Actionable Claims

In one line

An unsecured debt, or a beneficial interest in movable property you do not hold, can be transferred by a signed writing, and the person who takes it takes it with every defence the debtor already had.

In exam wording: section 3 defines an actionable claim as a claim to any debt other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief, whether the debt or beneficial interest be existent, accruing, conditional or contingent.

Section 130: how the transfer is made

By writing only. The transfer of an actionable claim, whether with or without consideration, is effected only by the execution of an instrument in writing signed by the transferor or his duly authorised agent. There is no oral assignment of an actionable claim, and it makes no difference that the assignment is a gift.

Complete on execution. The transfer is complete and effectual upon the execution of the instrument, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, vest in the transferee, whether or not notice is given.

But notice protects the debtor. The proviso is the practical heart of the section. Every dealing with the debt by the debtor is valid as against the transfer, save where the debtor is a party to the transfer or has received express notice of it.

So the assignment binds the debt from the moment it is signed, and yet a debtor who has not been told may safely go on dealing with his creditor. Both propositions are true because they answer different questions: who owns the claim, and whom the debtor may safely pay.

The Act's illustration (i) makes it concrete: A owes money to B, who transfers the debt to C. B demands the debt from A, who, not having received notice of the transfer, pays B. The payment is valid, and C cannot sue A for the debt.

Suit in his own name. Under sub-section (2), the transferee may sue or institute proceedings in his own name, without the transferor's consent and without making him a party. This is what distinguishes a statutory assignment from the old practice of suing in the assignor's name.

Exception. Nothing in the section applies to the transfer of a marine or fire policy of insurance, or affects section 38 of the Insurance Act 1938.

Illustration (ii) deals with life policies: A assigns a policy on his own life to a bank to secure a debt; on A's death the bank may receive the money and sue without the concurrence of A's executor, subject to the proviso and to section 132.