Sykt Kejuruteraan Letrik Sin Foh Sdn Bhd

- vs -

Perbadanan Putrajaya

Judgment

Suriyadi Halim Omar, J

1. Syarikat Kejuruteraan Letrik Sin Foh Sdn Bhd (hereinafter referred to as the assignee plaintiff or "the plaintiff"), had filed an Ord. 14 application against Perbadanan Putrajaya (hereinafter referred to as the defendant), and after a hearing before the Senior Assistant Registrar was successful.

2. Judgment sought for was for a sum of RM315,236.58. Going into the details of the matter, sometime on November 4, 1996 a written contract was sealed between the said defendant, a corporation sole established under the Perbadanan Putrajaya Act 1995, and a company called Randai Jaya Sdn Bhd (now wound up). In the contract was included proviso 34.3 (Exh AR3), which permitted the assignment of any benefit or interest of the contract, in favour of a third party inclusive of any corporation, but subject to the prior written consent of the defendant. In brief, Randai Jaya as the main contractor was to carry out certain building works for the defendant.

3. Not unexpectedly Randai Jaya Sdn Bhd had inducted a third party on April 9, 1997 as its sub-contractor to fulfil parts of the project i.e. in the form of the assignee plaintiff. Taking advantage of the above assignment provision, Randai Jaya on September 10, 1997 had written a letter to the defendant, requesting the immediate payment of RM600,000 owed to itself, be made direct to the assignee plaintiff. Unfortunately the defendant refused to do so, culminating in a suit being filed by the assignee plaintiff against it.

4. It was quite obvious that the basis of the assignee plaintiffs action was the above letter of September 10, 1997 (LKF 2), alleging the constitution of an assignment within it, by Randai Jaya to the plaintiff. In brief, aside from the recriminations, and the allegation of failure by the defendant to make payments the letter, which carried the assignment, reads as follows:

   As such, we hereby write to request you to immediately pay on our behalf the sum of RM600,000 to the said Syarikat Kejuruteraan Letrik Sin Foh Sdn Bhd and thereafter to deduct the said sum so paid from the outstanding sum due to us.

5. Under s 4(3) of the Civil Law Act 1956 ("the said Act"), any debt or other legal thing may be assigned, thus vesting the assignee with certain legal rights and remedies (The Chartered Bank v Rashid Mohamed [1986] 2 MLJ 219). To be effective, the statute requires such legal assignment or sometimes interchangeably referred to as a statutory assignment to be absolute and not by way of charge only, to be in writing and under the hand of the assignor, followed by express notice in writing to the relevant debtor from whom the assignor would have been entitled to claim the debt before the commencement of any legal action (Van Lynn Developments Ltd v Pelias Construction Co [1969] 1 QB 607; UMW Industries Sdn Bhd v Ah Fook [1996] 1 AMR 238). Without these averments no case could be brought within the Act and an assignee would have no rights to bring the action (Seear v Lawson (1880) 16 Ch D 121).

6. If there was to be no absolute assignment, in that the entire interest had not been transferred to the assignee unconditionally, then such an assignment could not be construed as absolute. Permanency of the assignment is not a precondition for a good absolute assignment.

7. Needless to say, in the event of any legal dispute that could emerge from such an arrangement, the four comers of the relevant instrument will invariably come under severe scrutiny.

8. As opposed to this statutory based right, there exists another form of assignment, i.e. that of the equitable. The latter version was bandied around by the assignee plaintiff, as a premise of its action to obtain summary judgment before me. In this case even though there existed a document that could have satisfied the requirements of a statutory assignment, but for the non-adherence of proviso 34.3, it was my view that an equitable assignment could not be discounted. In William Brandt 's Sops & Co v Dunlop Rubber Co Ltd (1905) AC 454 at p 461 Lord Mac Naghten had occasion to opine:

   The statute does not forbid or destroy equitable assignment or impair their efficacy in the slightest degree.

9. Cheshire, Fifoot and Furmston's Law of Contract (1994) at p 729 had also authored:

   If there is a failure to comply the transaction is not void. It is void as a statutory assignment but it still stands as a perfectly good equitable assignment. This means that the assignee of the legal chose in action cannot take advantage of the new machinery set up by the Act and bring an action in his own name, but must fall back upon the rules governing equitable assignments and join the assignor as a party.

10. Without the necessity of having to delve into the adequacies of the prerequisites of an absolute assignment having been complied with here, the parties did agree that at no time was the defendant's prior permission obtained to agree to such assignment. Presumably, that was the principal reason for the abandonment of the invocation of the document as the premise of its action by the assignee plaintiff, and instead unveiled the equitable assignment argument. Generally speaking this legal precept of equitable assignment does not have a particular form but is enforceable so long as there exist sufficient expression of intention to assign that bundle of rights (Snell's Equity, 29th Edn; Malaysian International Merchant Bankers Bhd v Malaysian Airlines System Bhd [1982] 2 MLJ 59 at p 60 paragraph H (right hand).

