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, it’s 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 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 bank’s 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

1  [1902] 2 KB 427.

2 [1896]A.C 250.

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.