Contributed by Roger Tan
“In consideration of the Facility granted to the Assignor upon the terms and conditions contained in this Agreement, the Assignor as beneficial owner hereby absolutely assigns all of the Assignor's rights and title to and interest whatsoever in the Property including all rights and interest of the Assignor in the Sale and Purchase Agreement to the Bank.”
In this respect, one is often faced with the question of whether an assignor can found an action against the developer without involving the assignee. Likewise, can the assignee sue the developer directly without involving the assignor? The law in this area is at least settled after the date of coming into force of the Civil Law Act 1956 ("CLA") which is 7 April 1956 for West Malaysia and 1 April 1972 for East Malaysia as s 4(3) CLA provides that if the assignment is a statutory assignment under that section, then the assignee can sue the developer/debtor directly without the concurrence of the assignor which means the assignor cannot sue the developer/debtor directly without the concurrence of the assignee unless it is an assignment by way of charge.
Source: http://www.malaysianbar.org.my/banking_finance/right_to_sue_under_an_assignment.html
RIGHTS OF ASSIGNORS AND ASSIGNEES TO SUE UNDER AN ABSOLUTE ASSIGNMENT AND ASSIGNMENT BY WAY OF CHARGE USED AS A SECURITY FOR LOAN
Introduction
If a borrower acquires a property in which the individual title deed has not been issued and he intends to obtain a loan by using the property as a security, the financier will require the borrower to assign all his rights in the sale agreement with the developer/vendor in favour of the financier with notice of assignment to the former. Likewise, a creditor can obtain a loan by assigning all his rights over a debt to the factor by giving notice of assignment to the debtor. These assigned rights are also known as “choses in action” which simply means things recoverable by action as opposed to a “chose in possession” which entitles a person to have actual physical possession. In the words of Channell J in Torkington v Magee [1902] 2 KB 427 at 430, the expression “choses in action” means “all personal rights of property which can only be claimed or enforced by action, and not by taking possession.”
This paper, therefore, examines the rights of an assignor and an assignee in an assignment of rights particularly over the sale agreement in the event there should be a dispute between the assignor and the developer/vendor. A common clause in such a loan agreement cum assignment will look like this:
“In consideration of the Facility granted to the Assignor upon the terms and conditions contained in this Agreement, the Assignor as beneficial owner hereby absolutely assigns all of the Assignor's rights and title to and interest whatsoever in the Property including all rights and interest of the Assignor in the Sale and Purchase Agreement to the Bank.”
In this respect, one is often faced with the question of whether an assignor can found an action against the developer without involving the assignee. Likewise, can the assignee sue the developer directly without involving the assignor? The law in this area is at least settled after the date of coming into force of the Civil Law Act 1956 ("CLA") which is 7 April 1956 for West Malaysia and 1 April 1972 for East Malaysia as s 4(3) CLA provides that if the assignment is a statutory assignment under that section, then the assignee can sue the developer/debtor directly without the concurrence of the assignor which means the assignor cannot sue the developer/debtor directly without the concurrence of the assignee unless it is an assignment by way of charge.
Finally, the Federal Court put an end to all these upon appeal in Phileo Allied Bank (Malaysia) Bhd v Bupinder Singh Avatar Singh & Anor [2002] 2 MLJ 513 which reinstated the law in Nouvau Mont Dor and also held that the RHC could not extend into an area of substantive law and in the absence of any statutory provisions or common law requiring the equitable mortgagee to obtain a court order to realise its security under an absolute assignment of rights to land, the court should recognise the contractual rights of the parties. Hence, the assignee bank is once again entitled to foreclose the property by way of public auction without a court order. (Ngoi Thiam Woh v Maxwell, Kenion, Cowdy & Jones (sued as a firm) & Anor [2002] 3 MLJ 341.)However, this still does not solve the problem of the poor assignor purchaser who is still incompetent to sue the developer. But his position has improved substantially if he is a homebuyer when Parliament passed the Housing Developers (Control and Licensing) Amendment Act 2002.The 2002 amending Act seeks to insert a new section 22C in the Housing Developers (Control and Licensing) Act 1966 which has the effect of overriding s 4(3) CLA and the decision of Nouvau Mont Dor if it involves a homebuyer who is a purchaser of a housing accommodation or has a dealing with a licensed housing developer under the 1966 Act. This new section will allow the assignor homebuyer to sue the developer directly unless a contrary intention is expressed in any assignment between the homebuyer and his financier in which case the prior written consent of his financier must first be obtained. This section operates “notwithstanding anything contained in any written law or any rule of law” and applies retrospectively to every assignment.
Conclusion
In conclusion, it cannot be gainsaid that a statutory assignment under our s 4(3) CLA is a common security for a loan if there is no individual title to the property, but not an assignment by way of charge. Therefore, there is a need for the legislature to look at the predicament of an assignor purchaser as particularised above just as what it did for the assignee under s4(3) CLA and a homebuyer under the Housing Development (Control & Licensing) Act 1966.
Source: http://www.malaysianbar.org.my/banking_finance/right_to_sue_under_an_assignment.html
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