KOLA DAISI UNIVERSITY

FACULTY OF LAW
EQUITY AND TRUST I – PCL 403

TOPIC: ASSIGNMENT OF CHOSES IN ACTION

Introduction
Properties are classified into realty and personalty. A realty is a property owned in real
estate, this includes physical land and all things legally described as being part of the land.
Personalty are further divided into tangibles and intangibles: tangibles are choses in
possession and they can be physically possessed; they can also be stolen. The intangibles
on the other hand are called choses in action and they cannot be physically possessed.
Choses in action are proprietary right in property, i.e. a right of recognizable economic
value which has no tangible or physical existence. Examples of intangibles are debts, shares
in companies, insurance policies, copyrights, rights of actions arising from a contract,
negotiable instruments, patent rights, etc.

A chose in action may be either legal or equitable. A legal chose in action is a right
enforceable and recoverable by an action at law e.g. a debt or benefit under a contract. An
equitable chose in action or a chose in equity is a right which owes its existence to a subject
matter which before 1873 would have been recognised only by the Chancery Court. Such
right was enforceable and recoverable only by what was formally called a suit in equity.
Examples are rights and interests of a beneficiary in trust fund, interest under a legacy and
right to a relief against forfeiture of a lease for non-payment of rents, beneficial interest in
a partnership and, reversionary interest under a will. Generally these choses arise out of
proprietary rigi1ts in respect of which the Chancery court formally exercised exclusive
jurisdiction.

There is also future chose in action. This may either be legal or equitable. It is a right in
respect of property which has not fallen into possession but which is to be acquired at a
future date. Thus, the interest upon which the chose depends for its existence has not come

1|P ag e
into possession, for example, right of a beneficiary to a legacy under his father's will when
the father is still alive, copyright of a book which is to be written at a future date.

The right in intangibles can be transferred to another person. The transfer of the right in
intangibles (choses in action) is referred to as an assignment. When there is an assignment
of choses in action, the person doing the transfer is called the assignor while the one to
whom the right is transferred to is called the assignee. For example, if Emilokan is indebted
to Jagaban for the sum of ₦50,000,000, Jagaban’s right to recover the money from
Emilokan is a chose in action. If jagaban assigns the right to Oluomo, Jagaban becomes
the assignor while Oluomo becomes the assignee of the right and Oluomo can sue
Emilokan to recover the debt sum.

Assignment at Common Law

At common law, choses in action could not be assigned unless the debtor agreed and
assented to the assignment. This is because debts or choses in action were regarded as
personal obligations existing between the two parties and was, therefore, not enforceable
by persons other than the original contracting parties. Any attempt to assign choses in
action was considered to be an intrusion by a third party into a dispute between two parties.
It was also stated in addition that to allow such an assignment would occasion
multiplication of contentions and suits, and it would amount to great oppression on the
people and a subversion of the due and equal execution of justice. However, there is an
alternative method which is by letter of attorney, authorizing the recipient to sue in the
name of the person entitled. The rule on assignment at common law has some exceptions:

(i) The king could grant and receive choses in action by way of assignment;
(ii) Mercantile choses in action (negotiable instruments) such as bills of exchange
were assignable;
(iii) Assignment of one or two particular choses in action was possible under special
statues.

2|P ag e
Assignment in Equity
The doctrine of equity found non-assignability of choses in action too absurd and therefore
gave effect to assignments of both legal and equitable things in action. When the thing in
action is equitable, the assignee could institute proceedings to recover it in the Court of
Chancery in his own name. If, on the other hand, the thing assigned is legal, the proceedings
in Common Law Courts had to be taken in the name of the assignor since the assignment
was not recognised at law. The Court of Chancery (equity) interfered by restraining the
assignor from objecting to the use of his name, either as co-plaintiff or co-defendant,
subject to the assignee giving proper indemnity against cost.

