ABSTRACT

Locke believed and affirmed that:

“though men as a whole own the earth
and all inferior creatures, every
individual man has a property in his own
person; this is something
that nobody else has any right to. The
labour of his body and the work of his
hands, we may
say, are
strictly his.
So, when he
takes from
the
state that nature has provided and left it
in, he mixes his labour with it, thus
joining it to
something that is his own; and in that way
he makes it his property.”
DR NORAZIAH ABU BAKA
R
UiTM LAW

LAND LAW II [LAW 554]

FACULTY OF LAW
UNIVERSITI TEKNOLOGI MARA SHAH ALAM
LESSON PLAN

COURSE : LAND LAW 2

CODE : LAW 554
SEMESTER : OKTOBER 2020 – JANUARY 2021
LECTURER : DR NORAZIAH BT ABU BAKAR
WEEK DATE TOPICS
ACTIVITIES &
ASSESSMENTS

Week 1 12-18 Online Lecture

OKTOBER Introductory Lecture and
2020 Overview of the Subject
• Overview of the content.
• Distribution of assessments.
• Statutes, Text & References
• Exit/entrance survey

Week 2 19-25 Security Transactions Online Lecture

OKTOBER • Meaning
2020
• Types

1. Jual Janji

Week 3 26 Security Transactions Online Lecture

OKTOBER • Lien Tutorial - Discussion via
2020 – online platform.
1
NOVEMBER
2020

Week 4 2–8 Security Transactions Online Lecture.

NOVEMBER • Charge
2020 Tutorial - Discussion via
online platform.

1
Week 5 9 – 15 Security Transactions Online Lecture.
NOVEMBER • Remedies
2020 Tutorial - Discussion via
1. Order for sale online platform.

Week 6 16 – 22 Security Transactions Online Lecture

NOVEMBER • Remedies
2020 Tutorial - Discussion via
2. Taking Possession online platform.

3. Assignment to Danaharta

Week 7 23 – 29 Easement Online Lecture.

NOVEMBER
2020 Tutorial - Discussion via
online platform.

Take home test-30% – 24

hours (28 /11/2020 to
29/11/2020 @ 11.59pm)

30 MID –SEMESTER BREAK 1 week

NOVEMBER
2020 –
6
DECEMBER
2020

2
Week 8 7 – 13 Land Administrator’s Right Of Online Lecture.
DECEMBER Way
2020 Tutorial - Discussion via
online platform.

Week 9 14 – 20 Caveats Online Lecture.

DECEMBER • Meaning in general
2020 • Effects in general Tutorial - Discussion via
online platform.

Week 10 21 – 27 Indefeasibility 1 Online Lecture.

DECEMBER
2020 Tutorial - Discussion via
online platform.

Week 11 28 Indefeasibility 2 Online Lecture.

DECEMBER
2020 – 3 Tutorial - Discussion via
JANUARY online platform.
2021

28/12/2020 Release
question for assignment
(30%)

30/12/2020 Submit
assignment

Week 12 4 JANUARY Registrar Caveat Online Lecture.

2021 – 10
JANUARY Tutorial - Discussion via
2021 online platform.

3
Week 13 11 – 17 Private Caveat Online Lecture.
JANUARY
2021 Tutorial - Discussion via
online platform.

Week 14 18 - 24 Lien holder’s Caveat Online Lecture.

JANUARY Trust Cveat
2021 Tutorial - Discussion via
online platform.

Week 15 REVISION WEEK

25 – 31
JANUARY
2021

1 EXAMINATION WEEK • FINAL

FEBRUARY ASSESSMENT
2021 -23 • Release of
FEBRUARY questions
2021 (1/2/2021)
• Submission date
(5/2/2021)

COURSE ASSESSMENT PLAN

4
 TYPE ASSESSMENT DURATION OF %
RELEASE OF
ACTIVITIES ASSESSMENT ASSESSMENT

a. Assessme
nt 1 Take home Week 7 24 hours 30%

test (23/11/2020) (24/11/2020)

(Individual)

b. Assessment 2

Assignment Week 11 3 days 30%

(group) – (28/12/2020) (30/12/2020)

(Problem
Essay/ Case
Study/ Article
Review) 2-
3 Issues

c. Final Week 16 5 days 40%

Problem Essay
Assessment (1/2/2021) (5/2/2021)
question.
(Individual) 35
Issues.

TOTAL 100%

LAND LAW 2 (LAW 554)

SECURITY TRANSACTION
JUAL JANJI

5
• Concept of jual janji:

• Modus Operandi:

• Elements of Jual Janji:

• The issue of Jual Janji transaction:

• Views of Court:
• Strict interpretation - As a contract of sale:
o HAJI ABDUL RAHMAN & ANOR V MOHAMED HASSAN (1917) AC
209 (PC) o WONG SEE LENG V SARASWATHY AMMAL (1954) 1
MLJ 141 o IBRAHIM V ABDULLAH(1964)1 MLJ 139 o A KANAPATHY
PILLAY V JOSEPH CHONG (1981) 2 MLJ 117 (FC) • Exceptions:
• JJ held to be a contract but time was not of an essence.
▪ ISMAIL HJ EMBONG V LAU KONG HAN (1970) 2 MLJ 213

o Refusal of Lender to accept repayment within stipulated time

▪ AHMAD BIN OMAR V HJ SALLEH SHEIK OSMAN (1987) 1
MLJ 338.
o ABDUL HAMID SAAD V ALIYASAK ISMAIL (1999) 1 AMR
105.
o HATIJAH BTE REJAB V ABDULLAH SAAD (2004) 2 AMR 665

• JJ as an equitable security transaction.

▪ YAACOB BIN LEBAI JUSOH V HAMISA BTE SAAD(1950) 1
MLJ 255 (COA)
▪ NAWAB V MOHAMED SHARIF (19530 19 MLJ 121
▪ HALIJAH V MORAD (1972) 2 MLJ 166
▪ OTHMAN & ANOR V MEK (1972) 2 MLJ 158
• Equittable security transaction vs illegal contract or against public
policy?
▪ HUSAINI BIN YAACOB v TAN TEO SIANG [2014] 5 MLJ 606
(jual janji transaction)
▪ PANNIR SELVAM A/L SINNAIYAH & ANOR V TAN CHIA FOO
& ORS [2019] MLJU 1699 (illegal money lending
transaction)
▪ Sembagavally a/p Murugason v Tee Seng Hock [2020] 7
MLJ 1 (illegal money lending transaction)

6
• What is the effect if lender disposed the land within the stipulated
period?
o Fraudulent conduct as decided in the case of MOHAMED ISA V HJ
IBRAHIM (1968) 1 MLJ 186.

7
 JUAL JANJI

1.0 INTRODUCTION

Conceptual framework of Jual Janji:

Jual janji is a security transaction that was being practiced by the early Malay
society since 19th century and as stated by Judith Sihombing in her book
“National Land Code: A Commentary”: Jual Janji evolved from a local
community loan transaction where land is used as a security for the loan to
secure full repayment of loan. In order to complete this transaction, the
borrower will transfer his land to the lender with an undertaking given by the
lender that the borrower can redeem the loan upon full settlement of the loan.
It is also an understanding between the parties that the right to redeem
stretched even after the expiry of stipulated time for repayment of the loan
because the transaction represented a communal assistance to those in the
need. (gotong royong). This transaction is based on the Islamic concept of
communal assistance and any deed between two parties under Islamic concept
should be based on the aqad and intention of the parties during the formation
of the contract.

S.K Dass1 defined Jual Janji as a conditional transfer with a right to

repurchase. He further elaborated in his book that this system was recognized
in Kelantan via Section 108a of the Enactment No 26 of 1938. The special form
of transfer is provided under Schedule 24a where the amount advanced by the
creditor is subject to an undertaking by the borrower that the money advanced
shall be paid within two (2) years from the date of transfer. The borrower’s
right to redeem the land shall lapse after two years and it was barred by Rule
9.The creditor shall then free from any jual janji transaction and he will be
considered as an absolute owner of the land in question.

Maxwell wrote in his report on “Malay Customary Land Tenure” published in

1884 interpreted jual janji as a dealing between the owner of a piece of land
who sell his proprietary right of the land to the creditor and upon full
settlement of the loan, he shall be entitled to take back his land. If the term
mentioned is not satisfied by the borrower. The sale will become absolute. 2
Another prolific writer, David Wong3 viewed Jual Janji as a transaction where
the borrower transfers (in a loose sense) to the lender who thereby takes
possession of it. Whatever profits the lender may make out of the land will be
1 SK Dass, The Torrens System in Malaya, Malayan Law Journal Ltd, Singapore, 1963
2 See Yong Chiu Mei, A review of the Judicial Approaches to the Recognition of Customary Security Transaction in the
3
Peninsular Malaysia Land Law, http://eprints.UM>edu.my/234/1/A on the 23/6/2009
S.Y Wong, (1975
), Tenure and Land Dealings in Malay States,Singapore University Press

8
his to keep as the reward, akin to interest, for the loan. The borrower is
entitled to resume the land upon full settlement of the loan, except if time is
stipulated, default will turn the original arrangement into absolute sale or
commonly known as Jual Putus.

Modus Operandi:

• The borrower who is the owner of the land “transfers” his land to the
lender.
• The lender will then takes possession of the land and will be entitled to the
profit make out of the land throughout the loan period.
• Right to the profit is only during the period of the loan.
• Upon full payment of the loan, the borrower may then resume possession of
the land and the lender is obliged to surrender the land back to the owner.
• The loan period is fixed in an agreement made between the borrower and
the lender.
• If the borrower defaults then the original arrangement for re transfer of the
land will then be an absolute sale that is jual putus.

Elements of Jual Janji:

1. lender and borrower;

2. loan;
3. land as a security;
4. land transferred to the lender;
5. lender takes proceeds of the land during the loan period;
6. upon full settlement of loan, lender shall re transfers the land
to borrower.
7. if borrower defaulted in the repayment of the loan, land will
be absolutely vested to the lender (jual putus).

In the early days the concept of “transfer” in jual janji is only in form of oral
understanding between the creditor and borrower and no actual documentation
or registration of any documents takes place. The lender only takes possession
of the land and interest therein; the proprietary rights remain with the
borrower. However, the lender will, in most cases, let the land to the borrower
and rent will reflect the interest payable under the loan advanced by the
lender to the borrower. If the borrower fails to repay the loan within the
stipulated time agreed by both parties under the loan agreement, then the
land will be transferred into the name of the lender.

9
When National Land code 1965 was introduced and owner must comply with the
mandatory requirement for registration of land titles, Jual Janji transaction
was also affected. Dealings were regulated and Jual Janji has to conform to the
procedures of transfer of land. The land will be transferred into the name of
the lender and a collateral agreement will be executed whereby the lender is
obliged to transfer the property to the borrower upon full repayment of the
loan.

It should be noted that this transaction is akin to that of a common law

mortgage. However since most of the loan transactions carried out by the
parties were not revealed in the documentation, the right of redemption could
not be easily invoked by the borrower. After National Land Code 1965 was
introduced, the transfer of land under Jual Janji transaction involved an actual
transfer of land by using Form 14A and presented for registration. On record,
the land is transferred to lender by the borrower.

Development of Jual Janji transaction.

• Jual Janji has been practiced by the early Malay society and widely
accepted as security transaction. It is based on Islamic concept where
riba’ or usury is prohibited.
• It received recognition and being codified under the Kelantan Land
Enactment (No 26 of 1938). Section 108A of that Enactment provided for
transfer of property by way of Jual Janji.
• Rule 9 of the above Enactment provided that the borrower has to settle
the loan within two years from the date of transaction, if the borrower
failed to pay the loan, the land will be vested with the lender free from
the obligation from the Jual Janji and the borrower’s interest ceases to
exist.
• However, once the Enactment repealed Jual Janji did not received any
recognition.

2.0 ISSUES OF JUAL JANJI TRANSACTION IN WEST MALAYSIA

Problem arises in determining the status of Jual Janji when the parties bring
the matters to court. This occurred when the borrower failed to pay within
stipulated time. Is the transaction a pure contract of sale under the law of
contract or is it a customary security transaction? If Jual Janji is a pure
contract of sale then time shall be of an essence with regards to the period
stipulated for repayment in the collateral agreement for a re transfer.

The effect to the parties if Jual Janji is merely regarded as a pure contract of
sale will be the lender shall be at liberty to become absolute owner of the
property if the borrower fails to pay within the stipulated time. The borrower

10
will not be able to redeem the property even though the intention of the
parties when transferring the land was only to use the land as security under
the loan transaction. The borrower will be badly affected if he has made
partial repayment of the loan or the actual value of the land is much higher
than the loan advanced to him.

If Jual Janji is regarded as a customary security transaction, time would not be

of an essence as the security is represented by the land which is in the name of
the lender. Provided the borrower repays the loan in full, the land would be
retransferred to him.

The effect to the parties if Jual Janji is regarded as security transaction will be
the lender could not refuse to retransfer the land upon full payment of the
loan because the land is only used as a security for the loan (which should be
discharged upon full settlement) even if the repayment is made after the
stipulated time in the collateral agreement. If the borrower failed to pay
within stipulated time, the creditor can recover the outstanding amount by
applying for a foreclosure proceeding against the borrower’s land. In brief, the
creditor can only recover the outstanding amount and any residue from the
sale of the land must be refunded to the borrower.

Pinciples Adopted by the Malaysian Courts.

1. Strict Interpretation: Transfer of land and the Collateral Agreement are

only regarded as a contract of sale.

• The collateral agreement to re transfer the land to borrower in a Jual

Janji transaction confers no real right in the land on the borrower. The
agreement is however valid as a contract only. If the term of contract
regards time as an essence, then the parties are bound to comply with
the said term. In brief, it means if the borrower failed to comply with
the terms of the contract, the court will not assist him to obtain re
transfer of the land upon full settlement of the loan if it is made out of
time.

• Our court viewed the transaction as merely having a contractual

operation because to transact any land dealing, it must be recognized
dealing under the National Land Code 1965 or any previous land statute.
In order to be recognized as having an equitable right must comply with
the provisions of NLC. Therefore, if the parties intended the transaction
to be a security transaction, they must either create a charge or lien.

• Case:

11
 o HAJI ABDUL RAHMAN & ANOR V MOHAMED HASSAN (1917) AC 209
(PC) Facts:
The Borrower entered into a loan agreement with the lender and
transferred his land to the lender with a collateral agreement to
retransfer upon full settlement. He fails to repay on time but
managed to settle the full outstanding amount. He insisted that
the land be transferred back to him.

Issue:
Whether the collateral agreement is a contract or it was part of
a security transaction? If it was a security transaction then,
time will not be of an essence and the owner may redeem the
land back even after the expiry of the loan agreement.

Held:
It was NOT a security transaction or mortgage as the only form of
mortgage in Malaysia is charge or lien. Since it was a contract, the
claim was statute barred.

• Cases that supported Haji Abd Rahman:

o A KANAPATHY PILLAY V JOSEPH CHONG (1981) 2 MLJ 117 (FC)

Salleh Abas FJ:
It was contended by the appellant (owner) that the option to
repurchase the land created a trust in his favour thereby making
him beneficial owner and as such he was entitled to call upon the
respondent to re transfer the land at any time he chose to do so.
In other words the option to repurchase gave him an equitable
interest in the land.

But following Hj Abd Rahman’s case, the option to repurchase

only confers the borrower a contractual right which can be
defeated by an effluxion (lapse) of time and this right does not
give rise to an equitable interest. It is purely governed by the
terms of the arrangement under the contract.

o WONG SEE LENG V SARASWATHY (1954) 20 MLJ 141

The case was about a purported security transaction by way of

transfer of land together with an agreement for repurchase. The
borrower contended that although the period for repurchase had
expired, he was however entitled to a retransfer of the land
based on equitable principle that is “once a mortgage always a
mortgage” should be applied.

12
 Held – This argument was rejected by the judges. The judges
decided by following Hj Ab Rahman’s case that any transaction
which did not comply with the provision of the Land Code will not
give rise to an equitable interest in land.

