LAWS2012 Lecture Notes - Lecture 3: Harry Gibbs, Credit Suisse, Novation
INTRO TO PROPERTY &
COMMERCIAL LAW
1. Choses in Action
• Chose in Action – an intangible personal property right which can only be claimed or
enforced by action, and not by taking physical possession.
o Legal choses can be enforced by an action at common law or in equity:
▪ Debts – right to sue for defined amount
▪ Shares – a bundle of rights to participate in profits (dividends) of a
company and surplus capital on winding up
o Equitable choses can only be enforced in equity:
▪ Interest under a trust
▪ Interest under a partnership
• Canny Gabriel Advertising v Volume Sales
− Under partnership, there is:
a) A legal chose in action held by each partner, i.e.
the right to participate in surpluses of assets upon
dissolution of partnership.
b) An equitable chose in action in each asset for that
forms partnership property.
− Later CGA given equitable charge over concert proceeds
(upon which partners already had an equitable interest).
− Partner’s equitable and not legal interest is relevant since
assets to which partners have interest are not discrete.
− Partner’s earlier equitable interest prevails over later
equitable interest.
• When is a thing subject to property rights? Criteria from National Provincial Bank Ltd v
Ainsworth:
1. Definable, i.e. identifiable by third parties
2. Capable of being assigned (not always, e.g. Native title)
3. Some degree of permanence or stability
3.1 Assignability
• Historically, debts have not always been assignable at common law due to fear of “trafficking
in litigation” (law of maintenance and champerty).
o However, equity courts permitted this and provided remedies.
• Maintenance and champerty now abolished as torts and crimes by the Maintenance and
Champerty Abolition Act 1993 (NSW).
• Intangible rights that cannot be assigned
a) Bare rights to litigate – doctrine of maintenance and champerty, but
▪ Can assign rights to any “fruit” that may arise from an action; Glegg v Bromley
▪ Can assign right to sue if:
1. Right is ancillary to a recognized right of property (see below), or
2. Assignee has a genuine commercial interest in taking the
assignment; Trendtex Trading Corp v Credit Suisse
b) Rights to performance of personal services
▪ Where identity of parties is material to performance
▪ Rights to services under employment contracts not assignable; Nokes v
Doncaster Amalgamated
c) Rights which have been contracted out; Linden Gardens v Lenesta
o Cannot assign a burden of the contract, i.e. the obligation to render performance,
without consent of the promise (non-assigning party); Pacific Brands Sport v
Underworks
3.1.1 Bare Rights to Litigate
• Fruits of an action are assignable.
o Glegg v Bromley
▪ Facts: Wife assigned to her husband rights which she claimed in an action
for damages, i.e. all the interest or sum of money to which is may be
entitled to under verdict.
▪ Held: “I know of no rule of law which prevents the assignment of the
fruits of an action” – Williams LJ
▪ Such assignment does not give the assignee any right to interfere in the
proceedings in the action, e.g. to insist on the action being carried on.
• Genuine commercial interest?
o Trendtex Trading Corp v Credit Suisse
▪ Facts: T was owed money under a credit note by a Nigerian bank, but bank
refused to pay and argued it had immunity against suit for debt. CS agreed
to take assignment of T’s right for 800K pounds. CS managed to get a
settlement from Nigerian bank of 8M pounds.
▪ T argued that assignment of the right to sue for debt was champertous and
hence invalid.
▪ Held: Assignment is valid. Assignable if right to sue is ancillary to a
property right, or if assignee has a genuine commercial interest.
▪ CS had pre-existing financial interest in maintaining T’s solvency (since T
owed CS money) which arose independently of the assignment of right to
sue.
• Litigation funding OK
o Campbells Cash & Carry Pty Ltd v Fostif
▪ Facts: A class action was brought by tobacco retailers against wholesalers
for recovery of state licence fees, following HCA declaration that fees were
illegal.
▪ Class action financed by litigation funder, Firmstone, on the basis that it
would take one-third of proceeds if case was successful.
▪ Held: Litigation funding not contrary to public policy. Existing doctrines of
abuse of process sufficient to deal with funders who act in a manner
“inimical to the due administration of justice.”
▪ In this case, acts of seeking out potential plaintiffs, exercising large degree
of control over proceedings and obtaining rights to litigate (for profit), by
themselves or together, did not constitute an abuse of process.
▪ No general rule of public policy preventing assignment of rights to sue.
• Rights Ancillary to Property
o A bare right of action that is itself incapable of being assigned can be assigned if it is
annexed or ancillary to property.
▪ E.g. Assignment of chattels together with a right to sue a bailee for damage
to the chattels caused by negligence; Re Kenneth Wright Distributors.
o Mid-City Skin Cancer and Laser Centre v Zahedi-Anarak
▪ Facts: Doctor Z sued under confidentially and anti-competition clauses of
employment contract after leaving employment. Clinic sold to another party,
new owner sues doctor.
▪ Issue: Was new proprietor of business assigned the right to sue for
confidentially and anti-competition clauses of employment?
▪ Held: Yes, “where right assigned is an attribute of an ongoing business
which is also assigned, assignee has legitimate interest in its enforcement” –
Campbell J
▪ Confidentiality covenant was an equitable chose in action and not related to
performance of services hence, Nokes v Doncaster principle (below) didn’t
apply.
3.1.2 Rights to performance of Personal Services
• Where identity of parties is material to performance, rights to performance not assignable
o Nokes v Doncaster Amalgamated Collieries Ltd
Document Summary
Interest under a partnership: canny gabriel advertising v volume sales. Later cga given equitable charge over concert proceeds (upon which partners already had an equitable interest). Partner"s equitable and not legal interest is relevant since assets to which partners have interest are not discrete. Ainsworth: definable, i. e. identifiable by third parties, capable of being assigned (not always, e. g. native title, some degree of permanence or stability. Doncaster amalgamated: rights which have been contracted out; linden gardens v lenesta, cannot assign a burden of the contract, i. e. the obligation to render performance, without consent of the promise (non-assigning party); pacific brands sport v. Cs agreed to take assignment of t"s right for 800k pounds. Cs managed to get a settlement from nigerian bank of 8m pounds: t argued that assignment of the right to sue for debt was champertous and hence invalid, held: assignment is valid.