The enactment of the Judicature Act of 1873-1875 removed the rule against assignment
under Common Law. Section 25(6) of the Act specifically provides that “any debt or legal
thing in action” may be assigned at law. The effect of this is that there are now four
categories of assignment recognised:

(i) Statutory assignment of legal choses

(ii) Statutory assignment of equitable choses
(iii) Equitable assignment of legal choses
(iv) Equitable assignment of equitable choses

Statutory Assignment
After the enactment of the Judicature Act of 1873-1875, the Common Law’s rule against
assignment of choses in action was replaced by a statutory provision permitting such
assignments. However, for an assignment to take effect as a statutory assignment, certain
conditions (as stated in Section 25(6) of the Judicature Act) must be satisfied:

(i) THE ASSIGNMENT MUST BE IN WRITING AND MUST BE SIGNED BY

THE ASSIGNOR
This requirement does not mandate that the assignment be by deed or that it be for value.
In Udukason Enterprises Nig Ltd v Robinson L. Olisa [(1972) 11 ECSLR 171],

3|P ag e
Udukason (Nig) Enterprises, a partnership firm, sold and delivered goods to the defendant.
The defendant made certain payments leaving the balance of N5,320.00. Later, the
partnership was incorporated into a limited liability company in the name of Udukason
Enterprises (Nig.) Ltd. The partnership by agreement dissolved the partnership and
assigned all the assets and liability of the partnership to the limited liability company. By
a separate letter, the partnership notified the defendant of this agreement. The company
sued the defendant to recover this sum of N5,320.00. The defendant argued that the
agreement did not constitute a valid assignment of a legal chose in action and that the letter
to him was not a valid notice. The court held inter alia, that an assignment of a legal chose
in action is valid if it is absolute, in writing under the hand of the assignor and if express
written notice is given to the debtor. That the assignment tendered, though inelegantly
drafted, together with the letter to the defendant satisfied the requirements of the Act.

(ii) THE ASSIGNMENT MUST BE ABSOLUTE, NOT PURPORTING TO BE

BY WAY OF CHARGE ONLY
The entire chose, that is the entire interest of the assignor in the property, must be assigned.
Where part of a chose is assigned, the assignment is not statutory but equitable. In Western
Nigeria Finance Corporation v. West Coast Builders Ltd & Ors [(1971) 1 UILR93] it
was held that an assignment of a part of a debt is not absolute and therefore not a legal
assignment but could take effect as an equitable assignment. Consequently, the assignee
could not sue without joining the assignor.

(iii) NOTICE MUST BE GIVEN TO THE DEBTOR

An express notice in writing must be given to the debtor. The right of action is transferred
only when this is done. The right of action in respect of the assignment is transferred only
as from the date of notice. The importance of notice in statutory assignment cannot be
overemphasized as it goes to the essential validity of the statutory assignment. Where there
is failure to give notice, the assignment cannot be statutory or legal; rather, it becomes an
equitable assignment. The following should be noted –

4|P ag e
  The said notice need not be in formal language, but it must be sufficiently plain to
make it clear to the debtor that the debt has been assigned.
 Notice is not invalidated by omitting to specify the date of assignment, but a wrong
date for the assignment will invalidate the notice for such will lead parties away
from the true transaction.
 The notice must be in writing even if the debtor cannot read or write, and the notice
may be given either by the assignor or the assignee.
 While a notice given after the death of the assignor is valid, a notice after the action
has begun is invalid.
 A notice takes effect when it is received by or on behalf of the debtor.
 Where there are two joint debtors, notice must be given to both of them.

Effect of Statutory Assignment

An assignment which complies with the statute as to the notice and otherwise is effectual
in law to pass and transfer from the date of notice:
(a) the legal right to such debt or thing in action;
(b) all legal and other remedies for the same; and
(c) the power to give a good discharge for same without the concurrence of the
assignee; or thus, the assignee becomes the owner of the chose at law and may sue
the debtor without making the assignor a party to the action.

Equitable Assignment
An assignment that does not meet statutory requirements may still function as an equitable
assignment. In fact, an assignment may be equitable and later become statutory upon giving
the required notice. However, for an equitable assignment to be valid the following must
be considered:

(i) INTENTION TO ASSIGN

For a transaction to be considered an equitable assignment, there must be a clear direction
on how the specific subject matter is to be disposed of, including the granting of a third

5|P ag e
party right or interest. No special form is required for a valid equitable assignment, except
when dealing with an equitable interest under a trust, which requires a written document.
The intention to assign is crucial, and an oral agreement is sufficient unless writing is
mandated by statute.