11. That being so unlike a legal assignment, an equitable assignment could still be adverted to, as attempted by the assignee plaintiff in this case regardless of the failure to comply with the prerequisites of the legal assignment e.g. no consent having been obtained from the debtor. To take a step further, even if there had been a failure in notifying the debtor, the assignee would still not be prevented from proceeding with its action founded on an equitable assignment, provided the assignor is made a party to the proceedings (UMW Industries Sdn Bhd v Ah Fook [1996] 1 AMR 238). Success thus will depend on the prerequisites or rules governing equitable assignments being complied with rather than that of statutory assignments.

12. With the canvassed equitable assignment in mind, I was painfully aware that the assignor had not been joined as a party, hence causing some hesitation in me to conclude that all procedural matters had been ironed out. As said above, for the assignee of a legal chose to sue in equity, the law requires that the assignor be made a party e.g. as a co-plaintiff, or if he refuses to lend his name to the action in this way, as a co-defendant (Hughes v Pump House Hotel Co (No 1) [1902] 2 KB 190). I was not unmindful too that, with Randai Jaya being out of action, as it had been wound up, the assignee plaintiff would face an uphill task in its attempts to drag the latter into the affray. Certainly this agonising procedural matter would necessitate some clarification from the plaintiff, of which only a full trial could resolve.

13. I now delve onto another point but evidential in nature. In Re Warren: Ex p Wheeler v The Trustee in Bankruptcy (1938) Ch 725, the court viewed that-

    an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by a debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order, directing such person to pay such funds to the creditor will create a valid equitable charge upon such fund; in other words, will operate as an equitable assignment of the debts or fund to which the order refers. [Emphasis mine]

14. In the current case, the assignee plaintiff had attempted to adduce the existence of a specific fund, by an indirect way, that was by adducing a letter (LKF-3) dated July 7, 1998 wherein the defendant admitted owing Randai Jaya RM315,236.58. To reiterate the assignment date as per LKF-2 was September 10, 1997. It was quite obvious to me that the date in LKF-3 which admitted the supposed debt (the specific fund), fell outside the assignment date, and hence had created a doubt in me whether a confirmed specific fund existed coming the way of Randai Jaya, at the time of the purported assignment. Had LKF-3 carried the date of September 10, 1997 or had there been any other document introduced carrying that same date, and simultaneously indicating the existence of a specific fund, this evidential aspect of the case would not have perturbed me.

15. An interesting point vehemently canvassed by the defendant was that, as it had not granted permission to the assignment, the assignee plaintiff thus could not advert to an assignment, equitable or otherwise to support its case. After due consideration I concluded that so long as there was a prior arrangement of the assignment between the assignor and the assignee, a good assignment would materialise, regardless of whether the debtor had no notice of it, had not given consent or even disagreed with that arrangement (Gorringe v Irwell India Rubber and Gutta Percha Works (1886) 34 Ch D 128). In Morrell v Wootten (1852) 16 Beav 197 it was opined that the debtor, and even the assignor, would not be bound by an assignment unless the assignee had notice of the latter. In the current case the assignee plaintiff merely adduced the so-called letter of assignment (LKF-2) as part of the evidence, without factually establishing first the necessary grounds that at the relevant time it was aware of the arrangement to itself. This point certainly left a gaping hole in the case of the assignee plaintiff, in its attempts to convince me that it was entitled to a summary judgment

16. For the above legal and factual reasons, I was not convinced that this was a straightforward case, which entitled the assignee plaintiff to an Ord. 14 judgment. I thereupon allowed the appeal with costs.

Chartered Bank v Rashid Mohamed [1986] 2 MLJ 219; Gorringe v Irwell India Rubber and Gutta Percha Works (1886) 34 Ch D 128; Hughes v Pump House Hotel Co (No 1) [1902] 2 KB 190; Malaysian International Merchant Bankers Bhd v Malaysian Airlines System Bhd [1982] 2 MLJ 59; Morrell v Wootten (1852) 16 Beav 197; Seear v Lawson (1880) 16 Ch D 121; UMW Industries Sdn Bhd v Ah Fook [1996] 1 AMR 238; Van Lynn Developments Ltd v Pelias Construction Co [1969] 1 QB 607; Warren, Re; Exp Wheeler v The Trustee in Bankruptcy (1938) Ch 725; William Brandt 's Sops & Co v Dunlop Rubber Co Ltd (1905) AC 454

Civil Law Act 1956, s.4(3)

Perbadanan Putrajaya Act 1995

Rules of the High Court 1980, Ord.14

Cheshire, Fifoot and Furmston's Law of Contract, 1994

Snell's Equity, 29th Edn

Anita Stephen (Philip Choong & Co) for Plaintiff

Eugene Jayaraj (Zaid lbrahim & Co) for Defendant

This decision is also reported at [2002] 3 AMR 2678