The absence of written notice under s 4(3) does not invalidate an equitable assignment if the debtor had knowledge of it.

Introduction

[1] In the High Court, the 1st respondent sued the appellant as the 1st defendant and the 2nd respondent as the 2nd defendant for breach of contract and for breach of trust and various other causes of action.

[2] After the full trial, the High Court found for the 1st respondent and allowed the claim and ordered an inquiry to be held to determine the amount of money that was in the sinking fund in the account of the 2nd respondent in the appellant's bank which was due to the 1st respondent based on the Deed of Assignment and a Power of Attorney granted to the 1st respondent by the 2nd respondent and awarded RM500,000.00 as general damages against the appellant and RM100,000.00 as general damages against 2nd respondent.

[3] Dissatisfied with the decision of the High Court, the appellant appealed to Court of Appeal against the whole decision, and on 28 August 2014, the Court of Appeal dismissed the appeal with costs.

[4] On 6 January 2015, this Court granted leave to the appellant to appeal against the decision of the Court of Appeal on the following questions of law:

(a) Where there is no written notice of an absolute assignment pursuant to s 4(3) of the Civil Law Act 1956 , is the debtor liable to the assignee for the debt under the assignment;

(b) Where there is no written notice of an absolute assignment pursuant of s 4(3) of the Civil Law Act 1956 , and the trial Court make a finding that the debtor has knowledge of an assignment between its customer and third party, can the debtor be held liable to that third party for the debt where the debtor has made payment of the same to its customer;

(c) Where the creditor has assigned the benefit of funds in a fixed deposit account to a third party, can mere knowledge of the identity of the signatories to a current account, constitute notice of an assignment to the debtor

Background Facts

[5] The 2nd respondent was the appellant's customer since 5 April 1994. The appellant part-financed three government projects awarded to the 2nd respondent.

[6] As an additional security for the financing, a sinking fund was created, where 5% of the proceeds of the government contracts were deposited into the sinking fund account. The account was operated solely by the appellant.

[7] The 2nd respondent was unable to complete the said three projects. The 2nd respondent then executed a Deed of Assignment and a Power of Attorney, both dated 19 September 2003, in favour of the 1st respondent so as to enable the 1st respondent to complete the projects.

[8] On 6 May 2004, the 2nd respondent made an application to the appellant to add one Amiruddin bin Ahmad, a Director of the 1st respondent, as another signatory to its current account with the appellant. Before that the only signatory to the said account was Mohd Hamidi bin Dato' Haji Abd Hamid, the owner of the 2nd respondent.

[9] On 20 May 2004, the 2nd respondent passed a board resolution to approve a change in the authorised signatures in respect of its current account.

[10] The 1st respondent completed the projects.

[11] On 11 July 2005, upon the 2nd respondent's request, the appellant closed the sinking fund account and credited the fixed deposit to the 2nd respondent's current account upon repayment of the loan.

[12] On 20 December 2006, the 2nd respondent passed another resolution to remove Amiruddin bin Ahmad as the signatory from its current account. On 22 December 2006 a copy of the resolution was given to the appellant.

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