Week 7: Equity in Malaysian Land Law

(Part III Equitable Assignment,

Equitable charge, jual janji & equitable
ownership)
Muhammad Nizam Awang
mnizam@usim.edu.my

Outline
Definitions assignment, chose in action
Equitable assignment v. legal assignment
Elements 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
(1) Owes money to
Assignor

DEBTOR

(3) Debtor
must pay to
assignee

Assignee

(2) Assignor
assigns debt
to assignee

(1) Owes money to

Assignor

DEBTOR

(3) Debtor
must pay to
assignee

Assignee

(2) Assignor
assigns debt
to assignee

Equitable v. legal assignment

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

EQUITABLE ASSIGNMENT

1. Intention to assign
2. Must be some form of
assignment
3. Property assigned must
be identifiable

 Is assignment of chose in action valid at law?

UMW Industries Sdn Bhd v Ah Fook [1996]
Assignment of benefits/ rights in a HPA
High 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 assignment

Intention to assign
The 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 identifiable

The 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 expectancies
Expectancies: 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 debtor
Notice to the debtor would perfect the
assignment
With notice: the assignee get right in rem
Without 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 government
NKHC signed another contract with MSB for supply of
steel bars
Payment: 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
Signed a contract to
construct a
broadcasting centre
Assignor
(NKHC)

DEBTOR
(government/ PWD)

(3) Debtor
must pay to
assignee

Assignee
MSB)

Contract for
the supply of
steel bar

 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 government
NKHC signed another contract with MSB for supply of steel
bars
Payment: 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 lien

Our 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 transactions

Malay customary land dealing with land
Of 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 limit
Loan 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 Hassan

The 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 213

where 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 land
Unregistered 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 173
The 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 Enactment
Held: 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 ownership
Though 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 54
P paid and entered into possession of land, which she
cultivated for 19 years
Relying 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 ownership
Though 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 54
P paid and entered into possession of land, which she
cultivated for 19 years
Relying 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 158

Under 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 week
Specific performance
(Note: Please bring the Specific Relief Act
1950)