Chose in Action: Meaning, Examples and Assignment

What is a Chose in Action?

The holder of a chose in action can enforce the right against the person who owes performance. It can exist before proceedings begin and while the other party performs voluntarily. The expression describes the property right, even when nobody needs to sue.

The Australian Financial Security Authority (AFSA) includes contractual enforcement rights and rights to recover money among its examples of choses in action. For practitioners, this separates the existence of property from the practical prospect of collecting it.

A signed loan agreement records the terms of a loan. The lender’s right to repayment is the chose in action. A bank transfer can establish that money moved, but its description alone cannot establish whether the recipient owes a debt.

Keep two conclusions separate in the matter file:

• A claimed right identifies an alleged obligation and the person asserting it.
• An established right has a supported legal basis, with the evidence needed to answer the other party’s denial or defence.

Disputing a right does not itself destroy it. Equally, calling a payment a loan in a spreadsheet does not create a repayment obligation.

Examples in Bank Records and Financial Disputes

An unpaid invoice, a positive bank balance and a disputed contract payment can each disclose a different chose in action. The following examples are fictional. They show why the identity of the obligor, meaning the person who owes performance, belongs beside the amount.

Claimed right	Right-holder and obligor	Underlying obligation	Records and payment history	Remaining amount
Unpaid supply debt	Wattle Supply Pty Ltd against Harbour Works Pty Ltd	Accepted order for delivered goods priced at $40,000	Order, delivery record and invoice, with $15,000 received into Wattle’s account	$25,000 before any supported adjustment
Positive bank-account balance	Noor against her bank	Bank’s obligation under the account relationship	Account terms and statement showing deposits less withdrawals	$12,400 credit balance, subject to applicable account rights
Disputed completion payment	Mallee Design Pty Ltd against Cedar Projects Pty Ltd	Contractual payment of $18,000 if the agreed milestone is met	Contract, acceptance correspondence, invoice and no matching receipt	$18,000 claimed, with milestone satisfaction disputed

For the bank-account example, the intangible property is the customer’s right against the bank under the account relationship. The High Court discusses bank-account rights and electronic payments in Lordianto v Commissioner of the Australian Federal Police.

In the disputed-contract example, no receipt appears in the supplied statement. That observation supports the payment chronology. Evidence that the milestone was met must come from the contract and performance records.

Incorrect inference: a $40,000 transfer proves the recipient owes the sender $40,000.

Supported approach: identify whether the transfer paid an invoice, advanced a repayable loan, made a gift or discharged another obligation. Then match that explanation to the documents. Asset tracing helps follow the payment when it moves between accounts.

Chose in Action vs Chose in Possession

A chose in possession is tangible personal property capable of possession, while a chose in action is an enforceable intangible right. A company vehicle and a debt owed to the company illustrate the difference.

The same distinction separates cash notes from a bank-account credit balance. You can physically possess the notes. The account balance records an entitlement against the bank under the account relationship.

A paper contract adds a second layer. The physical paper can be possessed, while the contractual right it records remains intangible. Holding the paper does not, by itself, establish ownership of the right.

If a file contains a loan agreement bearing someone else’s name, establish the holder’s capacity. They might hold it as solicitor, records custodian or assignee. An assignment requires evidence of the transfer of the right, beyond delivery of the folder.

Special instruments can have rules connecting possession and enforcement. Identify the instrument before applying the ordinary-contract example to it.

Legal and Equitable Choses in Action

A legal chose in action is a right recognised at law, such as an ordinary contractual debt. An equitable chose in action arises under equitable principles, such as a beneficiary’s right to enforce a trustee’s proper administration of a trust.

The source of the right determines the claim. In a supply debt, the claimant relies on the contract and the debtor’s payment obligation. A trust beneficiary relies on the trust relationship and the trustee’s corresponding obligations. The account receiving money does not settle which basis applies.

Classifying the right and classifying its assignment are separate tasks. A legal debt can be assigned in equity even where the transfer does not satisfy the applicable statutory legal-assignment route. That possibility needs its own analysis of intention, completion and any relevant formalities.

The classification affects enforcement parties. A statutory legal assignment can permit the assignee to sue in its own name. An equitable assignee of a legal debt may need the original holder joined to proceedings. The High Court explains the procedural distinction in Equuscorp v Haxton.

Record the precise right and transfer relied on before selecting the claimant. A trust entitlement, an assigned debt and a personal damages claim do not all follow identical rules.

Assignment of a Chose in Action

Assignment transfers an identified right from its holder, the assignor, to another person, the assignee. Establish assignability before deciding whether the transfer satisfies legal or equitable requirements.

1. Identify the existing right. Specify the agreement or other legal basis, the obligor and the entitlement being transferred. Distinguish an existing contractual right to future payment from a mere expectation of obtaining a future contract.
2. Confirm the assignor owns that right. Reconstruct any earlier assignments and check competing claims. Identify whether the transfer covers the whole right, a part or security over it.
3. Read contractual restrictions and the governing law. A clause can prohibit assignment or require consent. Examine its wording and legal effect before treating notice as sufficient.
4. Apply the relevant transfer formalities. Keep the executed instrument with the exact description of the assigned property and any required consent.
5. Give the required notice and retain evidence of delivery. Reconcile payments received before and after notice so the balance does not include money already discharged.

