DEFINITION OF CHOSE IN ACTION
Chose in action is defined as the bundle of personal rights over property
which can only be claimed or enforced by action and not by taking
physical possession. In law, its applied to personal property. Chose in
action is an intangible property cannot be possessed and can only be
enforced by legal action. Such example is debt. The concept is that the
owner has no possession but merely a right of action for their possession.
In Torkington v Magee1, chose in action is known as an expression used to
describe all personal right of property which can only be claimed or
enforced by action and not by taking physical possession Such examples
are right to receive or recover a debt, money related to contract, but
which cannot be enforced without action and therefore termed choses or
thing in action. Under Common Law, a chose in action is not assignable,
but bills of exchange and promissory notes may be assigned by
endorsement when payable to order or by delivery when payable to
bearer. There are two types of chose in action which is legal and equitable
choose in action.
Legal chose in action is effected at law, which mean that is it assignable
under statute. The relevant statute in Malaysia is Civil Law Act 1956,
Section 4(3). Firstly, it must be an absolute assignment and complied with
the relevant statute. Formalities include that it must be in writing, signed
by assignor and express written notice to the obligor. Express written
notice must be direct and definite state of the fact. It must be absolute
assignment and not partial and for a whole right. The consequence of
valid assignment is that assigned chose in action is effective at law.
The term legal chose in action was discussed in the case of King v Victoria
Insurance Company2. In this case, an insurance company had paid out to
its insured on a cargo damage claim and had taken the insured an
assignment of the claim. The Bank of Australian effected an insurance
1 [1902] 2 KB 427.
2 [1896]A.C 250.
with the insurance company of certain good to be shipped to London.
Before the cargo left Australia, it was damaged through the negligence of
the defendant King, an employee of the Queensland Government. The
bank claimed a sum from the company which was paid. The company took
an assignment by deed of all the rights of the bank against King subject to
stipulation that the banks name should not be used in legal proceedings.
The Privy Council held that, although subrogation would not have entitle
the insurance company to sue the wrongdoer in its own name, the
company would nevertheless do so by virtue of the assignment which fell
within the statute. The Court construed the term legal chose in action
includes all rights the assignment of which a Court of Law or Equity would
before the Act have considered lawful. In this case, the phrase legal
chose in action was said to mean lawfully assignable chose in action. It
is an action for something which is not possession, but which must be
sued for in order to recover possession of it. The decision of Victoria case
was affirmed in the case of Pacific Steam Navigation3 and the main
principle is that a legal chose in action is something which is not in
possession but which must be sued for in order to recover possession of it.
In the case of Manchester Brewery Co Ltd v Coombs4, in holding that an
assignment of the benefit of a covenant by a lessee of a hotel to buy all
the beer required for a sale at the hotel from the assignor was a legal
chose in action and within the statute, since it could lawfully have been
assigned in equity before the Judicature Act 1873.
Hence, chose in action refers to personal property rights which are not
enforceable by taking physical possession but only by action. Such
example are when A (the assignor) assigned benefit to third party, C (the
assignee) in which C can take action against B, being the person liable
under the contract.
3 [1965] 1 Q.B 101.
4 [1901] 2 Ch. 608.