The judges reiterated the fact that the contract alleged was a
contract where time was the essence of the same. This is a
contract which parties are free to make if they choose, and
people very frequently do make contracts of this kind. Courts
have no power to extend the time for exercising the option.

o IBRAHIM V ABDULLAH(1964) 1 MLJ 139, where the parties

executed 2 agreements. Under the first agreement, the borrower
purported to sell the land to the creditor for RM1000.The second
agreement, the creditor agreed to resell the land at the same
price that is RM1000 and the borrower shall pay the money within
three years. The borrower tried to pay the money in 1961 and
filed a case in court to redeem the land. He argued that the two
agreements amounted to equitable mortgage of the land. It was
decided by the court that since the borrower failed to pay within
the stipulated time, there was no equity in his favour.

Exceptions:
• However there are exceptions to the above principle. The judges were of
the view that the parties who enter into a contract must be ready to
perform their tasks in accordance with the terms and conditions of the
contract, failure to comply would amount to a breach of contract.
• In most cases, court will evaluate as to whether the non-payment within
stipulated time by the borrower caused by the conduct of the lender.
• If the payment is made within stipulated time such as the case of
OTHMAN & ANOR V MEK (1972) 2 MLJ 158 court will decide in favour of
the borrower. In this case the borrower managed to pay the loan before
the expiry of five years as provided by the agreement. The borrower
applied to court for the retransfer of the land and his application was
allowed.
• The court will also decide in favour of the borrower if the lender tried to
dispose the land within the stipulated period since the borrower is
entitled to perform the contract and any action to evade the contract
will give rise to a breach of contract. See case MOHAMED ISA V HAJI
IBRAHIM (1968) 1 MLJ 186 where before expiration of the contractual
period, the lender sold the land to another third party. The court noted
the fact that since the time stipulated in the Jual Janji agreement has
not expired at the time of the sale, the conduct of the creditor to sell

13
 the land in question amounting to fraud. The judge decided in favour of
the borrower.
• The followings are the relevant conduct of the lender that will give rise
to a breach of contract on part of the lender:
o The lender is agreeable to the extension of time for the
repayment of loan; or
o The lender himself refused to accept repayment either by evading
repayment or asking for additional term not provided for in the
original agreement.

i. Extension of time given by the Lender resulting to time is no longer

essence of the contract:
• The judges still follow the principle of contract but the borrower was
allowed to redeem because the lender still receive the repayment made
after the due date. Time will no longer be regarded as essence of the
contract once the lender agreed to give an extension of time for
repayment of the loan.
• Where the time for repayment is not the essence of the agreement, the
borrower’s (owner) contractual right to repurchase the land can still be
exercised even after the due date.

• Cases: o ISMAIL HJ EMBONG V LAU KONG HAN (1970) ) 2 MLJ 213

Plaintiff and Defendant entered into a JJ transaction and when

the period for repayment expired, the Defendant i.e the lender
extended the period provided he paid the $40 monthly.

Ibrahim J:
This is a clear case of Jual Janji insofar as the land is concerned
and whether or not the Plaintiff’s contractual right to
repurchase the land could still be exercised after the expiry of
the eightmonth period would depend on whether time was of the
essence of the contract or not. This would of course depend on
the intention of the parties…

Thus in this case if time was originally of the essence of the

contract it had been allowed to pass and the conduct of the
parties clearly showed that it was no longer an essence of the
contract. The Plaintiff is therefore entitled to repurchase the
land on payment of the sum of the money lawfully due to the
Defendant.

14
ii. Refusal of Lender to accept repayment or if the Lender evaded
payment.
• In the event the Lender refused to accept repayment to avoid the
borrower from performing the contract, the borrower will be allowed to
redeem the land.
• AHMAD BIN OMAR V HJ SALLEH SHEIK OSMAN (1987) 1 MLJ 338 where
in this case the borrower entered into an agreement to transfer his land
to the lender upon receipt of the loan amount. The parties signed a
collateral agreement that provide the borrower shall repurchase the land
within three years from the date of the agreement by paying a sum
equivalent to the loan amount i.e RM12,000. The borrower tried to pay
the said sum within the stipulated period but the lender refused to
accept repayment by avoiding the borrower. After expiry of the
stipulated period, the lender enforced the agreement. The court decided
that since the conduct of the lender himself did not regard time as an
essence of the contract by refusing to accept repayment within
stipulated period, the borrower is entitled to redeem the land.

Take note that even though the court recognized the existence of jual
janji at the introduction of the judgment, but Hj Ab Rahman’s was
followed in determining the rights of the parties involved, therefore jual
janji was considered as a security transaction but merely as a
contractual obligation.

• In the case of ABDUL HAMID BIN SAAD V ALIYASAK ISMAIL (1999) 1 AMR
105, the court endorsed the existence of Jual Janji by ordering the
Defendant to retransfer the land to Plaintiff. In this case, there was an
agreement executed between the parties and the land was transferred
to the creditor. It was agreed by the parties that the land would be
transferred back to the borrower upon full settlement of the loan.
However, when the borrower attempted to pay the loan, the creditor
refused to accept the repayment and he even asked that the payment be
raised. It was proven in court that the creditor’s conduct was done in
the hope that the borrower would not be able to pay so that the land
will be his absolutely.

The borrower claimed that the creditor has agreed to retransfer the land
when he is able to pay the loan. On the contrary, the creditor argued
that such agreement was not enforceable due to the fact that the land
has already been registered under his name and as such, his title and
ownership to the land is indefeasible.

The court rejected the creditor’s argument and since he failed to

perform his part that is by accepting the repayment of the loan from the

15
 borrower, it was decided by the court that the borrower is entitled to
redeem the land after full repayment of the loan is made.

2. Liberal interpretation : where Jual Janji is regarded as an equitable

security transaction akin to the English mortgage transaction.

• The collateral agreement for a re transfer in a Jual Janji transaction is in

nature of an equitable security transaction whereby the right to redeem
remains irrespective whether the period for repayment has lapsed.

• Case:

o YAACOB BIN LEBAI JUSOH V HAMISAH BTE SAAD(1950) 1 MLJ 255

(COA) Fact:
The Plaintiff sold the land to the Defendant on 28/10/44 and the
Defendant paid a sum f RM2000 in Japanese currency. On 30/1/45
the Defendant entered into a written agreement to resell the land to
Plaintiff for RM2000 within 3 years commencing on 1/2/45 and the
agreement will be null and void if the Plaintiff failed to repurchase
at the end of three years. The Plaintiff remained in possession of the
land.

Issue:
Whether the intention of the parties to treat the land as a security
or a contract of sale?

Held:
Looking from the fact that the Plaintiff is still in possession of the
land and the nature of the agreement to repurchase signed on
30/1/44.

Jobling J:
I think the agreement to repurchase the land justifies the inference
that it was prepared and executed to carry out some prior
arrangement between the parties that is that agreement form part
of a transaction which was in essence a mortgage of the land in
question to secure the repayment of RM2000.Being a mortgage the
right to redeem remains irrespective whether or not the period has
expired.

Briggs J:

The transaction was the familiar one of Jual Janji

16
• This case was followed by Nawab’s case but rejected by the later decision
such as Kanapathy Pillay.
• In the case of NAWAB V MOHAMED SHARIFF (1953) 19 MLJ 121
• However, in the case of HALIJAH V MORAD (1972) 2 MLJ 166 the Federal
Court was of the view that the right of an equitable owner to perfect his
title could never be statute barred.
• In HALIJAH ‘S case where the borrower handed over the possession of the
loan to the lender upon receipt of the loan. Lender agreed to hand back the
possession of the land upon payment of the said loan together with
expenses incurred in the development of the land. The payment must be
made within three years from the date of the agreement. Borrower failed to
pay within stipulated time and the Lender insisted the borrower to execute
the transfer. Even though the lender’s claim was statute barred, but the
lender could be considered as an equitable owner since the borrower did
not pay within 3 years and after lapsed of the stipulated period, she
became a purchaser of the land under a valid contract of sale.
• In another case OTHMAN & ANOR V MEK (1972) 2 MLJ 158 the court
decided in favour of the borrower who had paid the loan in full and insisted
the lender to retransfer the land. The principle used to support the
judgment was based on the case of WILLIAMS V GREATREX (1957) 1 WLR
31 where the right of equitable owner to perfect his title could never be
statute barred.
• Unfortunately, in Mek’s case, the security issue was not raised because the
court concluded that the borrower was an equitable owner due to the fact
that he had paid the loan within stipulated period and had entered into
possession of the land.

3. RECENT DEVELOPMENT OF JUAL JANJI IN MALAYSIA

The Malaysian courts were reluctant to deviate from the case of Haji Abdul
Rahman even though this case was decided on a different platform as
compared to the present position under the National Land Code 1965. In the
case of Haji Abdul Rahman court ruled land law is a system of registration of
title contained in a codifying enactment and not based on English equitable
principle. By virtue of Section 4 of the Federated Malay States of Selangor
Registration of Titles Regulation 1891, it was provided that the land shall not
be capable of being charged except in accordance with the provision and in
Section 41 stated that whenever any land is intended to be charged or made
security, the proprietor shall execute a charge in the prescribed form, which
must be registered.

However, a glance at the provision of the National Land Code 1965, Section 4
(2)a) provides that nothing in this act shall affect the provisions of any law

17
relating to customary tenure. In addition, Section 206(3) provides that
contractual operation of any transaction relating to alienated land or interest
will not be affected. In brief, the present statute is quite flexible in accepting
the equitable principle and since Jual Janji is a security transaction under the
Malay customary land tenure, it is about time to accept the fact that Jual Janji
is an equitable security transaction which will be hand in hand with the
intention of the borrower at the time of transferring the land to the creditor.

In the case of HATIJAH BTE REJAB V ABDULLAH SAAD (2004) 2 AMR 665, the
borrower sought to the court for the retransfer of the title to her on the basis
of the promissory sale agreement executed between the borrower and the
creditor in 1994. The borrower was having a financial difficulty and borrowed
RM20000 from the creditor with a condition that she has to pay in full the loan
amount within five years from the date of the agreement and creditor be
registered as new proprietor of the land. In 1996, the borrower made an
attempt to pay the loan. The creditor however refused to accept the same and
claimed that the transfer of title was done under direct sale by the borrower
for the sum of RM20000 and was not a promissory sale agreement. The court
decided in favour of the borrower because by refusing to accept the repayment
of the loan within the stipulated time shows that he has breached the contract.

The court in Hatijah seems to acknowledge the existence of Jual Janji being
practiced amongst land owners. However by following Haji Abdul Rahman, this
case indicated that until to date the Malaysian courts refused to recognize Jual
Janji as a species of security transaction under the Malay Customary Land
Tenure.

4. JUDICIAL VIEW ON JUAL JANJI TRANSACTION: EQUITTABLE SECURITY

TRANSACTION VS ILLEGAL TRANSACTION AND AGAINST PUBLIC POLICY?
The traditional judicial view of judges indicates acceptance of the jual janji
transaction as an equitable security transaction via contractual arrangement.
In the case of HUSAINI BIN YAACOB v TAN TEO SIANG [2014] 5 MLJ 606, the
appellant had entered into a jual janji agreement with the respondent where
the former agreed to lend the sum of RM60,000 (‘the loan sum’) to the
respondent with the time frame of one year from the agreement. In return, the
respondent was to transfer ownership of a piece of land (‘the land’) to the
appellant. Dispute arose when the respondent tried to settle the loan with the
appellant and redeem the land. There was no response from the appellant. The
appellant promised to retransfer the land to the respondent but failed to do so.

The respondent later found out that the appellant had transferred the property
to one Poh Chew Song (‘Poh’) for the sum of RM600,000. Poh had paid only
M300,000 and in turn, sold the land to Ng Giew Poh (‘Ng’). This caused the
respondent to file a claim in the High Court for the recovery of the full

18
purchase price at market value minus the loan sum from the appellant. The
appellant argued that the respondent had failed to settle the loan sum and
redeem the land before the expiry of the agreement. The High Court judge
(‘the judge’) held that the respondent had proven his case and accepted the
respondent’s evidence that the respondent did try to pay the loan but the
appellant refused to accept the payment. The judge awarded the respondent a
sum of RM1.5m as damages, which was a discounted sum from the respondent’s
claim of RM2.2m. In the present appeal, the issues that arose for the court’s
determination were whether the respondent was willing and able to settle the
loan sum within the agreed time; and whether the judge was correct in
awarding the sum of RM1.5m to the respondent. The Appeal was allowed
because the respondent had failed to prove on the balance of probabilities that
he was ready and willing to pay the loan to the appellant. The respondent had
admitted that he could not make the repayment because he did not have the
money.

However, in two illegal money lending transactions, the judge decided that
since the agreements were tainted with illegality, the whole transactions were
void ab initio and even the registration of transfer is defeasible and liable to be
set aside. The two cases are PANNIR SELVAM A/L SINNAIYAH & ANOR V TAN
CHIA FOO & ORS [2019] MLJU 1699 (illegal money lending transaction) and
SEMBAGAVALLY A/P MURUGASON v TEE SENG HOCK [2020] 7 MLJ 1 (illegal
money lending transaction).

5. Conclusion

Jual Janji is considered part of the security regime under the Malaysian Land
Law but it is not advisable for “Ah Long” or unlicensed money lender to adopt
this security transaction because under the contract law, illegal agreement
under Section 24 of Contracts Act 1950 is void ab initio and could not be
enforced in any court of law.

19
 LIEN List
of Cases:
• Introduction
• Statutory Lien:
1. Pre requisite of creating a statutory lien:

• PETER P’CHIENT V RAMASAMY CHETTY (1923) 3 FMSLR 220

• PERWIRA HABIB BANK (M) BHD V MEGAT NAJMUDDIN BIN

MEGAT KHAS & ORS (1999) 5 MLJ 334
• HONG LEONG FINANCE BHD V STAGHORN SDN BHD (2005)
5 MLJ 101
• PERWIRA HABIB BANK (M) BHD LWN LOO & SONS REALTY
SDN BHD & ANOR (NO 1) (1996) 3 MLJ 409
2. Depositing of IDT or duplicate lease.
• STANDARD CHARTERED BANK BHD V YAP SING YOKE
(1989) 2 MLJ 49
• MERCHANTILE BANK LTD V THE OFFICIAL ASSIGNEE OF
THE PROPERTY HOW HAN TEH(1969) 2 MLJ 169
• PERWIRA HABIB BANK (M) BHD V LOO & SONS REALTY SDN
BHD (1996)3 MLJ 409 (COURT OF APPEAL)
• HONG LEONG BANK BHD (FORMERLY KNOWN AS HONG
LEONG FINANCE BHD) V STAGHORN SDN BHD & ANOR
(2005)5 MLJ 101

20
 • HONG LEONG BK BHD (FORMERLY KNOWN AS HONG
LEONG FINANCE BHD) V STAGHORN SDN BHD & ANOR
(2008) 2MLJ 622 (FEDERAL COURT)
• SITHAMBARAM CHETTY VC RAMANATHAN CHETTY (1922)
3 FMSLR 8
• MANICKAWASAGAM CHETTY V MC GREGOR (1933) MLJ
295
3. Intention to create Lien
• MASTER STRIKE SDN BHD V STERLING HEIGHT SDN BHD
(2005) 3 MLJ 585
• STANDARD CHARTERED BANK LTD V YAP SING YOKE &
MERCHANTILE BANK V OFFICIAL ASSIGNEE.
• NALLAMAL V KARUPPANAN (1993) 3 MLJ 476
• PALANIAPPA CHETTY V DUPIRE BROTHERS (1922)1 FMSLR
370
• PARAMOO V ZENO LTD (1968) 2 MLJ 230
• ZENO LTD V PREFABRICATED CONSTRUCTION CO (M) LTD
(1967) 2 MLJ 104
• SAROJEANNE@ SULOCHANA D/O DURAISAMY & ANOR V DR
DM THURAIAPPAH (2000) 2 MLJ 472

4. Entry of Lien Holder’s Caveat

• ALLAGAPPA CHETTI V PERIANAYAGAM (1908) Innes
117
• CHEONG KAM V LOKE CHOW (1924) 4 FMSLR 294.
• MERCHANTILE BANK LTD V THE OFFICIAL ASSIGNEE
(1969) 2 MLJ 196
• STANDARD CHARTERED BANK V YAP SING YOKE (1989)
2 MLJ 49

21
 • Effect of wrongful entry of LHC : Section 331(4)
SAYANG PLANTATION BHD V KOH SIAK POO (2006) 1
MLJ 230.

