Thus, the debtor will not be discharged from liability to the assignee by making payment to the assignor of the negotiable instrument.[iii] An assignment of a chose in action is incomplete as regards the debtor, third persons, including subsequent assignees and attaching creditors until notice of the assignment has been given to the debtor.
Should C be an equitable assignee, similar proceedings 3. The chose in action arising from the debt owed by A to B is legal and not equitable, since such chose in action would have been recovered or enforced by an action at law, prior to the enactment of the Judicature Act 1873.
Others would include: appointing C as B’s agent or attorney for the purposes of accepting payment from A, coupled with a mandate that C need not account to B for such receipts; promising to permit C to use B’s name (on an indemnity for costs) to bring legal proceedings against A on the debt, if unpaid; entering into a tripartite agreement wherein in consideration for A’s obligation to make payment to B being discharged, A promises to make payment to C (ie, a novation); or where, following a request by B that A make payment of the debt owing to B to C, A “acknowledges” to C that A will pay to C the sum otherwise payable to B on account of the loan agreement between them, eg, Shamia v. References to choses in action hereafter should be taken to refer to legal and not equitable choses , unless indicated otherwise. For ease of exposition, this paper will concentrate on the question as to whether a debtor is entitled to claim to be discharged by precise performance of her contractual obligation to pay her creditor.
Thus, courts have held that notice to the debtor or to creditors of the assignor is not indispensable to complete the assignment.
“The essential element is the bona fide agreement between the assignor and assignee, for a sufficient consideration and without intent to defraud creditors or subsequent purchasers.
This document will also create the required notice to the debtor, informing him/her that the debt has been assigned.
An assignment is a transfer of property or of a right or interest in such property, from one person to another and the right to receive money due or to become due is generally assignable.When this is done, the assignment is complete, and a subsequent failure to give notice thereof does not affect the validity of the assignment.”[v] Even if the attaching creditor had no notice of the assignment at the time of institution of proceeding is immaterial and in such situations, the rights of the parties does not depend on notice because “a creditor can subject to legal process only the interest of his debtor, and his debtor has no interest in a chose in action he assigned before seizure by legal process.”[vi] Notice to the debtor of an assignment is not necessary to render the assignment binding as between the assignor and the assignee.However, a debtor is not bound by the transaction until he/she receives notice of the assignment.1 As noted in a recent treatise, 2 once the debtor is given notice of the equitable assignment: (i) should she pay the sum owed to her creditor, she is not discharged from her obligation but will have to make payment again to the assignee [the “no discharge after notice” rule]; (ii) the assignee’s right against the debtor has priority against subsequent assignments by the assignor, in order of precedence of notice [the rule as to priorities]; and (iii) the debtor is no longer entitled to assert such equities as may arise between herself and the creditor post-notice to reduce her liability to the assignee by way of set-off [the rule as to equities].Leaving aside discussion of the second and third of these rules for another day, this paper will focus on an examination of the “no discharge after notice” rule.Notice of assignment and discharge by performance Chee Ho Tham * “A debtor (A) who makes payment to the creditor (B) after having been given notice of its assignment to an assignee (C) is at risk of having to make payment again.” This appears to be a “well settled” aspect of the “transfer” of the legal rights to a debt effected by either equitable or statutory assignment.Yet it contradicts the common law rules as to invariability of a contractual obligation and the automatic discharge of an obligation when it is precisely performed.An obligor can also be discharged if the obligor otherwise changes his/ her position in good faith and without knowledge of the defect in the assignment.The essential element of a valid assignment is the bona fide agreement between the assignor and assignee, for a sufficient consideration and without intent to defraud creditors or subsequent purchasers.As for negotiable instruments, notice to the maker of the transfer of the note is not required.This is because the maker can protect himself/herself by demanding production of the instrument and refusing to pay a party not in possession of it.[iv] Some courts have taken a contrary view and criticized the requirement of notice to perfect title in the assignee.