NOUVAU MONT DOR (M) SDN. BHD. V. FABER
DEVELOPMENT SDN. BHD.
FEDERAL COURT, JOHOR BAHRU
WAN SULEIMAN FJ, GEORGE SEAH FJ, MOHD. AZMI FJ
[CIVIL APPEAL NO. 177 OF 1983]
26 MAY 1984
JUDGMENT
George Seah FJ:
The only question to be decided in this appeal involves the
interpretation of an assignment made on 18 February 1978 between the
appellant, as assignor of the one part and the Public Bank, as assignee of
the other part.
The relevant facts do not appear to be in dispute and may be briefly
stated. On 1 April 1977 the appellant, as purchaser entered into a sale
agreement with the developer, Tan Kim Chua Realty (M) Sdn. Bhd. whereby the
latter sold one shop/office unit described as Lot 222 in a multi-storey
shopping and office complex now known as Merlin Tower to be erected on land
held under Grant 5531 Lot 730 in the township of Johore Bahru to the
appellant for the sum of RM184,320 (hereinafter referred to as the said
property). Subsequently an arrangement was arrived at whereby the Public
Bank would grant to the appellant a fixed loan of RM92,160 to enable the
appellant to pay to the developer the balance of the purchase price. This
arrangement was carried through by means of two documents dated 18 February
1978. The first was a loan document and the second was an assignment, which
is the subject of the appeal. Not only the developer had express notice it
had in fact expressly consented to the assignment.
It is not disputed that in 1980 the respondent, Faber Development Sdn.
Bhd. purportedly purchased from the developer the whole shopping/office
complex (Merlin Tower) including the car park and hotel floors but excluding
the shop/office units already sold by the developer.
On 17 November 1982 the appellant commenced proceedings in the High Court
at Muar seeking from the respondent certain declaratory relief. After the
filing of the originating summons the assignment was revoked on 21 April
1983 following the repayment and settlement of the fixed loan by the
appellant to the Public Bank. At the hearing of the originating summons
preliminary objection was taken by the respondent that at the time of the
filing of the originating summons and having regard to the terms of the
assignment of 18 February 1978 the action could not be maintained in the
name of the appellant as assignor. The learned Judicial Commissioner upheld
the objection and struck out the proceedings with costs. Hence this appeal.
As is well known, an ordinary debt or chose in action before the
Judicature Act 1873 was not assignable so as to pass the right of action at
law, but it was assignable so as to pass the right to sue in equity. In his
suit in equity the assignee of a debt, even where the assignment was
absolute on the face of it, had to make his assignor, the original creditor,
party in order primarily to bind him and prevent his suing at law, and also
to allow him to dispute the assignment if he thought fit. This was a
fortiori the case where the assignment was by way of security, or by way
of charge only, because the assignor had a right to redeem. Further, the
assignee could not give a valid discharge for the debt to the original
debtor unless expressly empowered to do so. Now it was in order to afford
some remedy for this state of the law that subsection 6 s. 25 was passed. It
is plain on reading it that it does not apply to every case of equitable
assignment of a debt or chose in action (Chitty LJ in Durham Brothers v.
Robertson [1898] 1 QB 765 at p. 769 and 770).
The law on assignment is governed by s. 4 (3) of the Civil Law Act 1956
and it reads as follows:
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.
The wordings of this subsection are in the same terms with s. 25(6) of
the Judicature Act 1873 which had since been replaced by s. 136 of the Law
of Real Property Act 1925.
It is common ground that if the assignment was an absolute one, not
purporting to be by way of charge only, within the meaning of s. 4(3) of the
Civil Law Act 1956, then the appellant, as assignor was not entitled to sue
in its own name but the action should be brought by the assignee (Public
Bank) in its own name or by the assignee in the name of the assignor
(Read v. Brown [1888] 22 QBD 128; Hughes v. Pump House Hotel Co. Ltd.
[1902] 2 KB 190 and Walter & Sullivan Ltd. v. J. Murphy & Sons Ltd.
[1955] 2 WLR 919).