• Conclusion.

INTRODUCTION:
Definition of Lien:
Halsbury Laws of England – “Right of one man to retain the property belonging
to another man until certain demand of the man in possession of the goods are
satisfied”.

Section 281(1) National Land Code 1965 defines lien as the act of any
proprietor depositing his title or duplicate lease to another person as security
for a loan.

Section 343(6) of the National Land Code 1965 provides that co-proprietor of
undivided shares can create a lien by depositing his copy of IDT.

In brief lien can be created by:

a. registered proprietor of the whole piece of land – by depositing the

IDT;
b. co-proprietor of the whole of undivided shares-by depositing his copy
of IDT; and
c. registered lessee of a lease – by depositing his duplicate lease.

22
Modus operandi:
1. Borrower;
2. Lender;
3. Borrower is the registered proprietor of a piece of land or the
registered lessee of a land;
4. loan amount released to borrower by lender;
5. In return, the borrower used his IDT or duplicate lease as security by
depositing the same to the lender upon receipt of the loan.

Depositing of IDT or duplicate lease- means the borrower physically handed

over the IDT or duplicate lease to the lender. Lien is created when the lender
keeps the IDT or duplicate lease as security for the loan.

Lien is not a dealing (see Section 206(2)(b) NLC 1965 therefore it can be
created simply by the act of the lender holding the IDT or duplicate lease as
security for loan released to the borrower.

Lien can be divided into:

1. Statutory Lien; and
2. Equitable Lien.

Statutory Lien:
Lien is a mechanism recognized by the Code as an alternative method where
land can be used as security under a loan transaction. The conduct of borrower
in handing over the title to the lender will mark the commencement of a
relationship under lien between the parties. Since the Torrens system
originated from the concept of registration as the cardinal principle, lien was
introduced to facilitate commercial transactions by creation a simpler method
of security as compared to the formation of charge. The method is simpler
because there is no specific form to be filled or stamp duty to be paid and

23
what the borrower needs to do is merely to deposit or hand over the title to
the creditor in order to create an equitable lien.

NLC 1965 requires the following elements to be satisfied for the creation of
statutory lien:
1. Pre requisite of creating a statutory lien:

Section 281(1) provides only the registered proprietor or registered

lessee can create a lien. In brief, IDT or lease must be deposited by the
registered proprietor or lessee in order to create a lien.

Issue – can a proprietor or lessee deposit his title deed or duplicate lease to a
creditor for the benefit of another person who obtained a loan from the said
creditor?

General rule - Section 281(1) NLC, did not prohibit the registered
proprietor/lessee from depositing the title deed or duplicate lease to secure a
loan granted to a third party.

Issue : What is the effect if an instruction to create Lien Holder’s Caveat not
from the registered proprietor/lessee?

The traditional view of the court: Lien Holder’s can only be lodged by the
proprietor for his own benefit/loan.
Cases:
PETER P’CHIENT V RAMASAMY CHETTY (1923) 3 FMSLR 220
In this case it was decided by the court that the right to deposit the title as
security for a loan is restricted only to the proprietor.

PERWIRA HABIB BANK (M) BHD V MEGAT NAJMUDDIN MEGAT KHAS (1999)

24
The registered proprietor has agreed to use his title as security for a loan
advanced to a company. Subsequently the charge could not be registered. The
director of the company instructed the bank to lodge a lien holder’s caveat. It
was decided by the court that lien can only be created upon an instruction
made by the proprietor, not by any other third party. Therefore, the lien
created was not valid.

PERWIRA HABIB BANK (M) BHD V MEGAT NAJMUDDIN BIN MEGAT KHAS & ORS
(1999) 5 MLJ 334
By way of a letter of offer dated 17 August 1984, the plaintiff granted an
overdraft facility of RM700,000 to the borrower, to be secured by a registered
third party first legal charge over a property whose registered owner was Loo &
Sons Realty Sdn Bhd ('the owner/chargor'). In the meantime, the
owner/chargor had entered into a sale and purchase agreement to sell the
property to Land Holdings Sdn Bhd. The property was subject to a restrictionin-
interest term which prohibits any transfer, creation of a lease or any security
without the state authority's approval. One of the terms of the letter of offer
was that 'utilization of the overdraft may be allowed only after the execution
of all security documents and presentation of the charge for registration'. Since
it would take about two months to obtain the consent from the state authority,
the borrower proposed to the plaintiff the creation of a lien holder's caveat
over the property. On the advice of the defendants -- a legal firm -- that a lien
holder's caveat would be sufficient security for the disbursement of the
overdraft facility, the plaintiff allowed for the drawdown of up to RM700,000.
The plaintiff also contended that the defendants had advised that the security
of a lien holder's caveat over the property had been duly perfected and the
borrower could be allowed to utilize the facility. Since the borrower was in
need of a further overdraft facility of RM500,000, the plaintiff instructed the
defendants to create a fresh lien holder's caveat for the total of RM1.2m. The
defendants advised that since the earlier lien holder's caveat did not stipulate

25
a named sum, that lien holder's caveat was sufficient to secure the second
overdraft facility of RM500,000. The defendants further advised the plaintiff to
withdraw the lien holder's caveat lodged over the property and to relodge the
same to enable the transfer of the property from the owner/chargor to Land
Holdings Sdn Bhd. The plaintiff contended that the defendants had been
negligent in their advice to the plaintiff and thus commenced an action against
the defendants, both on breach of contract and on negligence.

HELD: Since the Borrower was not the owner of the subject property and since
the request to create lien holder’s caveat came from the borrower and not the
registered owner of the property, clearly, the defendants were negligent in
advising that the lien holder’s caveat was sufficient security for both the first
and the second overdraft facilities.

HONG LEONG FINANCE BHD V STAGHORN SDN BHD (2005) 5 MLJ 101
The first and second defendants were the registered owners of the land. On or
about 27 February 1981, the first and second defendants, as vendors, entered
into a sale and purchase agreement ('the sale and purchase agreement') with
the second intending interveners, Staghorn Sdn Bhd ('Staghorn') to sell the land
whereby Staghorn paid the 10% of the purchase price to the vendors. However,
the sale was completed not by Staghorn but by an associate company called
Teck Lay Realty Sdn Bhd ('the third defendant') which paid the full balance of
the purchase price and received from the vendors' solicitors the document of
title to the land and the memorandum of transfer duly executed by the
vendors.

In order to finance the payment of the balance of the purchase price, the third
defendant secured a loan from Bank Bumiputra Malaysia Bhd ('BBMB'). But
instead of favouring BBMB with a first legal charge over the land, the document
of title and the duly executed memorandum of transfer were handed over by

26
the third defendant or its solicitors to Hong Leong Bank Bhd ('the plaintiff') to
secure a third-party legal charge for facilities given by the plaintiff to another
associate company of Staghorn called Park Avenue Homes Sdn Bhd ('Park
Avenue'). As for BBMB, it was only able to protect its interest with a private
caveat placed on the land.

When the plaintiff attempted to register a first legal charge over the land
simultaneously with the transfer from the first and second defendants to the
third defendant, it was prevented by the private caveat of BBMB. Thus, the
plaintiff registered a lien holder's caveat over the land.

The issue was whether a beneficial owner who is not the registered proprietor
could hand over the document of title for the creation of a lien holder's
caveat.

HELD: It is material in the creation of a lien holder's caveat under s 281 NLC to
have the registered proprietor to deposit the document of title to the lender
for it is the registered proprietor who intends to surrender his rights to the
lender to deal with the land in the event of default in repayment of the loan
which he obtained from the lender. It does not extend to a beneficial owner
who is yet to become a registered proprietor.

In this case all these provisions were contravened in the creation of the lien
holder's caveat and the subsequent remedies resorted. The registered
proprietors did not borrow any money from the plaintiff nor did they deposit
the document of title with the plaintiff, and neither did the plaintiff obtain
judgment on the amount due under the loan against them. When there were
non compliance of the rules and procedure in the creation of the lien holder's
caveat, and the fulfillment of the pre-condition for enforcement of the remedy
subsequent to the failure in repayment of the loan, then the order for sale
made in pursuant to s 281(2) NLC was tainted with illegality.

27
In this case the court stated as follows:

“Thus, it is material in the creation of a lien holder's caveat under s. 281 NLC
to have the registered proprietor to deposit the document of title to the
lender for it is the registered proprietor who intends 4 to surrender his rights
to the lender to deal with the said land in the event of default in repayment
of the loan which he obtained from the lender. As a borrower, no other
person can substitute the registered proprietor in performing this task of
depositing the document of title with the lender for the creation of this
statutory instrument. To allow this would defeat the concept of the right of
the registered proprietor to deal with his own land. Section 281 NLC is
intended for a registered proprietor to raise money on loan, speedily, by
depositing the document of title registered in his name with the lender as
compared with the more complex process of registering a legal charge over
the land. But as the law demands, it is only available to a registered
proprietor who borrows money and deposits his title with the lender. It does
not extend to a beneficial owner who is yet to become a registered
proprietor. Since this facility is only available to the registered proprietor, in
the event of default in repayment of the loan, judgment must be obtained
against the registered proprietor, as borrower. The wordings in s. 281(2) NLC
of a ‘holder of any lien has obtained judgment for the amount due to him’ is
clear to this effect for there can be no one else other than the registered
proprietor who is the borrower.”

Obiter dicta in this case suggested that the wordings of Section 281(2)
indicated that the lien can only be enforced when the registered proprietor of
the land is the borrower under the loan transaction.

PERWIRA HABIB BANK (M) BHD V LOO & SONS REALTY SDN BHD (1996)3 MLJ
409 where Ahmad Fairuz JCA stated that “regarding the issue of lien, it was

28
noted that Section 5 and 281 of the NLC clearly showed the truth of the high
court’s finding that only the registered proprietor has the power or the right
to deposit the title deed for the purpose of creating a lien…”

Contemporary view: The court decided that a registered proprietor can use
land to create lien for the benefit of a third party.

Appeal case of:

HLB V STAGHORN (2008) 2 MLJ 622 it was decided by court that registered
proprietor may deposit his IDT as security for a third-party loan.

As quoted by Abdul Aziz Mohamad FCJ:

Sub Section 1 of Section 281 speaks of the registered proprietor depositing his
issue document of title “as security for a loan” but does not specify the
borrower and neither does it restrict the loan advanced only to the registered
proprietor. There is no reason for construing the loan only to the registered
proprietor. The loan may be a loan to third party. Where the loan is to a third
party, it must follow that a judgment obtained is a judgment against the
third-party borrower.

It does not lay down the procedure for or the manner of depositing. It ought
not to be construed as requiring that the registered proprietor himself must
do the act of depositing. It is his will that is important. If he wills that the
document of title be deposited with a person or body as security for a loan
and it is so deposited, then it is he who has exercised his power under Section
281(1). If the registered proprietor instructs or authorizes it or consent to it,
and the actual act of depositing may be done by someone else.

UJA SDN BHD V UNITED OVERSEAS BANK (MALAYSIA)BHD (2008) 4 CLJ 779

29
The plaintiff is the registered proprietor of a piece of land deposited its title
deed to the lender as security for a loan granted to a borrower, Union Plastics
Sdn Bhd. The borrower defaulted in the repayment of the loan. Subsequently
the lender obtained a judgment against the borrower and applied for an order
for sale under Section 281(2) against the plaintiff’s land.

Held- It was decided by the court that since the judgment had been obtained
and not been satisfied and all sums due under the lien had not been duly paid,
the lender was entitled to the benefit of the lien. Section 281(1) did not
specifically prohibit the creation of lien by registered proprietor to secure a
loan granted to a third party.

See also PERWIRA AFFIN BANK BERHAD V SELANGOR PROPERTIES SDN BHD
(2010) 3 CLJ
The title deed may not be necessarily be deposited by the proprietor.

2. Depositing of IDT or duplicate lease.

The literal meaning for depositing of title/duplicate lease means the act
of the borrower handing over the subject matter of lien to the lender.
The act of keeping the subject matter of lien by the lender will give rise
to a lien. This requirement is provided for under Section 281(1) National
Land Code 1965.

The subject matter of a lien:

1. Section 281(1) Issue Document of Title – registered proprietor;
2. Section 343(6) Copy of IDT – co-proprietor; and
3. Section 281(1) Duplicate lease – registered lessee.

30
In STANDARD CHARTERED BANK BHD V YAP SING YOKE (1989) 2 MLJ
49, it was noted by Lamin J the chargee acquired an equitable lien by
keeping the title as a security in a loan transaction.

The same view was expressed by Raja Azlan Shah J (as he then was) in
the case of MERCHANTILE BANK LTD V THE OFFICIAL ASSIGNEE OF THE
PROPERTY HOW HAN TEH (1969) 2 MLJ 169, where he stated that the
act of chargee keeping the title as security, created an equitable lien.

See also PERWIRA HABIB BANK (M) BHD V LOO & SONS REALTY SDN
BHD (1996)3 MLJ 409 where Ahmad Fairuz JCA stated that “regarding
the issue of lien, it was noted that Section 5 and 281 of the NLC clearly
showed the truth of the high court’s finding that only the registered
proprietor has the power or the right to deposit the title deed for the
purpose of creating a lien…”

Issue (1):
What is the consequence if the lender parted with the subject matter
of lien? Will the lien still intact?

Section 281(4) briefly allowed the lien holder to part with IDT upon
written request made proprietor or lessee but it only restricted to
produce the IDT or lease at any Registry or Land Office. There is no
provision as to the effect of parting with IDT/lease for any other reason
other than provided for under the above section.

Cases:
SITHAMBARAM CHETTY VC RAMANATHAN CHETTY (1922) 3 FMSLR 8
Upon the request made by the second lender, the lien holder handed
over the title to him. When the charge created in favour of the second
lender was rejected by the land office, the second lender applied for

31
 removal of caveat which was allowed. The first lender attached the land
under Section 275 of Civil Procedure Code.
It was decided by the court; the first lender lost his right as a lien holder
the moment he parted with IDT and his caveat was removed from RDT.

MANICKAWASAGAM CHETTY V MC GREGOR (1933) MLJ 295

Upon request made by the Collector of Land Revenue, the lien holder
handed over the IDT to the land office for the purpose of portioning the
land on application made by the co-proprietor. The caveat remained on
the RDT. When the new title was issued, there was no endorsement of
Lien Holder’s Caveat and was returned to the proprietor. The proprietor
contended that lien has been terminated.
It was decided by the court that the lien holder has not lost his lien over
the land by the fact that he was no longer in physical possession of
the title since his caveat remained on the RDT.

3. Intention to create Lien

Intention is intangible and is in the mind of the parties that can only be
inferred from the relevant circumstances of the situation or transaction.
Inference can be made from the conduct of the parties as a whole. For
example, if the transaction does include any loan arrangement as in the
case of MASTER STRIKE SDN BHD V STERLING HEIGHT SDN BHD (2005)
3 MLJ 585, where in this case the plaintiff and defendant entered into a
sale and purchase agreement not a loan transaction, it was decided by
the court that they could not convert the sale agreement into loan
agreement and alleged that the title is handed over to the purchaser as
a lien.

As a matter of fact, intention can be determined through the following

means:

32
i. The depositing of title by borrower to lender originated from a loan
transaction;

It can be gathered that from the fact that the IDT was deposited as a
security for a loan and not for any other purpose. In brief it need not
be expressly documented.

See STANDARD CHARTERED BANK LTD V YAP SING YOKE &

MERCHANTILE BANK V OFFICIAL ASSIGNEE.