In Williams Brandt’s Sons & Co. v Dunlop Co. (1905) A.C. 454, the merchants agreed
with a bank that payments for goods sold would be remitted directly to the bank. When
purchasers mistakenly paid elsewhere, the agreement was deemed an equitable assignment,
and the purchasers were held liable to pay the bank. In this case, Lord McNaughten
clarified that an equitable assignment could take various forms, whether a command, a
request, or mere permission, as long as the debtor understands the debt has been assigned
to a third party. Ignoring such notice places the debtor at risk, and once communicated, the
assignment cannot be revoked or disregarded.

In Thomas v Harris (1947) 1 A11ER 444, a father handed life assurance policies to his
son, instructing him to use the funds to erect a tombstone. Although no notice was given
to the insurance company, the Court of Appeal upheld that this constituted a valid equitable
assignment under the binding oral contract between the father and son.

The essential element of an equitable assignment is the intention to assign, regardless of

form. However, statutory requirements impose exceptions. Under Section 9 of the Statute
of Frauds 1677 and Section 78(1)(c) of the Property and Conveyancing Law of
Western Nigeria, 1959, any disposition of an equitable interest or trust must be in writing
and signed by the person disposing same or their authorized agent. In Grey v I.R.C. (1959)
3 W.L.R. 758, an oral direction to reassign shares held in trust was deemed ineffective
because it violated the requirement for a written disposition under Section 53(1)(c) of the
Law of Property Act 1925 (England).

(ii) THERE MUST BE AN IDENTIFIED CHOSE

The subject of the assignment must be clearly identified. In Miller Bros. Ltd. v. Sassin &
Farar (1926) 7 NLR 45 at 46-47, Tew J. ruled that a bona fide assignment of a chose in

6|P ag e
action, whether before or after judgment but before the service of a garnishee order, defeats
attachment and is binding on both the assignor and all claiming under him.

For a valid equitable assignment, the assignment must specify a particular chose in action
or a portion of it. There must be a designated fund from which payment is to be made. A
general request for the debtor to pay a sum to the assignee does not constitute an
assignment. However, it is sufficient if the request specifies payment from a particular
fund, such as "out of the monies due from you to me" as was in Brice v Bannister (1878)
3 QBD 569.

(iii) NOTICE TO THE DEBTOR

The validity of an equitable assignment is not affected by the absence of notice to the
debtor. However, in certain cases, it is prudent to notify the debtor or the party responsible
for discharging the liability. NOTE:

(a) Notice is effective from the date it is received by or on behalf of the debtor [Holt v
Heatherfield Trust Ltd [1942] 2K B 1 at 6].
(b) Notice ensures that the assignee receives payment. Until the debtor is notified, any
payment made to the original creditor (the assignor) discharges the debt. Without
notice, the assignee may only recover from the assignor, which could lead to further
litigation and potential loss if the assignor is insolvent. Serving notice prevents the
debtor from mistakenly paying the assignor and secures the assignee's claim against
the debtor. In Brice v Bannister (1878) 3 Q.B.D. 569 at 578 and William Brandt’s
Sons & Co. v Dunlop Rubber Company Ltd. [1905] AC 454, debtors who paid
the assignors after receiving notice of the assignment were held liable to pay the
assignees again.
(c) Notice protects the assignee against new rights that might arise between the debtor
and the assignor. Since the assignee is subject to existing equities between the
debtor and assignor, they are not affected by new equities arising after the debtor
has received notice of the assignment.

7|P ag e
 (d) Notice preserves the assignee’s priority against subsequent assignees, in accordance
with the rule in Dearie v Hall (1823) 3 Russell 1.

(iv) CONSIDERATION

The role of valuable consideration in the validity of an equitable assignment depends on

several factors. As Knight Bruce L.J. stated in Kekewich v. Manning 42 E.R. 522, a
person who is of sound mind, acting freely and with sufficient knowledge, has the power
to make a binding and effective voluntary gift of any part of their property, regardless of
its nature or current possession status. Consideration is not necessary for the assignment of
an equitable or legal chose in action. However, consideration is required for an agreement
to assign future property [Tailby v. Official Receiver (1888) 13 App Cas 523; Lee v.
Magrath (1882) 10 LR 313]. In an equitable assignment, the assignee is placed in the
position of the assignor, so no consideration is needed [Holt v Heatherfield Trust Ltd
[1942] 2K B 1 at 6] unless:

 The assignment involves an expectancy or a future chose, or

 The assignment is not absolute or complete but is instead a charge.