Reference will be made to certain English cases in an attempt to see how
the Courts there have been dealing with the same problem which we are called
upon to solve. In considering English authorities, however, we must bear in
mind the provision of s. 6 of the Civil Law Act 1956 which provides that
"Nothing in this Part shall be taken to introduce into Malaysia or any of
the States comprised therein any part of the law of England relating to the
tenure or conveyance or assurance of or succession to any immovable property
or any estates, right or interest therein". We would first of all refer to
two cases, viz. Comfort v. Betts [1891] 1 QB 737 and Hughes v.
Pump House Hotel Co. (supra) where the Courts came to the conclusion
that the documents amounted to an absolute assignment, not purporting to be
by way of charge only. In the former case it was held that an assignment of
a debt or legal chose in action may be absolute within the Judicature Act s.
25 (6) although a trust is thereby created in respect of the proceeds of
such debt or chose in action in favour of the assignee. In the latter case,
the plaintiff on 7 March 1901 signed and gave to Lloyd's Bank, the following
instrument:
In consideration of your continuing a banking account with me the
undersigned, and by way of continuing security to you for all moneys due or
to become due to you from me alone, or jointly with others, either on the
said account or otherwise, I hereby assign to you all moneys due, or to
become due, to me from the Pump House Hotel Company, Limited, of Llandrindod
Wells, under or by virtue of a certain contract dated 1 November 1899, and
made between the said company of the one part and myself of the other part
(being a contract for completion of the new pump room and for making certain
alterations and additions to the Pump House Hotel, Llandrindod Wells) and
all other moneys, if any, due, or to become due, to me from the said
company, including all moneys due, or to become due, for extras in
connection with the works contemplated by the said contract; and I hereby
empower you, on my behalf, and in my name, to settle and adjust all accounts
in connection with the works and matters aforesaid, to give effectual
receipts for the moneys hereby assigned, which shall discharge the person
paying the same from being concerned to see to the application thereof;
also, if necessary for enforcing payment of the moneys hereby assigned, or
any part thereof, and to compromise and settle any such proceedings on such
terms as you may think fit, it being understood that all costs and expense
of recovering the moneys hereby assigned are to be paid out of the amount
recovered; and I hereby undertake at your request and my cost to do and
execute all such further acts, deeds, and things as you may reasonably
require for giving full effect to the security hereby created.
It was held that the above-mentioned instrument having the effect of
passing the whole right and interest of the assignor in the moneys payable
under the building contract to the assignees by way of security, it was an
absolute assignment (not purporting to be by way of charge only) within the
meaning of s. 25(6) of the Judicature Act 1873.
The other two authorities we like to refer to are Mercantile Bank of
London v. Evans [1899] 2 QB 613 and Durham Brothers v. Robertson
(supra) where a contrary conclusion was reached by the Courts. In the
Mercantile Bank case the plaintiffs made an advance to a customer who
executed the following assignment:
In consideration of your placing to my credit to-day the sum of £200, I
hereby assign to you the whole of my rights and interest under the agreement
dated 1 June 1897 as security for the repayment on demand of the said sum of
£200 and any further sum or sums that you may from time to time hereafter
advance to me either directly or by way of overdraft or otherwise howsoever,
and I hereby appoint you my nominees in pursuance of the provisions of the
said agreement, with power to exercise all my rights thereunder, either in
my name or your own; and I hereby appoint you my irrevocable attorneys in
the behalf.
Held that the assignment was not an absolute assignment within the
meaning of s. 25(6) of the Judicature Act 1873.
In the latter case a firm of building contractors delivered to the
plaintiffs a document in the following terms:
Re Building Contract, South Lambeth Road - In consideration of money
advanced from time to time we hereby charge the sum of £1080, which will
become due to us from John Robertson on the completion of the above
buildings, as security for the advances, and we hereby assign our interest
in the above-mentioned sum until the money with added interest be repaid to
you.
It was held that the document was not "an absolute assignment" (nor
purporting to be by way of charge only) within s. 25(6) of the Judicature
Act 1873 and that the plaintiffs could not recover in the action.
Commenting on the Mercantile Bank case in Hughes case,
Mathew LJ said at p. 195:
... general terms were used in making the assignment, but, when the whole
instrument was looked at, it appeared that what was intended was only to
assign so much of the debt or chose in action as would provide security for
a debt of £200 ... Upon that becoming apparent it was held that the true
character of the interest given was that of a charge only ...