Nevertheless, it was noted by the court in the case of NALLAMAL V

KARUPPANAN (1993) 3 MLJ 476 that element of intention is not
satisfied if possession of title is obtained through fraud or
misrepresentation and deposit of title as security was never
authorised by the registered proprietor.

ii. The agreement executed between the parties incorporate the

intention to use the title as a security.

Case:
PALANIAPPA CHETTY V DUPIRE BROTHERS (1922)1 FMSLR 370
It was decided by the court that possession of title by the lender give
rise to the presumption that the deposit was made with intention of
creating a lien. The court further noted that it was the intention of
the legislature to do away with the rigid scheme of registration in
order to facilitate commercial transactions by creating a simpler
form of security such as lien.

PARAMOO V ZENO LTD (1968) 2 MLJ 230

33
Plaintiff advanced money to defendant and they have agreed to
create a charge. The charge was never registered. It was provided in
clause 6 “the mortgagor further hereby deposits the title for the
land concerned with the lender as security for principal and interest
and the lender may lodge a caveat with the Collector of Land
Revenue to create a lien”
It was decided by the court that the document signed by the parties,
a mortgage transaction, clearly showed an intention to create a lien.

Raja Azlan Shah J (as he then was) in the case of ZENO LTD V
PREFABRICATED CONSTRUCTION CO (M) LTD (1967) 2 MLJ 104
stated that once title is deposited with the lender that is
evidence of intention to create a lien.

DATO’ JOSEPH CHONG CHEK AH V AMCARD SERVICES SDN BHD

(2017) 6 CLJ 151 COA
Lien may also be created to secure a payment of a balance of a
judgment debt. Creation of lien to ensure that debtor satisfy the full
balance of the judgment debt.

SAROJEANNE@ SULOCHANA D/O DURAISAMY & ANOR V DR DM

THURAIAPPAH (2000) 2 MLJ 472
The registered proprietor lent her title to the defendant to create a
third-party charge for the defendant’s loan. Due to technical default,
the charge was not registered. The defendant refused to return the
title by claiming that the loan advanced to him by the bank had been
forwarded to her. He further contended that he’s entitled to keep the
title as a lien. The proprietor claimed that there was no loan
advanced to her, therefore she’s entitled to get back her title. The

34
 court decided in the plaintiff’s favour because there was no borrowing
of money by the plaintiff.

4. Entry of Lien Holder’s Caveat

It is the requirement provided under Section 281(1) that in order to
create a valid and enforceable statutory lien, the lien holder must
apply for the lodgement of a lien holder’s caveat pursuant to Section
330(1) National Land Code 1965.Lien Holder’s caveat can only be
withdrawn by virtue of Section 331 of National Land Code 1965.

Effect of lodgement of a lien holder’s caveat:

1. the same affect as a private caveat under Section 322 of
National Land Code 1965 that is it will restraint all dealings
with the land.
2. in the event of default by the borrower, the lender is
entitled to invoke remedy available under Section 281(2)
National Land Code 1965.

Section 281(2) provides that the lien holder can obtain

judgement on the outstanding amount and upon receipt of
the judgment, to obtain an order for sale against the
property at the relevant court/tribunal.

Right to recover debt or judgment debt is still within the

limitation allowed under Limitation Act, delay will render
the action statute barred and lien holder will lose his right
to enforce lien.

35
 See: ALLAGAPPA CHETTI V PERIANAYAGAM (1908) Innes
117 and the case of CHEONG KAM V LOKE CHOW (1924) 4
FMSLR 294.

Issue:
What is the status a lien holder who did not lodge a lien holder’s caveat?

In the case of MERCHANTILE BANK LTD V THE OFFICIAL ASSIGNEE, Raja

Azlan Shah stated that the lien holder will not be considered as a
statutory lien holder but he still possesses a right in equity. He can
exercise that right by registering the caveat at any time.

In brief, any lien holder who did not lodge a caveat to mark his presence
as a lien holder on the land will not receive any benefit granted to a
statutory lien holder but it will only create an equitable lien.

The above view was affirmed by Lamin J in the case of STANDARD

CHARTERED BANK V YAP SING YOKE where he stated that “as the IDT
was all the time in the custody of the plaintiff, it had acquired a lien in
equity over the land. The equitable interest is not affected by the
absence of a caveat. the plaintiff had the right to lodge a caveat and
may do so at any time under the provisions of the National Land Code
1965”.

Issue: Can a Lien Holder’s Caveat be withdrawn before the full

satisfaction of the loan?

General rule: NO
Case:
RHB Bank v Wong Kok Leong [2017] 6 CLJ 1 FC

36
 The Lien Holder’s Caveat cannot be withdrawn until the loan is fully
settled.

Issue : whether damage or loss must be proved before compensation

ordered under Section 331(4) NLC 1965.

Case: SAYANG PLANTATION BHD V KOH SIAK POO (2006) 1 MLJ 230,
the caveator failed to withdraw its LHC from the land for nearly five
months. It was decided by the court that failure to withdraw the caveat
has caused damage or loss to the proprietor therefore there was no
necessity to adduce evidence of damage or loss.

CONCLUSION
The creation of Lien is recognized as a form of security transaction under the
NLC in order to facilitate and expedited the disbursement of a loan. It is
statutory perfected only by the lodgment of a lien holder’s caveat. However,
the remedy granted by the NLC is limited because in order to obtain an order
for sale, a lien holder must first obtain judgment debt through a civil
proceeding in court. In addition to this, it will be cheaper and less time
consuming because no payment of stamp duty involved in the preparation of a
lien holder’s caveat. In brief, lien is useful as an interim measure prior to the
preparation of a charge.

37
 SECURITY TRANSACTION
CHARGE LIST
OF CASES:
• CONCEPT OF CHARGE
• DEFINITION OF CHARGE
• MODUS OPERANDI OF CREATING A CHARGE
• CHARGE V MORTGAGE
▪ KIM LIN HOUSING DEVELOPMENT SDN BHD V BBMB
(1997) 2 MLJ 805
▪ BBMB V DORIC DEVELOPMENT SDN BHD ( 1988) 1
MLJ 46
• POWER TO CREATE CHARGE
• HARTA EMPAT SDN BHD V KOPERASI RAKYAT BERHAD
(1997) 2 CLJ 94
• HO GIOK CHAY V NIK AISHAH (1961) 1 MLJ 49
• PERWIRA HABIB BANK V VISVANATHAN (1997) 4 MLJ 474
• UMBC V SYARIKAT PERUMAHAN LUAS SDN BHD (No 2)
[1988] 3 MLJ 352
• EFFECT UPON CREATION OF A CHARGE IN FAVOUR OF A
CHARGEE
• KIMLIN HOUSING DEVELOPMENT (1997) 2 MLJ 805

38
• REGISTRATION OF CHARGE
• MAHADEVAN S/O MAHALINGGAM V MANILAL & SONS
(1984) 1 MLJ 266
• MALAYAN BANKING BHD V ZAHARI AHMAD (1988)2 MLJ
135
• ORIENTAL BANK V CHUP SENG RESTAURANT (1990) 3 MLJ
493
• HJ ABD RAHMAN v MAHOMED HASSAN (1917) AC 209
• STD CHARTERED BANK V YAP SING YOKE (1989) 2 MLJ 49
• UMBC LTD V GOH TUAN LYE (1976) 1 MLJ 169
• DOCTRINE OF CONSOLIDATION
• CUMMINS V FLETCHER (1880) 14 Ch D 699
• DOCTRINE OF TACKING
• DOCTRINE OF POSTPONEMENT

• REMEDIES AVAILABLE TO CHARGEE

• ORDER FOR SALE – DIFFERENCES BETWEEN 16D & 16E
▪ ELIATHAMBY V SHEIKH MOHD SAID (1970) 2 MLJ
190
▪ VAM HUSSAIN V BP MALAYSIA SDN BHD(1970) 2 MLJ
69
▪ JACOB V OVERSEAS CHINESE BANKING CORP(1974)
2 MLJ 161
▪ MARY MICHAEL V UMBC(1971) 1 MLJ 172
▪ CENTRAL MALAYAN FINANCE V LOKE
KOK
LAI(1975)1 MLJ 160
▪ SIONG HOLDINGS SDN BHD V D&C BANK(1997) 1
MLJ 340
▪ SYARIKAT KEWANGAN MELAYU RAYA V MALAYAN
BANKING BHD (1984)2 MLJ 253

39
 ▪ NATIONAL BANK OF AUSTRALIA LTD V UNITED
HAND IN HAND (1879) 4 AC 391
• CONTENT OF NOTICE
▪ PERWIRA AFFIN BANK V SAAD ABDULLAH (1999) 6
MLJ 418
▪ KHALID FARZALUR RAHMAN V CITIBANK BERHAD
(2000) 5 MLJ 421
▪ PERWIRA AFFIN BANK BHD V LIM WEOW (1998) 3
MLJ 56
• SERVICE OF NOTICE
▪ STANDARD CHARTERED BANK (M) BHD V TUNKU
MUDZAFFAR TUNKU MUSTAPHA (2005) 1 MLJ 604
▪ KEKATONG SDN BHD V BANK BUMIPUTERA
MALAYSIA BHD (1998) 2 MLJ 440
▪ MUNIANDY V D&C BANK (1996) 1 MLJ 374 AND
AFFFIN MERCHANT BANK BHD
• EXISTENCE OF CAUSE TO THE CONTRARY
▪ KENG SOON FINANCE BHD V MK RETNAM HOLDINGS
SDN BHD (1989) 1 MLJ 458
▪ LOW LEE LIAN V BAN HIN LEE BANKING BHD (1997)
1 MLJ 77
▪ TAN TENG PAN V WONG FOOK SHANG (1973) MLJ
31
▪ CHARGE IS VOID OR UNENFORCEABLE
• PUBLIC FINANCE V NARAYANASWAMY (1971)
2 MLJ 32
▪ AGAINST RULE OF LAW
• PHUMAN SINGH V KHOO KWANG CHOON
(1965) 2 MLJ 189
• ASEAM CREDIT SDN BHD V EMINENT AVENUE

40
 SDN BHD (2008) 1 CLJ 12
▪ AGAINST RULE OF EQUITY
• KUCHING PLAZA V BBMB (1991) 3 MLJ 163
• OCBC BANK (M) BHD V AU KEE SIAN & ANOR
(2006) 4 CLJ 595
▪ POWER OF LAND ADMINISTRATOR
• Gurpal Singh v Kananayer (1976) 2 MLJ 34
• Suppiah v Pannompalam (1963) MLJ 202
▪ Govt. of Malaysia v Omar Hj Ahmad (1983) 1 MLJ
242
• CANCELLATION OR RECTIFICATION OF OFS
▪ Mui Bank Bhd v Chiam Kim Yu (1992) 2 MLJ 642
▪ Lim Yoke Foo v Eu Finance Bhd (1985) 1 MLJ 17
• SIMULTANEOUS ACTION
▪ BBMB v Esah Abd Ghani (1986) 1 MLJ 16
▪ HSBC v Wan Mohd Wan Ngah (1991) 3 MLJ 119
▪ Cooperative Central Bank v Balaka Suria Sdn Bhd
(1991) 3 MLJ 45
• PUBLIC AUCTION
▪ Std Chartered Bank v Pakiri Maidin (1963) MLJ 276
▪ Mui Finance v Tay Lay Soon ( 1991) 1 MLJ 504
• TAKING POSSESSION
• CONSTRUCTIVE POSSESSION
• ACTUAL POSSESSION
▪ Woon Foon Ho v Muttiah Chetty (1934) MLJ 121
SECURITY TRANSACTION
CHARGE The
concept of charge:
Charge is one of the recognized dealing under NLC 1965. It is a dealing or
transaction whereby the registered proprietor of land or lease uses that

41
particular property as a security for the repayment of loan advance to him or
another third party. In brief it means, the registered proprietor or lessee of a
piece of land assure the lender that the borrower will pay the loan advanced by
creating an interest known as charge over the property.

How will the creation of charge over the land or lease be able to assure that
the loan will be paid in full? Upon default, the charged property can be used to
generate money and satisfy the full outstanding amount. The charged property
can either be sold in a public auction or the chargee can take possession of the
land and collect proceeds from the land to satisfy the loan amount. These
rights are incorporated in the NLC 1965 and the chargee can invoke the
provisions to enable him recover the full outstanding amount.

The person who offers his land or lease as security is known as a chargor and
the lender who is agreeable to accept the land as security is known as chargee.

Definition of charge.
Charge is defined as “registered charge”.3 The definition did not explain the
concept of charge and its modus operandi except, in brief, charge is only
considered as valid and enforceable once it has been duly registered in
accordance with the provision of the National Land Code 1965.
The concept of registration embedded under the Torrens System emphasized on
the principle that any interest must first be registered before it can be
recognized and protected by the relevant Code.4

Modus Operandi in the creation of a charge:

In order to create a charge, the followings must be present:
• Borrower & lender;
• Loan;

3 Section 5, National Land Code 1965.

4 See Section 243 of National Land Code 1965 where it stipulated that charge will only be effective upon registration.

42
 • Both parties entered into a loan agreement;
• Borrower offers land as a security;
• Both parties execute charge documents (as provided for under NLC);
• Charge document is presented for registration; and
• Upon registration, a “charge” is created which confers the Chargee an
indefeasibility of interest over that particular property.
• As security the charged property will be utilized to recover any
outstanding amount or any debt due to the chargee. The chargee will be
eligible to opt for remedies available under NLC 1965.

Charge v Mortgage
Charge is a security transaction under NLC 1965 and mortgage is another type
of security transaction under UK land dealing. In a charge transaction, the
chargee is vested with an interest in land upon registration of Form 16A. The
interest will remain throughout the loan period and will be discharged upon full
satisfaction of the loan. If the chargor defaulted in the repayment of the loan,
the chargee can either apply for an order for sale (auction) or take possession
of the land or assign the land to Danaharta.

Whereas mortgage is a security transaction conducted by borrower (mortgagor)

and lender(mortgagee). The land will be transferred to the lender upon signing
of a mortgage agreement. In the mortgage agreement, it is agreed that the
borrower shall pay within stipulated time and upon full settlement of the loan
the borrower is entitled to redeem the land from the lender. This right is
commonly known “Equity of Redemption.” In the event of default, the lender
may apply for foreclosure action.
See case:
These cases may illustrate the differences:
Case :

43
 Kim Lin Housing Development Sdn Bhd v BBMB (1997) 2 MLJ 805 The
judge stated that for mortgage, the rights and powers of
mortgagee are those which are incidental to the legal and
equitable rights vested in him in his role as mortgagee. But for a
charge, the rights and powers of chargee are provided in the NLC.
Chargee cannot get away from the provisions of NLC. Eg: In the
event of default in payment, chargee can apply for order for sale
but the chargee cannot sell through private treaty.

BBMB v Doric Development Sdn Bhd ( 1988) 1 MLJ 462

For a charge, only the interest is transferred to the chargee but
the ownership remains with the chargor. In mortgage, both the
interest and ownership are shifted to mortgagee with the concept
of ‘equity for redemption’, which means that the mortgagor is
allowed to redeem back the land upon full payment.

What can be charged?

Section 241(1) NLC 1965 provides that the following can be a subject of
charge:
• Whole piece of land;
The chargor is the registered proprietor of the charged land and is
agreeable to create a charge over the whole piece of land in
favour of the chargee as an assurance that he will repay the loan
in full within the stipulated time agreed by them.
• Whole of an undivided shares;
The chargor is the co-proprietor of a piece of land 5 and he used
his undivided shares as security for his loan. He will only create a
charge over the whole of the undivided shares.
Even though the Code allowed creation of charge over the
undivided shares but it is not a popular subject matter of charge
5 See Section 343 NLC 1965.

44
 because of its characteristic. It is uncertain as to which portion
belongs to the charger and in the event of default it is difficult to
auction the property.

• Lease including sub lease.