An assignment is considered complete when the assignor has fulfilled all obligations, and
no further action is required to transfer the title to the assignee. This completion allows the
assignee to obtain proprietary rights in the assigned property. However, an assignment by
way of charge only does not constitute a complete assignment. In the case of an equitable
assignment of a chose in equity, consideration is unnecessary if the assignment is complete.
As Wills J. explained in Harding v. Harding (1886) 17 QBD 442, if a transaction remains
incomplete and the donor still needs to act to give effect to their intention, equity will not
enforce it. However, once the transaction is completed and the donor has created a trust for
the intended beneficiary, equity will enforce the assignment. An assignor who has made a
complete, though gratuitous, assignment of a chose in equity cannot later revoke the benefit
conferred on the assignee.

8|P ag e
Effect of Equitable Assignment
When the entire interest is assigned, equity allows the assignee to sue in their own name
without joining the original creditor/assignor. However, if only part of the chose is assigned
or if it is an equitable assignment of a legal chose, the assignee or the original creditor must
include the other party in the lawsuit—either as a co-plaintiff if they consent or as a co-
defendant if they do not [Holt v Heatherfield Trust Ltd. (1942) 2 KB 1 at 5].

Novation and Assignment

At common law, novation was used to shift the burden of obligation from the original
contracting parties to another party. While an assignment transfers rights or interests,
novation is a substitution, resulting in a new contract. The requirements for a valid novation
are:

(a) The creditor must consent to substituting a new debtor, and the debtor must consent
to substituting a new creditor.
(b) The original debt must be completely extinguished.
(c) Novation must be supported by consideration.

This process is cumbersome. To streamline it, a contractual form was developed in some
cases, where the obligor expressly agreed, at the time of the original contract, to fulfill the
obligation in favor of a person named in the contract or any person to whom the claim
might be assigned. Novation differs from assignment in that the three requirements for
novation do not apply to assignments. Consent is the key distinction: while consent is
necessary for novation, it is not required for assignment.

Assignment of Expectancies
Expectancy refers to property that has not yet been acquired but is anticipated in the future,
such as an inheritance from a living person, copyright on an unwritten book, future
royalties, unearned freight, or a lease of land expected to be obtained. At common law,
such assignments were invalid because one cannot assign what they do not yet possess
(Nemo dat quod non habet). However, in equity, these assignments are treated as contracts

9|P ag e
to assign, which can be enforced through specific performance if made for valuable
consideration. If the assignor later acquires the property, they are deemed to hold it in trust
for the assignee, who becomes the beneficial owner [Ukatta v Emembo (1963) 7 ENLR
137].

Ineffective Assignments
Certain rights cannot be assigned due to public policy:

(i) Public Officer's Salary: The pay or half-pay of public officers (e.g., army, police,
and civil servants) cannot be effectively assigned. This restriction ensures that
the dignity of their offices is maintained and their duties are properly discharged
[Stone v Lidderdale (1795) 2 Anstruther 533].
(ii) Alimony: Alimony or maintenance granted to a wife by a divorce court or any
competent court is not assignable, as it is intended for the wife's support [Re
Robinson (1884) 27 Ch.D 160].
(iii) Maintenance or Champerty: Assignments involving maintenance (financial
support provided by a third party to a litigant without lawful excuse) or
champerty (maintenance combined with an agreement to share the proceeds of
a lawsuit) are not enforceable. Additionally, the right to sue without an
associated property interest, such as in a libel case, cannot be assigned. However,
the right to sue for negligence can be assigned, such as to an insurance company,
as this does not constitute maintenance or champerty.
(iv) Rights from Personal or Fiduciary Contracts: Rights arising from contracts of
personal service or of a fiduciary nature cannot be assigned [Griffith v Tower
Publishing Co. & Ors (1897) 1 Ch. 21].

10 | P a g e