Jurisdiction Changes the Formalities

In NSW, section 12 of the Conveyancing Act 1919 addresses absolute assignments of debts and other legal choses in action. It requires writing signed by the assignor, excludes a charge-only assignment and requires express written notice to the obligor. The transfer remains subject to prior-ranking equities.

Queensland’s Property Law Act 2023, sections 189 to 192 uses different provisions. Section 190 requires a signed written absolute assignment and actual notice. The definitions in section 189 expressly include part of a debt or thing in action. Completed voluntary assignments in equity are addressed separately in section 192.

These differences prevent a national rule that every assignment needs the same notice or that every partial assignment must be equitable. Select the governing jurisdiction and any transitional provisions for the actual transfer.

An equitable assignment needs a sufficient basis in equity. Failing a statutory formality does not automatically make every attempted transfer effective in equity. Where the transfer is voluntary, examine completion. Where consideration supports the transfer, retain evidence of the bargain and performance.

Assignment Is Different From Novation

Assignment transfers rights. It does not, by itself, release the assignor from contractual obligations. Novation substitutes a new contractual relationship with the necessary parties’ agreement. The Australian Government Solicitor’s briefing on novation and assignment explains that distinction and the effect of contractual consent clauses.

A right to payment and a bare right to litigate also require different treatment. Rules about maintenance and champerty can restrict trafficking in litigation. Their application depends on the claim, the transaction and the assignee’s commercial interest. A signed instrument does not establish that any lawsuit can be sold.

Equuscorp addresses assignability separately from whether the instrument actually transferred the restitutionary right. Apply both inquiries to the proposed transaction. Do not assume that transferring a named debt necessarily captures every alternative claim.

Retain the original agreement, each assignment, authority to execute and any consents. Add the notices and delivery evidence, then reconcile receipts to the claimed balance. A deed of assignment records the transfer once its subject matter and requirements are established.

Ownership and Control in Bankruptcy

Bankruptcy can transfer control of a chose in action to the trustee, depending on the particular right and statutory exclusions. Begin with ownership and the nature of the claim, before deciding who can pursue or settle it.

Under the Bankruptcy Act 1966, section 58 governs vesting and section 116 identifies divisible property and exclusions. An unpaid trading debt owned by the bankrupt can vest in the trustee. Property held on trust for another person requires separate treatment.

Personal-injury and personal-wrong claims also need separate analysis under sections 60 and 116(2)(g). A claim combining personal and property elements requires examination of the relief sought. For existing proceedings, section 60 governs the trustee’s election to continue or discontinue, subject to its exceptions.

Keep an estate-owned contractual debt distinct from a right to sue conferred on the trustee by the Act. Schedule 2, section 100-5 permits assignment of those statutory rights. It requires written notice to creditors and court approval if the trustee’s action has begun.

Record who owns the right and who has authority to compromise or assign it. Wider administration questions belong with the trustee in bankruptcy. A recovery under section 121 of the Bankruptcy Act has its own statutory basis and must be identified separately from an unpaid receivable.

Prepare the Right for Recovery

Prepare a chose in action for recovery by connecting its legal basis to the current holder and a reconciled outstanding amount. Use the fictional Wattle Supply debt from the examples.

Wattle’s accepted order requires Harbour Works to pay $40,000 for delivered goods. The delivery record supports performance. Bank statements show one $10,000 receipt and a later $5,000 receipt, each matched to remittance advice for the invoice. The unreconciled invoice amount reduces to $25,000.

Wattle then assigns the whole receivable to Banksia Recoveries Pty Ltd under an instrument governed by NSW law. The file holds the signed absolute assignment and evidence of express written notice to Harbour Works. Those documents support examining enforcement by Banksia as assignee under section 12.

Harbour Works alleges a $4,000 credit for damaged goods. The $25,000 balance is therefore the amount claimed before resolving that defence. Preserve the complaint and delivery evidence, and test whether the claimed credit is contractually supported.

Also resolve disputed ownership, missing consideration where the transfer relies on a bargain and the applicable limitation period. Record accrual and any alleged acknowledgment or part payment for legal assessment. Assignment is not a reason to assume an expired claim becomes enforceable. Compare likely recovery with enforcement costs and the debtor’s capacity to pay before recommending proceedings.

For statement-heavy matters, FinTrace removes hours of manual statement review by consolidating supplied records into a searchable ledger and clear findings report. Source PDF filenames and page references put the payment evidence directly at hand. Lawyers and forensic accountants can use that analysis when assembling the receipts and unpaid balance for the particular right.

Finish the matter note with an instruction that another practitioner can act on:

• Record the legal basis and the conditions for payment.
• Identify the current holder, the obligor and any competing ownership claim.
• State the amount claimed and show the reconciliation, including disputed adjustments.
• Index the agreement, performance records, statements and complete assignment chain.
• Record notice evidence, unresolved defences and the limitation issue requiring a decision.
• Name the next instruction, such as obtaining a missing delivery record or advising on proceedings in the assignee’s name.

For Wattle’s receivable, the next instruction is to resolve the damaged-goods allegation and limitation position before Banksia authorises recovery of the supported balance.