The chargor is the registered lessee. As a registered lessee of the
land he is in possession of the duplicate lease. He will create a
charge over the lease. In the event of default, the lease will be
auction in a public auction.
Lease is subject to forfeiture as provided under Section 234 NLC
1965.
Therefore, lease is also not a popular means to be made a subject
matter of a charge because once lease is forfeited the charge can
no longer exist. The existence of charge is depending on the
existence of lease.

Power to create Charge

Section 241(3) provides that power to charge shall be subject to:
• Any limitation imposed by NLC or any other written law.
o Under Trustees Act, Malay Reserve Land Enactment or under
Companies Act.
o Under Malay Reservation Land Enactment from the respective
states – land cannot be charged to non malays.
o Companies Act 1965- director cannot use the company’s property
as a security for his own loan. (S.133 CA)
▪ HARTA EMPAT SDN BHD V KOPERASI RAKYAT BERHAD
(1997) 2 CLJ 94, the charge is not valid when the director
charged the company’s property for his own loan.
o S.43 NLC- minor cannot own a land.

o Limitation imposed by Malay Reservation Enactments.

45
 • Ho Giok Chay v Nik Aishah (1961) 1 MLJ 49
The charge was created in favour of non-Malay for a Malay
reservation land. This was not allowed.

• The charge was against Power of Attorneys Act 1969. See case:
Perwira Habib Bank v Visvanathan (1997) 4 MLJ 474.
• Any limitation imposed by restriction in interest of the land.
• UMBC V SYARIKAT PERUMAHAN LUAS SDN BHD (No 2) [1988] 3 MLJ
352.
Charge was registered without letter of consent to charge.
It was held that the charge was defeasible.
• Creating a charge over a lease, this charge shall be subject to any
express or implied term of the lease agreement between the lessor and
the lessee.

• In relation to lease used as a security – must comply with the express

provision stipulated in the lease agreement as well as implied under NLC
e.g S.231 NLC provides that lessor must give written consent before the
lease can be charged.

Type of charge:
1. First Party Charge – when the chargor and the borrower is the same
person.
2. Third Party Charge – when the borrower and the chargor are different
person.

Form of charge:
In practice the solicitor has to prepare the following:

46
 1. Statutory Form. See Section 242 NLC (Form 16A)
2. Annexure.
• In addition to the rights and duties expressly and impliedly
provided for under NLC, it is also accepted practice to include an
agreement to the instrument of charge to reinforce the statutory
provisions.
• This contract spells out the terms and conditions regulating the
relationship between the chargor and the chargee in particular
the chargor’s obligation in respect of the l;oan and the land in
question.

Brief stages in the creation of charge:

1. Preparation of charge document – must comply with provisions in
Section 207 – 208 NLC;
2. Execution of documents – Section 210 NLC;
3. Stamping of documents – Stamp Act 1949.
4. Presentation of documents – Section 294-306 NLC.
5. The charge is valid.

What is the effect upon creation of a charge in favour of a chargee?

• Upon registration of a legal charge, the title or ownership of the
property or lease does not vest in the Chargee.
• The Chargee will endorse its interest in the land –this is done by the
registration of Form 16A. The title will not be transferred to the Chargee
but from the date of the registration of the charge, the Chargor
(Borrower) will have to obtain consent from the chargee whenever he
intends to deal with the said land. Why would the Chargor have to obtain
consent from the Chargee? This is simply because the Chargee is vested
with interest in the said land until the loan granted to the Chargor is

47
 fully settled. Before settlement of the loan, the said land is still subject
to the loan agreement that it is to be used as “security” for the loan.
• The Chargee merely acquires an interest in the land or the lease. It
means from the date of the registration of charge the lender’s rights as
chargee, will be acknowledged by NLC and any prospective buyer of the
land will have knowledge that the said land is used as a security to
obtain a loan.
• Since no transfer of ownership involve – it is possible to create more than
one charge over the same land or lease. See Section 241(2) NLC.
• In KIMLIN HOUSING DEVELOPMENT (1997) 2 MLJ 805- stated that even
in the event of proceedings being brought under NLC (OFS) to enforce a
statutory charge over the land, a Chargor still possess certain valuable
rights as proprietor of the land.
• In brief it means that if the chargee intends to foreclose the land, it
must be done in accordance with NLC and the procedures must be
strictly complied with or else the chargor can challenge to nullify the
whole proceeding.
• Section 215(3) NLC – the Chargor can still dispose the land or sell the
land or lease, but subject to the proviso of the charge.
• Section 251 NLC – Chargor can only lease or sublease with the consent of
the Chargee.
• Remedies only available to registered chargee.
• Section 218 NLC - Chargee may assign his interest in the land.
• Where the land or lease held by a company then the Chargee must
register the charge with Registrar of Companies. See Section 108 of
Companies Act. (registration must be effected within 30 days of the
execution of the charge).

What happen if Chargor or the Borrower fails to repay the loan?

48
 • In the event of default i.e the borrower fails to comply with the loan
agreement, as a “chargee” NLC provides the Chargee with a statutory
remedy.
• The statutory remedies include Order for Sale, Order of possession and
also an assignment of the property to Danaharta.
• By having a statutory remedy, Chargee is entitled as of rights under the
law to choose any of the methods to recover the outstanding amount.

What happen if charge is not registered?

• General rule: not valid because the registration is a mandatory
procedure. See Section 206(1)(a) NLC and Section 206(1)(b) NLC.
• Nevertheless, since the parties have entered into a loan agreement, the
transaction is valid as a contract (loan agreement). See Section 206(3)
NLC.
• Where the lender(chargee) takes possession of the IDT as a security or
assurance for the repayment of loan by debtor(chargor) but fails to
present the instrument for registration, the law regards the chargee as
unregistered chargee or equitable chargee.
• Cases:
o MAHADEVAN S/O MAHALINGGAM V MANILAL & SONS (1984) 1 MLJ
266
Salleh Abas: it does not prevent the creation of an equitable
charge.
• MALAYAN BANKING BHD V ZAHARI AHMAD (1988)2 MLJ 135
Unregistered charge was considered as an equitable charge.
• ORIENTAL BANK V CHUP SENG RESTAURANT (1990) 3 MLJ 493 Mohd
Dzaiddin J: It must be recognized that NLC adheres strictly to the
principle of registration and recognizes only parties who are
registered under the Code. However, it does not prohibit the
creation of an equitable charge.

49
 • HJ ABD RAHMAN v MAHOMED HASSAN (1917) AC 209
Code is silent to security which does not conform to the Code.
It is permissible but it is not protected by the Code.

• In Chup Seng’s case it is suggested that the fact that the Chargee has in
their possession the IDT will create a Lien and based on this fact the Lien
Holder may enter a Lien Holder’s caveat to protect the subject matter of
the security.
• See STD CHARTERED BANK V YAP SING YOKE (1989) 2 MLJ 49 and
• UMBC LTD V GOH TUAN LYE (1976) 1 MLJ 169.

Rights of a Registered Chargee:

A. Sec. 244 - A chargee has the right to possess IDT but it is only given to
the first chargee. It must be noted that there can be more than one
chargee on a piece of land.

B. Sec. 218 – A chargee can also assign or transfer the charge. This is
because Sec. 214 allows a charge to be transferred. By transferring a
charge, the chargee can liquidate the asset because to a chargee, a land
is considered as an asset because they gain interest from it.

C. Chargee is entitled to obtain enhancement of priority of charge. The

general rule of equity for the priority of a charge – the first in time shall
prevail. It means that if a chargee has agreed to take a land as security
over a piece of land that has been earlier charged to another lender, the
first chargee shall be given a priority as compared to him who came in
later than the first chargee. However NLC allowed the said chargee to
enhance its priority in the following circumstances:

50
 o Doctrine of Consolidation;
o Doctrine of Tacking; and o
Postponement of Charge.

1. DOCTRINE OF CONSOLIDATION:
• Consolidation is a doctrine developed by equity.
• The purpose of this doctrine is to curtail the right of the
mortgagor to redeem the charged property.
• Characteristic – only applicable when several charges given by the
same person on different properties and charges created by the
same chargor. In brief – same chargor and chargee but several
distinct charges.
• What is the effect of this doctrine?
-if both parties are agreeable to invoke this doctrine, the lender
may refuse to discharge any one of the charged land unless all the
loans are fully paid. Charged properties are discharged
simultaneously.
-consolidation control the right to discharge.
-in CUMMINS V FLETCHER (1880) 14 Ch D 699 –it was held that
the doctrine of consolidation means that the power of redemption
given in the original contract to the mortgagor is gone.
• The chargor and the chargee may have an agreement to
consolidate two or more charges effected between themselves
but this agreement must be made expressly at the time of
execution of the loan agreement and charges. See Section 245
NLC.
• In brief, for consolidation to operate, the chargee must satisfy the
following:
o Charges must have been effected by the same chargor; o It
must be in favour of the same chargee; and

51
 o The consolidating clause must be expressly provided for in
the charge agreement.

2. DOCTRINE OF TACKING
• Tacking is a doctrine whereby a prior legal charge (1st charge)
may amalgamate his original charge with his subsequent charge
(over the same piece of charged property) so that all the charges
will take priority over intermediate encumbrances with another
chargee.
• Section 246 NLC provided the following conditions on tacking are
satisfied:
a. property to be tacked must be the same land;
c. further advance is made with the consent of the subsequent
chargee.

• In brief, tacking applies under the following situation:

o Same chargee; o Same chargor; o Same
charged land; and
o Express consent from another charge that
used the same piece of land as security
for the chargor’s loan.

• An exception is provided under Section 246(3) NLC 1965 where if

the subsequent chargee did not notify the first chargee in writing
of the creation of the subsequent charge, the chargee who
intends to invoke the doctrine of tacking need not obtain express
consent from him.

3. POSTPONEMENT OF CHARGE.
• It is provided under Section 247 NLC 1965.

52
 • This privilege is rarely used by chargee since whenever they
create a charge, they will make sure it is effective and
enforceable upon registration of charge document.
• The only situation that can be used as an example is in a situation
where chargee is not registered as company at the time of
preparation and registration of charge. Therefore, in order to
make sure that the charge is valid, chargee will apply for
postponement at a later date where the chargee by then is duly
registered under the Companies Act 1965.

Settlement of the loan: Discharge of Charge

❑ Upon full settlement of the loan, the borrower may release the charge
by using Form 16N. See S.278 NLC.(it is known as Discharge of Charge).
❑ The Form 16N is prepared in accordance with S.208-212 NLC. Only the
chargee executed Form 16N before the person under Fifth Schedule.
❑ After stamping, the instrument is presented for registration in
accordance with S.293-306 NLC.
❑ The documents are: o A duly stamped Form 16N; o Duplicate charge; o
Original IDT; and o Fee.

REMEDIES AVAILABLE TO CHARGEE

ORDER FOR SALE

• Chargor has to comply with the express provision of the loan agreement/
charge such as installment and the implied provisions as stated in
Section 249(1) NLC 1965 where it is stipulated that the chargor shall pay
the sum secured together with the payment of interest. It is also
provided in Section 249(2) that the chargor shall pay all the relevant
rent, rates, taxes and other outgoings relating to the charged land. The
chargor is also required to observe and perform all express and implied
conditions attached to the land.

53
 • If the chargor fails to observe and perform the express and implied
obligations thereof, he shall be liable for breach of contract.
• In the event of default by chargor – the registered chargee may exercise
this right.
• NLC requires the chargee to comply strictly to the provisions (Mandatory)
– failing which the chargor can claim that the sale is void or the chargor
may invoke Section 256(3) i.e OFS will be denied because the existence
of “cause to the contrary”.
• Order for sale is carried out by obtaining court’s or land office’s order to
auction the property to the public at large. Once the property is sold to
bidder, the proceeds of the sale will be utilized towards repayment of
the full outstanding amount plus incidental costs and the residue if any
will be refunded to the chargor/borrower.
• In brief, order for sale is to recover whatever amount due to the lender
and any residue shall be refunded to the borrower since the borrower is
the owner of the property.

7.1 PROCEDURES:
1. Notice;
2. foreclosure proceeding;
3. OFS;
4. Auction.

NOTICE:
• Before the Chargee can apply for an Order for Sale from the court or the
Land Administrator there are preliminary procedure that he has to
comply.
• The Chargee must first serve a notice in a form specified by NLC to the
Chargor.

54
• There are three factors that will affect the validity of a statutory notice:
o The form of notice used by the chargee;
o The content of the notice; and o The
service of the notice,

1. Form of Notice:
1. Form 16D under Section 254 NLC; and
2. Form 16E under Section 255 NLC.

Form 16D:

• The keyword under S.254:

o Breach of any express or implied obligations of chargor under the
charge agreement.
o The breach has been continued at least one month or more.

• The chargee may serve on the chargor a notice in Form 16D.

• Form 16D shall indicate :
o The amount due i.e Principal and Interest’

o Requiring the chargor to remedy the breach within the time

stipulated in the charge agreement.
o If not stipulated in the agreement – then NLC requires the chargee
to give one month grace period to remedy the breach. In practice,
normally the bank provides 7 days or 14 days grace period.
o The chargee is also required to give warning to the chargor that
failure to comply the statutory notice he will take proceedings to
obtain an OFS.

Form 16E
o Only relevant when the loan agreement states that the Chargee is
entitled to demand the principal sum at any time.

55
 o Therefore, the Chargee is allowed under NLC to demand for the
loan advanced, even without default on part of the Chargor or the
borrower.
o The Chargee may use Form 16E under Section 255 NLC to give
notice to the Chargor of his intention to demand for the principal
sum advanced to him within one (1) month from the date of the
notice is served on the Chargor. o If the Chargor fails to pay the
sum demand, the Chargee is entitled to apply for an Order for
Sale.

Difference between Form 16D and 16E

1. 16D – only relevant when chargee has to prove default i.e the chargee
has to specify how long the breach has occurred and asking the chargor
to remedy the breach.
16E - no default necessary, it is only relevant when the principal sum is
payable on demand.

2. 16D – must establish breach has occurred. Therefore if proceed before

breach occurred is immature proceeding.
16E - need not specify breach. Therefore it is faster to start with 16E.
Cases:
Eliathamby V Sheikh Mohd Said (1970) 2 MLJ 190
No provision in the charge agreement that allows the chargee to demand for
principal sum. The Chargee used 16E to demand for the outstanding
amount.
Held:16 E was wrongly used.

VAM Hussain V BP Malaysia Sdn Bhd(1970) 2 MLJ 69

The charge agreement provides that the principal sum secured was payable
on demand.

56
Held: The respondent had used the correct form, that is Form 16E.

Jacob V Overseas Chinese Banking Corp(1974) 2 MLJ 161

The appellant charged his land to the respondent to secure the repayment
of an overdraft. On default of payment, the respondent served Form 16D
and applied for OFS.
Held: Sufian LP: The object of the legislature was to see that sufficient
notice was given to the chargor before the chargee applied for OFS. Where
there was a demand for payment of principal sum and interest, Form 16E
could be used as well as Form 16D and the demand may be made by either
form.

Mary Michael V UMBC (1971) 1 MLJ 172

The appellant charged lands to the respondent as security for an overdraft
facility. The respondent caused a notice in Form 16D to be served to the
appellant demanding payment.
The appellant contended that the notice under Form 16D is null and void.
HELD:
In this case although the principal sum was payable on demand, the chargee
was seeking to the interest which had become due and payable. Therefore,
the notice in Form 16D was an appropriate notice.
Per Azmi LP: It is to be observed that a notice in form 16D applies to any
charge, so that it can validly be used even in the case of a charge where the
principal sum is payable on demand.

Central Malayan Finance V Loke Kok Lai(1975)1 MLJ 160

The charge agreement provides that in the event of default, the chargee
would give notice under Section 254 NLC. The chargee issued 16E instead of
16D when the borrower defaulted in the payment. It was contended that the
notice is void.

57
Held:The notice was defective since it was provided in the loan agreement to
proceed under Section 254.

A notice in Form 16E is both a notice of demand for payment as well as a

notice that in default of payment within one month of the service of the
notice the chargee would apply for OFS.

A notice in Form 16D can be used whether or not the principal sum is
payable on demand.