It is plain that in every case of this kind, all the terms of the
instrument must be considered; and whatever may be the phraseology adopted
in some particular part of it, if, on consideration of the whole instrument,
it is clear that the intention was to give a charge only, then the action
must be in the name of the assignor. While, on the other hand, if it is
clear from the instrument as a whole that the intention was to pass all the
rights of the assignor in the debt or chose in action to the assignee, then
the case will come within s. 25 and the action must be brought in the name
of the assignee (Mathew LJ in Hughes v. Pump House Hotel Co. Ltd. (supra)
Having stated the preliminary and before we examine the terms of the
document of assignment dated 18 February 1978 we would dispose of a short
submission of learned counsel for the appellant. It was contended that since
the assignment was entered into following the execution of a loan agreement
between the appellant and the Public Bank, the said assignment should not be
read in isolation but should be read in conjunction with the said loan
agreement. With respect, we do not agree. In our judgment and it seems clear
from the authorities above-mentioned, whether or not an assignment is an
absolute one (not purporting to be by way of charge only) within the meaning
of s. 4 (3) of the Civil Law Act 1956 is to be gathered only from the four
corners of the instrument itself.
Now, the assignment of 18 February 1978 appears to be in the form of a
legal document signed by all the parties concerned, viz. assignor
(appellant), assignee (Public Bank) and the predecessor-in-title of the
respondent. After reciting that (a) the appellant had entered into a sale
agreement with the respondent's predecessor-in-title for the purchase of one
unit of shop/office lot in the Merlin Tower, (b) that the Public Bank would
give a loan to the appellant to enable him to pay off the balance of the
purchase price, (c) that when the "strata title" of the said property was
issued and registered in the name of the appellant he would execute and
register a first legal charge of the said property in favour of the Public
Bank and (d) pending the issue of the "strata title" the appellant would
assign to the Public Bank all his rights title and interest in the said
property and the appellant duly executed the assignment in the following
term:
That in consideration of the Bank having agreed to grant the loan the
assignor as beneficial owner hereby assigns absolutely to the Bank all his
rights title and interest in and to the said property and under the said
Sale Agreement and the full benefit granted thereby and all stipulations
therein contained and all remedies for enforcing the same.
(See Clause 1)
Clause 2 provides, inter alia, that the assignor shall at all
times hereinafter save harmless and keep the Bank indemnified. The assignor
shall be solely liable for the cost of preparing the document of assignment
(see Clause 3), and the assignment shall be binding upon the executors,
administrator or assigns of the parties (see Clause 4). In Clause 5 it
reads:
This assignment shall remain in force until such time as it shall be
revoked by the execution and registration thereof by the assignor of a first
legal charge over the said land in favour of the Bank.
Looking at the whole document of 18 February 1978 and bearing in mind the
provision of s. 6 of the Act, in our opinion, the document was an absolute
assignment and not purporting to be by way of charge only within the meaning
of s. 4(3) of the Civil Law Act 1956. The assignment was in terms absolute
in the sense that the assignor (appellant) intended to pass and transfer to
the assignee (Public Bank) absolutely the beneficial interest as well as all
the rights title and interest in the Sale Agreement dated 1 April 1977 and
the remedies of enforcing them. The instrument clearly purported and was
intended in point of form, to be an absolute assignment because of the use
of the word "absolutely" in Clause 1 thereof (see Fry LJ in Comfort v.
Betts (supra) at p. 740). If the assignment was an absolute one (not
purporting to be by way of charge only) the fact that it had the effect of
passing to the assignee the rights title and interest of the assignor in the
Sale Agreement and the beneficial interest of the assignor in the said
property under the said Sale Agreement by way of security only did not
derogate from the absolute character of that assignment (Hughes v. Pump
House Hotel Co. (supra) and Comfort v. Betts (supra)). We
therefore agree with the judgment of the learned Judicial Commissioner but
for different reason, that the appellant was not competent to maintain this
action at the time when the originating summons was filed on 17 November
1982. The appeal is dismissed with costs to the respondent. The deposit of
RM500 to be paid to the respondent on account of taxed costs.
