignment of expectanciesExpectancies: future interests in a subject matter.Void under common law, but valid under equity.As long as assignor has received good consideration for something he expects in future, come to possess it, he must perform the contract obligation (equitable assignment).Examples: expectation of inheriting an estate of living testator; future damages expected to be recovered in an ongoing lawsuit. Case: Re Angulia (deceased) [1941] MLJ 22

Must be valuable consideration Not against public policy or the applicable law in Malaysia (refer to Contracts Act 1950

Notice to perfect the assignment Equitable assignment is perfect and binding despite no notice is given to the debtorNotice to the debtor would perfect the assignment With notice: the assignee get right in remWithout notice: the assignee only get a right in personam.

Malayawata Steel Bhd v Government of Malaysia [1975]Construction company (NKHC) signed a contract to construct a broadcasting center for the governmentNKHC signed another contract with MSB for supply of steel barsPayment: by way of NKHC authorising the PWD to deduce the amount of progress due & for the PWD to make direct payments to MSB.Intead of paying NKHC, NKHC instructed govt to pay MSB

Malayawata Steel Bhd v Government of Malaysia [1980]2 MLJ 103 Privy Council; [1975] 1 MLJ 22 High Court; [1977] 2 MLJ 215 Federal Court

DEBTOR(government/ PWD)Assignor (NKHC)Signed a contract to construct a broadcasting centre AssigneeMSB)Contract for the supply of steel bar(3) Debtor must pay to assignee

The legal issue: Can MSB claims the outstanding amount of steel bars supply from the PWD (the government)? (was it a valid equitable assignment?)Facts: Construction company (NKHC) signed a contract to construct a broadcasting center for the governmentNKHC signed another contract with MSB for supply of steel barsPayment: by way of NKHC authorising the PWD to deduce the amount of progress due & for the PWD to make direct payments to MSB.Intead of paying NKHC, NKHC instructed govt to pay MSB

Held: there was a valid equitable assignment of the progress payments in so far as the payment of the relevant steel supplied was due an outstanding.

Equitable charge or lienOur land law does not recognise mortgage (English law)The Code is silent as to the effect of equitable charge or lien, i.e. which arises as a result of depositing a title deed with the lender. Thus, equitable charge and lien are permissible under our land law.

Jual janji transactionsMalay customary land dealing with landOf security in nature.The borrower transfer his land to the lender who thereby takes possession of it.The profit of the land will belong to the lender (as interest for the loan)A contract is entered into by parties in which the vendor agreed to sell (jual) his land to the purchaser for a fixed sum with a condition that the purchaser is obliged by a promise (janji) to sell back the same piece of land to the vendor at the same price without charging any profit of interest at a fixed time. Failure on the part of the vendor to purchase back the land will lead to jual putus (absolute sale) The land is transferred into the name of the lender, the borrower is given the right to obtain a retransfer upon repayment of the debt within stipulated period in collateral agreement.

Characteristics Land used as security is relatively small.Small loan.No time limitLoan is based on the needs, not the land value.Widely practised among Muslim kampung folks; relatives and friends. Strangers are generally required to put land as a charge. No interest is charged.

Haji Abdul Rahman v. Mohamed HassanThe Privy Council: where an agreement is in nature the nature of a mortgage the right to redeem remains irrespective of whether or not the period within which it is specified the loan shall be repaid has expired.

Read also: Yaacob Lebai Jusoh v. Hamisah Saad (1950) 1 MLJ 255 The plaintiff sold land to the defendant and later the parties entered into an agreement whereby the defendant would resell the said land back to the plaintiff within 3 years, and that such an agreement would be null and void had this period lapse, and so it did. Jobling J and Briggs J held that time did not matter, as it was a mortgage ie a jual janji. Ismail Embong v. Lau Kong Han (1970) 1 MLJ 213where the period for repaying had expired, but the lender extended the period subject to a $40 charge. The court held that the borrower was entitled to his land back.

Lease of landUnregistered lease has no legal effect under NLC.But in several cases, courts give effect to such lease by ordering specific performance, or by registration of the lease.Margaret Chua v. Ho Swee Kiew [1961] 1 MLJ 173The court rejected the argument that an unregistered elase was null ands void by reason of non-compliance with the prescribed form under the Kedah Land EnactmentHeld: the court ordered SP indirectly amounted to enforcing the unregistered lease. Here, the court gave effect to the intention of the parties despite the absence of legal requirement if any.

Equitable ownershipThough the transfer of land was never registered, the court recognised the principle of equitable ownership based on the facts of the case.Munah v. Fatimah [1968] 1 MLJ 54P paid and entered into possession of land, which she cultivated for 19 yearsRelying on contract, P occupied and did acts as she was in possession of the land. She was equitable owner.Held: The title was not transferred and it was held that the vendor (P) held the land on trust for the purchaser.

Equitable ownershipThough the transfer of land was never registered, the court recognised the principle of equitable ownership based on the facts of the case.Munah v. Fatimah [1968] 1 MLJ 54P paid and entered into possession of land, which she cultivated for 19 yearsRelying on contract, P occupied and did acts as she was in possession of the land. She was equitable owner.Held: The title was not transferred and it was held that the vendor (P) held the land on trust for the purchaser.

Othman v. Mek [1972] 2 MLJ 158Under the contract of sale, the purchaser had paid the full price and entered into possession of the land. He had become the equitable owner. He had the right to acquire the full title and the right unaffected by the limitation of period or laches.

Laches: A defense to an equitable action, that bars recovery by the plaintiff because of the plaintiff's undue delay in seeking relief.

Next weekSpecific performance (Note: Please bring the Specific Relief Act 1950)