Siong Holdings Sdn Bhd V D&C Bank(1997) 1 MLJ 340

The respondent issued Form 16D and the chargor contended that the figure
was wrong. The charge agreement provides for conclusive evidence clause.
Held:Notice was valid because the effect of conclusive evidence clause is
that the chargee only need to prove the inability of the defendant to settle
the loan.

Syarikat Kewangan Melayu Raya V Malayan Banking Bhd (1984)2 MLJ 253
Facts:
First loan (1965) - $400,000-00 2nd
loan (1967) -$180,000-00.
Both loans under one account with the defendant.Defendant issued notice
under 16D in 1980 to demand for the outstanding amount. Land
Administrator granted OFS. Appellant appealed to High Court on the
grounds:
i. 16D provides with a heading “Notice of default with respect to a charge”
and it was inappropriate to issue a single notice in respect of the whole sum
because it was secured not by a charge but by two charges.
ii. that there should have been two notices specifying how much was
claimed under each charge.

58
Held: by Fed Court application dismissed.
On appeal to Privy Council the appellant argued that a single notice was
invalid since it fails to specify in relation to each charge the separate
specific sum.
Held:Dismissing the appeal.
The purpose of the notice is to specify the breach and the need to recover
the same. It does not prejudice the appellant since they perfectly knew the
fact, they had one account under two loans.

• Breach is not limited to failure to pay the installment or interest only. It

can also occur when the chargor breached any implied provision for
example failure to pay quit rent or breach of conditions of the land.
• If the charge agreement include clause to eliminate the need to give
service before they can proceed with application for OFS then this clause
is invalid. The requirement to give notice is mandatory. Case:
o National Bank of Australia Ltd v United Hand in Hand (1879) 4 AC
391
Consequences of failure to give notice:
i. sale cannot be effected;
ii. registrar may refuse to register any transfer; iii. chargor may
obtain an injunction preventing the sale from proceeding.

2. Content of Notice:
The contents of notice must be in accordance with NLC/loan agreement
Not in accordance with the provision of the loan agreement:
Perwira Affin Bank v Saad Abdullah (1999) 6 MLJ 418
There was a variation of interest in the notice from the loan
agreement. The Court decided that the variation of interest might
affect the notice if there is no notification of the variation to the
chargor.

59
 Not in accordance with the provision of NLC:
Case: KHALID FARZALUR RAHMAN V CITIBANK BERHAD (2000) 5 MLJ
421 (High Court) please refer to the decision of COA (2000) 5 MLJ
96 (the same year).
The loan agreement provides 7 days to remedy breach but NLC
provides 1 month to remedy breach. 7 days provided by loan
agreement is invalid since it is shorter than the provision under the
NLC. At High Court; court rejected the chargee’s application for OFS.
On appeal to the Court of Appeal; the chargee’s application for OFS
was granted because the agreement to remedy breach within 7 days
have been agreed upon by the parties during the execution of the loan
agreement. Thus, it is valid and enforceable.
Perwira Affin Bank Bhd V Lim Weow (1998) 3 MLJ 56.
3. Service of Notice:
• Service of notice must follow the provisions in Section 430 -433 NLC.
• Sec. 431 - notice can be delivered by way of personal delivery
- by leaving the notice at the person’s last known address
- pre-paid registered post
- substituted service
• Effect for non compliance- the notice can be challenged as provided in
the case of Standard Chartered Bank (M) Bhd v Tunku Mudzaffar
Tunku Mustapha (2005) 1 MLJ 604.
• In the case of Kekatong Sdn Bhd v Bank Bumiputera Malaysia Bhd
(1998) 2 MLJ 440, it was decided by the court that the notice was not
effectively served when the chargee served to the address that they
knew it was no longer being occupied by the charger. See also case

60
 Muniandy v D&C Bank (1996) 1 MLJ 374 and Afffin Merchant Bank Bhd
(formerly known as Perwira Affin Merchant Bank Bhd) V Glorious
Triumphant (M) Sdn Bhd (2007) 2 MLJ 402.
• Once notice has been validly served, time begins to run against the
chargor and in favour of the chargee selling the property.
• After expiry of date in 16D or 16E then chargee is at liberty to apply for
OFS.
• Issues: What is existence of cause to the contrary?
What is the extent of the chargor’s right to pay the outstanding loan
demanded by the chargee by selling the charged property to third
party.

THE MEANING OF “EXISTENCE OF CAUSE TO THE CONTRARY”.

• There is no definition provided by NLC 1965.
• Section 256(3) and Section 263(1) NLC 1965 state that order for sale
should be granted by the High Court or Land Administrator unless there
is an existence of cause to the contrary.
• The judges in two landmark cases decided that “existence of cause to
the contrary” means the court or land office will not grant an order for
sale if granting that order will be against any rule of law or any rules of
equity.
• case:
o Keng Soon Finance Bhd v MK Retnam Holdings Sdn Bhd (1989) 1 MLJ
458.
o Low Lee Lian v Ban Hin Lee Banking Bhd (1997) 1 MLJ 77

b. Application for foreclosure proceeding to the relevant tribunals There

are issues that may arise is to determine which tribunal you should apply
for foreclosure proceeding. To determine the tribunal, it depends on the
Title of your land.

61
 Registry Title Land Office
(HIGH COURT) Title
Final Title – Sec. 86 Final Title – Sec.
87
i. Grant (Form 5B) i. Mukim Grant
(Form 5D) GM
ii. State Lease (Form 5C) PN ii. Mukim Lease
(Form 5E) PM
OR OR
Qualified Title – Sec. 177 Qualified Title It
is usually written as It is usually
written as QT(R) QT(M)
HS(M)
HS(D).

If it is a Registry Title, the relevant tribunal is the HIGH COURT. High Court will
originate motion.S 256
If it is a Land Office Title, the relevant tribunal is the LAND ADMINISTRATOR
whereby the Land Office will use Form 16G.S 260
Case : Tan Teng Pan v Wong Fook Shang (1973) MLJ 31
The title was a Land Office Title and the chargee applied to the
High Court. The Court decided that it had no jurisdiction to hear
the case if the title is not Registry Title.

c. Application For an Order For Sale

• Before the relevant tribunals grant Order For Sale (OFS), it will look at
whether there is existence of cause to the contrary.
Sec. 256(3) – for High Court
Sec. 263(1) – for Land Administrator
The above tribunals will grant OFS, unless there is existence of cause to the
contrary (not to grant OFS).

62
Existence of Cause to the Contrary
There is no definition as to what it means by the existence of cause to the
contrary in the National Land Code 1965. The words appear in Section 256(3)
and in Section 263(1) NLC 1965. In these particular sections, it is stated that
the judge of high court and the land administrator may grant an order for sale
for any application made by chargee unless there is an existence of cause to
the contrary. Literally it refers to a situation where if the judge or land
administrator is satisfied that there is a valid reason or valid objection to the
application, then order for sale will not be granted.

Therefore, in order to know the actual definition or to know what is deemed to

be ‘cause to the contrary’, these case laws shall be referred to:
Keng Soon Finance Bhd v MK Retnam Holdings Sdn Bhd
(1989) 1 MLJ 458
In this case, the registered proprietor applied for subdivision of
land. Before it was subdivided, he created a charge over the land
in favour of the chargee. Then, the registered proprietor failed to
pay and the chargee wanted to apply for the remedy of OFS. The
judge decided that before granting OFS, the Court will look at
whether there is existence of cause to the contrary. To prove the
existence of cause to the contrary, the judge laid down two ways:
i. There is existence of cause to the contrary if the granting of
OFS will be against the rule of law or; ii. it will be against the rule
of equity.
However, a later case added two more ways making it all together FOUR
ways to prove the existence of cause to the contrary.
Low Lee Lian v Ban Hin Lee Banking Bhd (1997) 1 MLJ 77
In this case, Justice Gopal Sri Ram stated that OFS will not be
granted if:

63
i. The charge is void or not enforceable
Case : Public Finance v Narayanaswamy (1971) 2 MLJ 32
Fact of the case was similar to Keng Soon’s case.
However, at the hearing, the chargee denied the rights
of the purchasers of the subdivided land. The Court
decided there was intention to cheat due to the denial.
The Court was very upset and said it amounts to fraud.

ii.The chargee fails to comply with the conditions precedent

before applying for OFS. It could be either a problem under
issuance of notice, applying to the relevant tribunal or failure
to comply with the provision of Rules of High Court 1980.
Case : All cases under issuance of notice and application to
tribunal.
The procedural aspect of any application made to High Court must
comply with the provisions of the Rules of High Court 1980. Non
compliance of the said Rules is fatal.

iii. It is against the rule of law if the chargee when creating

the charge violated any provision of NLC or other written laws.

Phuman Singh v Khoo Kwang Choon (1965) 2 MLJ 189 An

unlicensed moneylender(chargee) created a charge without
obtaining a license under Moneylender’s Ordinance.

Aseam Credit Sdn Bhd V Eminent Avenue Sdn Bhd (2008) 1 CLJ
12 where in this case the charge was created in favour of an
unlicensed moneylender.
(And all other cases under limitations to create a charge)

64
iv. It is against the rule of equity which is based on the
concept of fairness, natural justice and fair representation.
Kuching Plaza v BBMB (1991) 3 MLJ 163
The developer constructed a high rise building and applied for a
bridging loan with the chargee. The developer failed to pay and
the chargee applied for OFS. The sub-purchasers of the high-rise
building challenged the application for OFS because it is against
the rule of equity because the chargee already made an
undertaking to exclude the sub-purchaser’s units from the charge.
The Court decided on behalf of the sub-purchasers because if OFS
is granted it will be unfair to them, as they have paid for their
units. Further, the Court stated that not only the chargor can
claim that there is existence of cause to the contrary, any party
who have interest on the land may also do so.

OCBC Bank (M) Bhd V Au Kee Sian & Anor (2006) 4 CLJ 595
Where in this case the lender granted an overdraft facility to the
borrower and a charge was created in favor of the lender.
Subsequently the borrower intimated to the lender that they
intend to reduce the loan amount from RM380,000 by forwarding
two payments amounting to RM100,000 and as a result the
overdraft was reduced to RM280,000. The bank applied for an
order for sale when the borrower defaulted in the repayment of
the loan. There were other payments had also been remitted by
the borrower but without the specific request that they be used
to reduce further the overdraft limit, and that being so, such
payments were left untouched by the bank.

The borrower argued that it is against the rule of equity to grant

the order for sale, as the bank ought but failed to utilize the

65
 payments remitted by the borrower to reduce further the limit of
the overdraft.

Held – the conduct of the bank could not give rise to an equitable
right since the limit was the approved limit and they did not allow
the borrower to exceed the said limit.

• The extent of power of land administrator to hear matters prior to

granting OFS.
Case : Gurpal Singh v Kananayer (1976) 2 MLJ 34
The Court decided that Land Administrator had no power to
investigate on the validity of the charge.
Held: (1) the Collector has no powers to adjudicate on the
pleadings which were ordinarily heard in the courts; (2) the
powers of the Collector in the inquiry should be limited. He
should not go behind the charge in view of s 340(1) of the
National Land Code relating to indefeasibility of title or
interest and only the High Court possesses the power to set
aside any registered interest of a proprietor, chargor or
lessee in any land title; (3) the order of the Assistant
Collector was set aside without prejudice to either party to
take any fresh action to court.
Summary: This was an appeal by the chargee against the
decision of the Assistant Collector of Land Revenue who
dismissed the chargee’s application for an order of sale of
a piece of land under s 260 of the National Land Code 1965
charged by the respondent to the chargee. The Assistant
Collector considered allegations of fraud, mistake, non-est
factum, limitation, non-compliance with the Moneylenders

66
Ordinance, the Stamp Ordinance and the Evidence
Ordinance. The issue arising therefrom was whether the

Assistant Collector had the powers under s 261 of the

National Land Code to hear pleadings and defences which
arise in cases ordinarily heard by the courts.

Suppiah v Pannompalam (1963) MLJ 202

The only order that Ld Administrator can grant is OFS.
Held: (1) the Collector was bound to accept the register
and once he was satisfied that the charge with which he
was concerned was on the register then the only question
for him to decide was whether or not there had been
default in the payments provided for. If he was so satisfied,
he was obliged to make an order under the provisions of ss
141 and 142 of the Land Code. He has no power to
investigate any allegation of fraud or misrepresentation
and he could not have gone beyond granting a period of
delay to enable the party making the allegation to take
proceedings for rectification of the register under s 240. As
the appellant had ample time to take proceedings for
rectification of the register prior to the proceedings before
the Collector and no such proceedings were commenced or
were in contemplation the appeal should be dismissed
Summary: The appellant was the registered proprietor of
the land in question. By a charge registered on 20 February
1953, the appellant charged his land to the respondent for
RM8,000. On 12 January 1959, the respondent issued a

67
notice under s 138 of the Land Code calling on the
appellant to pay off the charge. The parties and their
solicitors then appeared before the Collector of Land
Revenue, Larut District on 14 February 1962 for the
appellant to show cause why an order of foreclosure and
sale should not made in respect of his land. The Collector
after hearing the parties held that there had been default
in the obligation in respect of which the charge was given
and made an order of foreclosure and sale in respect of the
land. The appellant appealed under s 237 of the Land Code
and this appeal was dismissed. On appeal to the Court of
Appeal it was argued (i) that the Collector should have
accepted the appellant’s story as to how he came to sign
the charge and should have given effect to that acceptance
by refusing to make the order he did make for foreclosure
and sale; (ii) that the instrument of charge was not proved
because the provisions of s 68 of the Evidence Ordinance
were not complied with.

UR Leisure Resorts Sdn Bhd v Malayan Banking Bhd

[2015] 4 MLJ 342
Facts: The appellant was the registered proprietor of a
piece of land ('the land') which was charged to the
respondent as security for a loan taken by a third party.
When the third party defaulted on the repayment of the
loan, the respondent proceeded to apply to the land
administrator for the sale of the land. Inquiries were held
on various dates but the land administrator did not make
any order for sale of the land but instead referred the
application to the High Court. It was alleged that the

68
 appellant/chargor had disagreed with the reserved price
proposed by the respondent/chargee and had made an
application to the High Court.
The High Court held that s 265(3A) of the
National Land Code (' the NLC') must be read independently
of sub-ss (2) and (3). Hence, the present appeal by the
appellant.
Issue on appeal: The issue that arose for the court's
determination was whether a land administrator has the
power to refer an application for sale, made under s 260 of
the NLC to the High Court without previously having carried
out a sale of the land at the land office twice pursuant to
sub-ss (1), (2) and (3) of s 265.
Held, allowing the appeal with costs:
• (1) With the introduction of sub-s (3A), the position does not change
as there still must have been two prior unsuccessful sales by the land
administrator before he can lawfully refer the matter to the High
Court. What the amendment now makes clear, via a proviso to sub-s
(3A), was that the High Court cannot, in exercising its power under
sub-s (3A), in dealing with the reference, make an order to direct the
Land Administrator to carry out a sale.
• (2) The order of the High Court and the decision of the land
administrator to refer the matter to the High Court were set aside.
The matter was ordered to be sent back to the land administrator to
carry out a proper inquiry in accordance with the provisions of s 261
of the NLC and to make the appropriate decision under s 263 of the
same.

• Commencement of breach and limitation of time to commence

proceeding:

69
• Lim Ban Hooi & Anor v Malayan Banking Bhd [2018] 5 MLJ 421
Facts:
The appellants created two charges over a piece of land in favour of the
respondent’s predecessor in title (‘the bank’) to secure credit facilities
that were granted to them. When the appellants defaulted in their
repayment obligations, the bank issued them notices of demand on 15
April 1998 and 20 May 1998. The bank then terminated the facilities,
sued the appellants in a civil action and simultaneously sought to obtain
an order for sale of the charged property. For that purpose, the bank
issued a Form 16D notice to the appellants under s 256 of the National
Land Code (‘the NLC’) on 27 September 1998. After holding a land
inquiry, the land administrator granted an order for sale on 6 May 1999.
On appeal, the High Court set aside that order with liberty to apply for a
fresh order for sale. After its appeal against the High Court’s decision
was dismissed by the Court of Appeal (‘COA’) in June 2004, the bank
took no further action on the matter. When the present respondent
(‘MBB’) took over the assets of the bank pursuant to a vesting order, it
issued a fresh notice of demand to the appellants followed by a fresh
Form 16D notice on 22 February 2010. When the appellants did not
respond to the said notices, MBB applied for an order for sale of the
charged property. The appellants appealed to the High Court arguing,
inter alia, that MBB’s right to file a charge action had become
timebarred under s 21(2) of the Limitation Act 1953 (‘the LA’). They
argued that since the default/breach under the facilities occurred in
April or May 1998 and the bank had acted upon the breach by issuing
notices of demand and a Form 16D in 1998, the 12 year period within
which a charge action should have been filed started running from 1998
and expired in 2010. MBB countered by saying that it was entitled to
issue a fresh Form 16D notice and that the 12 year time period only
began running after the expiry of the one month given in that notice for

70
 the appellants to remedy the breach; that since the Form 16D notice was
issued on 12 March 2012, the application for an order for sale was not
barred by s 21(2) of the LA.
The High Court agreed with MBB and dismissed the appellants’
appeal. In deciding the instant appeal against that decision, the COA
relied upon the views and conclusions it had expressed in its earlier
decision in Sivadevi a/p Sivalingam v CIMB Bank Bhd [2018] 5 MLJ 82
(‘Sivadevi’) where the interpretation and construction of s 21 of the LA
(in particular ss 21(1) and (2)), Part 16 of the NLC and O 83 of the Rules
of Court 2012 relating to charge actions were exhaustively considered.
Inter alia, Sivadevi held that: (a) an action to enforce a charge of land
fell under s 21(1) and not s 21(2) of the LA; (b) such an action became
time-barred after the expiration of 12 years from the date when the
right to receive the money secured by the charge accrued; (c) the 12
years began to run upon the expiry of one month after the breach or
such alternative period as might be specified in the charge (the words
occurring in s 254(1) of the NLC); and (d) it was wrong to hold that the
12 years ran only from when the chargor failed to remedy the default or
breach as specified in the Form 16D notice because that would not only
render the aforesaid words in s 254(1) of the NLC meaningless but result
in time not running until a chargee had issued the Form 16D notice. In
such an event, a chargee could well decide not to do anything for years
and still be in time when it decided to enforce its right to an order for
sale.

Held, allowing the appeal and setting aside the decision of the High
Court:

• CIMB Bank Bhd v Sivadevi a/p Sivalingam [2020] 1MLJ 583 FC

71
• Facts: The appellant (‘CIMB’) had granted the respondent
(‘Sivadevi’) a loan that was secured by a charge upon Sivadevi’s
land under the National Land Code (‘the NLC’). When Sivadevi
defaulted in the loan repayment (the last payment was made on
12 May 2003), CIMB began proceedings to obtain an order for sale
of the land. In January 2016, CIMB served on Sivadevi a Form 16D
notice under the NLC giving her 30 days to remedy her breach
under the charge. On her failure to remedy the breach, CIMB
applied to the High Court in August 2016 for an order for sale of
the land by way of public auction. The court granted the order for
sale in November 2016. Sivadevi successfully appealed to the
Court of Appeal (‘the COA’) to set aside the order for sale on the
ground that CIMB’s foreclosure proceedings were timebarred
under the Limitation Act 1953 (‘the LA’).
• The COA held that: (a) the foreclosure proceedings fell under s
21(1) of the LA which stated that an action to enforce a charge of
land to recover monies thereby secured had to be brought within
12 years from the date when the right to receive the money
accrued; (b) CIMB’s ‘right to receive the money accrued’ arose
when Sivadevi breached her contractual agreement to pay the sum
secured by the charge and that breach occurred on 12 May 2003
when she defaulted in her loan repayment; and (c) as the cause of
action accrued on 12 May 2003, limitation under s 21(1) of the LA
had set in when CIMB applied for the order for sale. The COA
further opined that the limitation period could not be computed
from the time a chargor failed to comply with a Form 16D notice
because a chargee could well sit on its rights and not issue a Form
16D notice for years, to the chargor’s detriment. In the instant
appeal against the COA’s decision,
• Issue: CIMB asked the Federal Court to determine, inter alia,
whether: (i) s 21(1) or 21(2) of the LA applied to proceedings

72
 commenced by a chargee for an order for sale of real property
under the NLC; and (ii) if s 21(1) was the applicable provision,
whether the date when the right to receive the monies secured by
the charge arose when the chargor defaulted under the loan
agreement or when the chargor failed to comply with the Form
16D notice. Section 21(1) of the LA provided that ‘No action shall
be brought to recover any principal sum of money secured by a
mortgage or other charge on land or personal property or to
enforce such mortgage or charge, or to recover proceeds of the
sale of land or personal property after the expiration of 12 years
from the date when the right to receive the money accrued’.
• HELD: unanimously (but for different reasons) allowing the appeal,
setting aside the COA’s decision and reinstating the decision of the
High Court: (1) (per Ahmad Marop PCA) When CIMB applied to
enforce the registered charge by way of an order for sale, s 21(1)
of the LA applied to such an action. The application came within
the ambit of an action ‘to enforce such mortgage or charge’ under
s 21(1) of the LA. An application for an order for sale under s 256
of the NLC was not the commencement of an action. The chargee
was not suing for a debt but was merely enforcing/exercising his
statutory remedy against the defaulting chargor
• (per Ahmad Marop PCA) A breach by the chargor of the agreement
in the charge, even one which had continued for a period of one
month or more, did not make ‘the right to receive the money
accrued’. The cause of action had not arisen yet to entitle the
chargee to apply for an order for sale. It was only when the chargor
defaulted in complying with the Form 16D notice that ‘the whole
sum secured by the charge shall become due and payable to the
chargee’ (s 254(3)(a) of the NLC). It was on that date that ‘the right
to receive the money accrued’ and the date when the cause of
action arose to entitle the chargee to apply for a judicial order for

73
 sale (s 254(3)(b) of the NLC). In this case, since the order for sale
was applied for about 2 1/2 years after the chargor’s default in
complying with the Form 16D notice, the application was not barred
by limitation under s 21(1) of the LA.

• Can OFS be cancelled/rectified once it has been granted?

ANSWER:NO No, the Ld Administrator cannot cancel or rectify
the OFS.
Mui Bank Bhd v Chiam Kim Yu (1992) 2 MLJ 642
Once OFS has been granted, the Ld Administrator is functus
officio. He has no power to cancel the OFS unless it is allowed by
the NLC.
Lim Yoke Foo v Eu Finance Bhd (1985) 1 MLJ 17
OFS was granted by the Collector of land Revenue in 1976.
Subsequently there was a mistake because only 12 out of 20 titles
were included in the application. The Bank/Chargee filed a notice
of appeal against the 1976 order and purported to cancel the sale.
The appeal made by the bank was later withdrawn and the bank
requested the Collector of Land Revenue to proceed with the
sale. The Collector of Land Revenue purported to make and issue
another order of sale in 1979, specifying the amount due to the
appellant as the same as that stated in the first order but fixed
the reserve price at a higher figure of RM562,000, and scheduling
all the 20 titles. This second order purported to find that the
amount due to the respondents was precisely the same sum as
had been found due in June 1976, with nothing added for
intermediate interest. Appellant (the Chargor) sought to take
advantage of this obvious mistake and paid the sum stated. The
Collector then purported to cancel the sale. The appellant
brought an action claiming that the charge had been redeemed
and demanding the title deeds. The respondents counterclaimed

74
for a declaration that the 1976 order for sale was still subsisting
and sought judgment for the full amount of principal and interest.
The learned judge of the High Court found in favour of the
appellant and ordered the respondents to execute a memorandum
of discharge. On appeal to the Federal Court by the
Bank/Chargee, the Federal Court held that the Collector had no
power to cancel the 1976 order of sale and that the said order on
which the appellant relied was a nullity and devoid of any effect.
The Federal Court set aside the judgment of the trial judge and
held that the respondent was entitled to payment of his claim
with accrued interest by using the OFS in 1976.

Rohaya Ali Haidar v AMbank (M) Bhd (Previously known as MBF

Finance Bhd) [2016] 2 MLJ 819
Facts: OFS was granted by the High Court in favour of the
Appellant (Chargee) in accordance with the provisions of the NLC.
Upon realizing that there are sub purchasers that have given a
Letter of Disclaimer dated 2/9/97 to the effect of disclaiming
interest in the lot purchased by the 9 sub purchasers defendant
and excluding it from foreclosure proceedings against the
developer/borrower. (Letter of disclaimer is a letter from the
bridging financier).
The Bank (Chargee) applied to the court for an order the
OFS and the auction sale be declared null and void and to be set
aside. The deposit and payment shall be returned to the Bidder.
High Court granted the application. The successful bidder
appealed to COA.
Held: Appeal allowed.
The High Court was functus officio in respect of all the

75
 proceedings once OFS has been granted. The court has no power
to set aside the order.

QM Resources Sdn Bhd v Parade Hotel Sdn Bhd [2019] MLJU

646 COA
Facts:
The bidder purchased a land and erected thereon a building
comprised of as per the proclamation of sale:
“the building comprises of 2 adjoining parcels of commercial land
erected thereon an abandoned 9 storey building known as Apollo
Riverview Hotel, including 4 units of shops: first floor-F8,F9 & F18
and second floor-S9”
The sub purchasers (Defendants) claimed that F8,F9 and F18 purchased by
them and to be excluded from the auction.
Thus, these unit do not form part of the auctioned property.
Issue:
i-whether the units claimed by the defendant form part of the
land?
ii-whether the defendants acquired any legal and/or beneficial
rights over the unit?
Held: High Court:
Dismissed the plaintiff’s claim over all the defendants’ units.
The plaintiff/bidder appealed against the decision to COA.

Court of Appeal:
Nowhere in the proclamation of sale precluded the defendants’
units. The Plaintiff/Appellant as the successful bidder has
obtained indefeasibility of title as against the beneficial owner’s
rights. Followed Rohaya’s case. High Court is functus officio.
The rights of the bidder as registered proprietor prevail

76
 over the rights of beneficial owner.

• Issue: whether the bidder is entitled to claim for damages if OFS was
subsequently set aside by court? ANSWER: NO
Ranjit Singh a/l Jarnail Singh v Malayan Banking Berhad [2015] MLJU
1765
Facts:
The bidder has paid for the full purchase price but was unable to
register the certificate of sale due to private caveat lodged by a third
party who is contesting the OFS. Subsequently, the order to set aside the
OFS was granted and ordered the sale price paid by the bidder to be
refunded in full. The bidder was not satisfied and filed a claim against
the bank for remedies on breach of contract.
Held:
Federal Court affirmed the decision of COA where no compensation or
remedies over and above the refunded purchase price.

• Can the chargee file a civil lawsuit against the chargor (borrower)
together with an application for OFS (simultaneous action)?
General Rule - the chargee may take two actions against the borrower
at the same time.
Traditional view:
Case : BBMB v Esah Abd Ghani (1986) 1 MLJ 16
There were two securities : A charge + loan agreement with
guarantor. The chargee went against the chargor for OFS
and also made a lawsuit to the guarantor of the agreement.
The Court decided that this is allowed. The chargee can
take simultaneous action (at the same time) because both
are different securities (a charge and a loan agreement).

77
 [NO LONGER APPLICABLE BECAUSE IT WAS OVERRULED
BY LOW LEE LIAN]
HSBC v Wan Mohd Wan Ngah (1991) 3 MLJ 119
However, in this case, the only security was land, with the
execution of a loan agreement. There was only one
security, no guarantor. The chargee (bank) went against
the chargor in a civil lawsuit and also applied for OFS. The
Court decided that it was an abuse process of the Court
because the chargee should go against the land first and
only if it is not sufficient, then he can go against the
chargor in a civil suit.

AUTHORITIES THAT DECIDE SIMULTANEOUS ACTIONS IS ALLOWED:

Low Lee Lian v Ban Hin Lee Bank Berhad [1997] 2 CLJ 36
The court in this case overruled the decision of HSBC v Wan Mohd Wan
Ngah (1991). In this case the court decided that the chargee may
enforce his statutory charge against the chargor by way of proceedings
in rem under S256 of the NLC 1965. He may also sue the principal
debtor (who may not be the chargor) upon the personal covenant
contain in the loan agreement entered into by the parties. (Action in
personam). In addition to the above, the chargee may also proceeds
against the surety who has guaranteed the loan. He may pursue all
these courses simultaneously, contemporaneously or successively.

Chan Boi Loi v Public Bank Berhad [2011] 1 MLJ 478

Facts: Respondent (Public Bank Berhad) granted a loan to the
borrower/chargor. The loan was secured by two registered charges over
two pieces of land. The annexure for each Form 16A contains a
covenant to pay the remaining unpaid sum in the event that the

78
 proceeds of sale of the charged land is not sufficient to recover the full
outstanding amount.
The commenced proceeding against the chargor on the personal covenant
(under the annexure) before proceeding under the charges. It was
argued by the chargor that the Bank is precluded from bringing an
action on the covenant to repay the loan, until and unless the charge
has auctioned the charged properties.
Decision: The decision of HSBC v Wan Mohd Wan Ngah was overruled by the
case of Low Lee Lian v Ban Hin Lee Bank Berhad. Thus, the bank is
entitled to pursue all remedies available against the borrower/chargor
simultaneously, contemporaneously or successively to recover the
outstanding amount unless there is an agreement to the contrary.

• Capacity of a chargee in an auction of the charged property

• Malayan United Finance Bhd,Johore Bahru v Liew Yet Lan [1990] 1
MLJ 317
V.C George (as he then was) at page 391: “in a forced sale pursuant to
S.256 NLC, the charge at whose instance the sale is effected is to be
regarded as the Vendor and the condition of sale (Proclamation of Sale)
is to be regarded as the sale and purchase agreement.”

d. The public auction will be held upon receiving OFS

General duties of chargee and bidders prior to and after public auction:
1. Prior to conducting a public auction, the chargee must submit the
IDT/duplicate lease to the relevant tribunals (High Court/Land Office).
2. The chargee need to advertise in the newspapers of the date, time,
place and reserved price of the property to be auctioned off.
3. To be an eligible bidder, the person must submit 10% of the reserved
price shall be made in a bank draft and shall be paid to the High Court/Land
Office.

79
4. On the day of the auction, the chargee will only observe the proceedings
because an auctioneer and a bailiff will carry out the auction.
5. The successful bidder must sign the proclamation of sale and it must also
be signer by either the SUR of High Court or the Land Administrator.
6. The successful bidder must then pay the balance of the price within 120
days without any extension – Sec. 257 (1)(g).
7. In the event of failure to pay, the money that has been paid so far will
be forfeited.
8. Upon full payment of the purchase price by the successful bidder, the
Land Office will give certificate of sale.
9. The relevant tribunal will distribute the proceeds of the sale in
accordance with Sec. 268. The successful bidder need not to apply for
discharge from the charge because they will have to pay for auctioneer’s fees,
application for OFS fees, fees to the High Court/Ld Office, payment to chargee
in accordance with priority, payment of annuity (maintenance) and lastly
payment to subsequent charges on the land. – Sec. 268A.
10. If the chargee is a financial institution, the bidder must pay within 14
days and if it is a person or a body, it must be paid not later than 21 days.
11. The bidder need not apply for consent to transfer the land later on even
though the land is subjected to RIN – Sec. 301.

Issues that may arise out of public auction:-

• Can the chargor(registered proprietor/borrower) sell the property by

private treaty when chargee has commenced with foreclosure
proceeding (OFS)? [Private treaty is the normal sale and purchase
transaction between two individuals.] Initially it was decided that:
Std Chartered Bank v Pakiri Maidin (1963) MLJ 276
The Court decided that once a chargee commenced OFS, the
Chargor cannot sell by private treaty.

80
However, the more recent case the court’s view seems to be more flexible:
Mui Finance v Tay Lay Soon ( 1991) 1 MLJ 504
It is not prohibited to sell by private treaty provided that the
property must be sold off before the date of the public auction.

UNITED MALAYAN BANKING CORP BHD v CHONG BUN SUN AND

ANOTHER APPLICATION [1994] 2 MLJ 221
Visu Sinnadurai J:
Powers of the court to order sale by private treaty outside the
provisions of the NLC
It was, however, argued before me that, if the court did not have the
power to order a sale by private treaty under s 257 of the NLC, then this
court had the power to do so either in exercise of its inherent
jurisdiction, or by virtue of the powers given to it under s 25(2) and item
3 of the Schedule to the Courts of Judicature Act 1964. For this purpose,
the decision of the Federal Court in Damodaran v Vasudevan, 19 was
relied upon. In that case, the Federal Court held that though there was
no machinery for the registration of a lis pendens under the provisions of
the NLC, s 25(2) and item 6 of the Schedule to the Courts of Judicature
Act 1964 empowered it to do so.
Having given careful consideration to these submissions, and in
considering the nature of the statutory order for sale under the
provisions of the NLC, I am unable to concede to the arguments of
counsel for the chargee. The Code itself expressly provides for the
manner of sale which the court ought to make under s 257 – a sale by
public auction. So strict is this requirement, that s 257(1)(a) does not
provide for any other method of sale. In the face of this express
provision, it would be a clear usurpation of the legislative function, if an
order by way of private treaty is allowed.
There are also other dangers when the court takes it upon itself to grant
other remedies which are not expressly provided for by the NLC. An

81
example of such an approach is the decision the Federal Court in
Damodaran v Vasudevan, 19 where the Federal Court gave recognition to
lis pendens when it is not provided for in the NLC. This approach
adopted by the Federal Court was subsequently the subject matter of
much criticism by the Privy Council. Lord Diplock, in Damodaran v Choe
Kuan Him, 20 a related case to that of Damodaran v Vasudevan 19
(where no appeal was brought to the Privy Council), in the course of his
judgment, when called upon to invoke s 417(1) of the NLC for purposes
of registration of a lis pendens observed (at p 270):
The National Land Code makes no provision for the registration of a lis
pendens. Counsel … has drawn their Lordships' attention to s 417(1) of
the National Land Code …. But this, in their Lordships' view, does not
authorize the court to direct the registrar to make on the register
entries of a kind for which no express provision is made by the National
Land Code and which are inconsistent with the whole scheme of the Act
….
Lord Diplock further concluded (at p 270):
It follows that, in their Lordships' view, the entry on the register of an
order of lis pendens is a mere brutum fulmen. Even if it be lawful to
make such an entry at all, it serves no useful purpose and their Lordships
would suggest that the precedent set by Damodaran v Vasudevan [1975]
2 MLJ 231 is one which ought not to be followed.
I am therefore of the view that considering the express provision of s
257(1)(a), no question arises as to the court making an order for the sale
of the charged property by way of private treaty by invoking its inherent
jurisdiction, or, for that matter, by the application of any other powers
conferred upon the court by any other statutes, for example, the Courts
of Judicature Act 1964.
In this connection, s 447 of the NLC, a provision which is often
overlooked, needs comment. Section 447 provides as follows:

82
(1) Nothing in this Act shall affect the operation of any rules of court;
and, if any provision of this Act is inconsistent with any provision of any
rules of court, the latter provision shall prevail and the former provision
shall, to the extent of the inconsistency, be void.
It may be said that the effect of this provision is that if any rule of court
provides for a sale pursuant to an order for sale of a charged property to
be held by way of a private treaty, that provision in the rules of the
court will prevail over the provisions of the NLC, so as to entitle the
chargee to apply for the order for sale by way of a private treaty.
The relevant rules of the court, for the present purposes are the RHC,
particularly O 83. It is now clearly established that in foreclosure
proceedings of a charged property, the chargee must comply with the
procedural rules set out in O 83, and not O 31. As pointed out earlier, s
256(2) of the NLC itself provides that an application to the court for an
order for sale under s 257 must be 'in accordance with the provisions …
in force relating to civil procedure'. However, it should be noted that O
83, unlike O 31, does not state the manner in which the court may direct
the sale to be conducted. Order 83 merely stipulates the procedural
rules which the parties to a foreclosure action of a charged property
need to comply with. The manner of the sale, and the details thereof
are therefore, governed by the NLC. As seen earlier, the NLC only
envisages one manner of sale which may be ordered by the court – sale
by public auction. This is unlike the position where an action is
commenced for the sale of property, not charged under the provisions of
the NLC. In such limited circumstances, O 31 of the RHC is applicable,
where under r 2(4)(b), it is expressly provided that the court in effecting
the sale of the property may fix:
the manner of sale, whether by contract conditional on the approval of
the Court, private treaty, public auction, tender or some other manner.
(Emphasis added.)

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This condition, and the others stated in r 2(4) of O 31 are clearly
inconsistent with s 257 of the NLC. However, as stated earlier, O 31 is
not relevant for the present purposes, as it is not applicable to
foreclosure actions of a property which has been charged under the
relevant provisions of the NLC.
Having held that the court has no power to order the sale of the charged
property by way of a private treaty in an application under s 257 of the
NLC, I hasten to add that a sale of a charged property by way of private
treaty may, under certain other circumstances, be permissible. There
are certain circumstances under which a sale by private treaty may be
conducted by the chargor, and I shall consider two such situations
briefly.
(a) Right of chargor to sell the charged property by private treaty before
an order for sale
A chargor may, before an order for sale has been made and with the
consent of the chargee, sell the charged property by way of private
treaty. Harun Hashim SCJ in MUI Bank Bhd v Cheam Kim Yu (Beh Sai
Ming, Intervener) 21 observed (at p 648):
Under the National Land Code, there is nothing to prevent a chargor
with the consent of the chargee to sell the charged property by private
treaty. There are no specific provisions in the Code for such a sale but if
such a sale is concluded as a purely business arrangement, it is for the
chargee to discharge the charge to give full effect to the sale. (Emphasis
added.)
This right of the chargor to sell by private treaty was also emphasized by
Wan Adnan J in Chung Khiaw Bank Ltd v Lau Ah Yen & Anor, 13 where
his Lordship observed (at p 249):
In my view the court may allow a chargor of any land to sell the land in
question by private treaty in circumstances where the court is satisfied
that the proceeds of such sale are not less than the amount due to the

84
chargee under the charge and that the chargee will be duly paid in full
out of the said proceeds. (Emphasis added.)
So long as the chargee's interest is not adversely affected, there appears
to be no reason as to why a chargor does not have the right to sell the
charged land before an order for sale has been made. As will be seen
later, even after an order for sale has been made, the chargor may sell
the property by way of private treaty. In both these situations, however,
it is prudent for the chargor to obtain the consent of the chargee.
In this respect, attention should be drawn to the earlier decisions of Gill
J in the Chartered Bank v Packiri Maideen & Anor, 22 and of the Federal
Court in Eng Ah Mooi & Ors v Overseas-Chinese Banking Corp Ltd, 23
(this decision was criticized on some other grounds by the Supreme
Court in the subsequent case of Malayan United Finance Bhd v Tan Lay
Soon 24). In both these decisions, the court pointed out that the chargor
may only sell the charged property by way of private treaty prior to the
commencement of any foreclosure proceedings by the chargee.
However, the decisions in these two cases may be explained on the
ground that in both the cases, the courts were concerned with the sale,
by the chargor of the charged property, by private treaty without the
prior consent of the chargee. Those decisions, therefore, merely hold
that any time prior to the commencement of the foreclosure
proceedings, the chargor, may without the consent of the chargee, sell
the charged property by way of private treaty. This the chargor may do
in exercise of his rights as the registered proprietor of the land, though
the sale must be made subject to the existing charge.
(b) Right of chargor to sell by private treaty after an order for sale
Section 266(1) of the NLC provides that the chargor, against whom an
order for sale has been made may, at any time before the conclusion of
the sale, tender the money owing to the chargee. The said section reads
as follows:

85
Any chargor against whom an order for sale has been made under this
Chapter may, at any time before the conclusion of the sale, tender the
amounts specified in sub-section (2) to the Registrar of the Court or, as
the case may be, Land Administrator (or, if the tender is made on the
day fixed for the sale, to the officer having the direction thereof), and
the order shall thereupon cease to have effect.
This provision is in line with the principle that the chargor always retains
a right to discharge a charge: see Jemuri Serjan SCJ (as he then was) in
Malayan United Finance Bhd v Tan Lay Soon, 24 at p 508.
The most obvious manner in which the chargor may tender the money
owing to the chargee is for the chargor to repay the chargee the
outstanding loan, including interest thereon, which the chargor had
borrowed. This the chargor may do either by obtaining the funds to
repay the loan from some other independent source, or by selling the
charged property to a third party. In the latter situation, the chargor
may enter into a private treaty with a third party to purchase the
charged property. The chargor, in such a situation may, from the
proceeds of this sale, tender the said sum owing to the chargee.[1994] 2
MLJ 221 at 235
There appears to be no local decision clearly dealing with the issue as to
whether the chargor may sell the charged property by way of private
treaty after an order for sale has been ordered. However, the recent
decision of the Supreme Court in M & J Frozen Food Sdn Bhd v Siland
Sdn Bhd, 4 appears to lend weight to the argument that the chargor still
retains such a right. Wan Yahya SCJ observed (at pp 308-309): Even after
the order of sale has been made and when the auction sale is already in
progress, but before a bid has been accepted, he still retains the right to
tender payment of the amount which he owed the chargee (which may
be less than the value of the land on sale) and call off the sale – s 266 of
the NLC. The exercise of such rights does not appear to us to be

86
 consistent with a proprietor who has surrendered absolutely his rights
over the land to another.
The Supreme Court in M & J Frozen Food Sdn Bhd 4 above held that the
chargor retained his rights and interests in the land even after an order
for sale had been made by the court. Wan Yahya SCJ, in discussing the
ambit of the chargor's rights observed (at p 308):
The chargor does not abrogate all his rights to the chargee at the making
of the order for sale. He is merely compelled to abide by the court's
order for his property to be sold in accordance with the statutory
safeguards on his interest as provided under ss 257 and 258 of the NLC.
His Lordship added (at p 308):
… the divesting of the chargor's right occurs only on completion of the
contract of sale and conveyance …
It therefore appears that until the sale of the charged property to a
third party at a public auction is concluded, the chargor retains the
right to discharge the charge by selling the charged property. If the
chargor decides to do so, it is, however, prudent for the chargor to
obtain the consent of the chargee. It would be most unusual for the
chargee, in such circumstances to refuse consent, for after all, a sale
by private treaty by the chargor, with the consent of the chargee,
cannot adversely affect the chargee, so long as the chargee is repaid
the sum owing. In such a situation, strictly speaking, there is no
necessity for the chargor to apply to the court for any order,
especially when the consent of the chargee has been obtained. The
earlier order for sale made by the court ceases to have effect under s
266 of the NLC.

• Can payment be tendered by chargor to remedy the breach? Sec. 266

states that a chargor may still tender payment of the loan at any time
before the public auction and also if it has been sold through action, the
chargor may still tender payment before the conclusion of sale.

87
Conclusion of sale in the auction means upon full payment of the
purchase price by the successful bidder to the High Court/Land Office.

M & J FROZEN FOOD SDN BHD & ANOR v SILAND SDN BHD &
ANOR [1994] 1 MLJ 294
Facts:

Siland Sdn Bhd ('the first respondent') was the registered owner of a
piece of land ('the property') which it charged to the second appellant,
Eu Finance Bhd. Due to a default on the part of the first respondent, the
second appellant applied to the senior assistant registrar ('the SAR') and
obtained an order for sale of the property by public auction. M & J
Frozen Food Sdn Bhd ('the first appellant') was the highest bidder and
was pronounced the purchaser of the property. The first appellant paid a
25% deposit of the total purchase price as provided under the conditions
of sale, while the balance of the purchase money was to be paid into
court within 30 days from the date of sale. However, this was not done.
In view of this default, the first respondent entered a private caveat on
the property and commenced an action for a rescission of the contract
and forfeiture of the deposit paid by the first appellant. The caveat was
subsequently removed on technical grounds. Before the caveat was
removed, the first appellant obtained an order for the completion date
to be extended. As the first respondent was not made a party in the
application for extension of time, it applied for and was granted an
order for leave to intervene as an aggrieved and interested party, and to
set aside the order for extension of time. Subsequently, a year after the
date of completion, the first appellant forwarded the balance sum to
the SAR who accepted the money and issued the certificate of sale to
the first appellant. The first appellant presented the certificate for
registration. The first respondent subsequently took out a summons-
inchambers for final judgment to be entered against the first appellant

88
 who, in turn, applied for the first respondent's action to be struck out.
Both summonses were heard simultaneously. The trial judge declared
the deposit forfeited, annulled the certificate of sale issued by the SAR
and cancelled the registration of transfer in respect of the property. The
judge also made orders for the return of the issue document of title and
ordered the property to be resold.
In this appeal, the issues were: (i) whether in a sale of land in a public
auction, the sale is completed at the fall of the auctioneer's hammer;
(ii) whether the court has the power to extend time for a defaulting
purchaser to complete the sale and purchase agreement after the
agreed date of completion had passed; and (iii) whether in the event of
a negative answer to either circumstance above, the High Court was
empowered to make the order as it did. It was contended on behalf of
the appellant that the trial judge could not have made the order as he
did because at the fall of the auctioneer's hammer in a public auction,
the sale was completed and whatever proprietary rights which belonged
to the chargor had come to an end.
Held, dismissing the appeal:
• (1)The terms 'sale concluded', 'conclusion of sale' and 'sale shall be
completed' as used in ss 259(2), 266 of the National Land Code 1965
('the NLC') and s 11 of the Johor Auction Sales Enactment 1932,
respectively are merely employed to signify that point of time when
there was an acceptance of the bid in accordance with the sale and
purchase agreement or sometimes referred to as the conditions of sale.
The sale at this juncture had only been concluded in the sense that the
goods will no longer be offered for sale to prospective buyers and the
successful bidder cannot be permitted to retract his acceptance.
Thereafter, each party to the contract of sale must perform his part of
the obligation and until then, no executed or actual sale would have
been concluded. Hence the term 'conclusion' in the context of these

89
 sections can only mean conclusion of certain aspects of the sale when
there was an agreement between the parties to sell and buy the
property but the proprietary right has yet to be conveyed from the
vendor to the purchaser.
• (2)At the fall of the auctioneer's hammer, no money had yet changed
hands between the parties and neither had any documents been
signed. In an auction, the vendor is regarded as having divested
himself of all the beneficial interest in his land and vested it in the
purchaser only at the time when the memorandum of transfer is
executed and the purchase money is paid in full. As a bare or
constructive trusteeship could only arise on payment of the balance of
the purchase price or on payment of the full purchase price, the issue of
non-payment of the full purchase price alone was sufficient to negate
the constitution of any constructive or bare trust and consequently, the
asserted transfer of the proprietary right from the second appellant as
vendor to the first appellant as purchaser. In any event, s 267(1)(a) of
the NLC, which provides that the passing of the interest in the
proprietary right from the first respondent to the first appellant would
occur on registration and after the issuance of a certificate given under
s 259(3)(a), clearly negated any proposition that the first respondent
abdicated his proprietary rights at that stage of the auction sales.
• (3)The first respondent did not abrogate all his rights to the first
appellant at the making of the order for sale. Even after the order of
sale was made and when the auction sale was already in progress, but
before a bid had been accepted, the first respondent still retained the
right to tender payment of the amount which it owed the second
appellant and call off the sale under s 266 of the NLC.
• (4)The terms or conditions of sale may be varied, but this has to be
done by the court after giving the first respondent the right to be heard.
As the court's power to order the sale was derived from the statutory

90
 provisions of the NLC after giving the first respondent the right to be
heard, it was manifest that any alteration to the terms or conditions
must likewise be exercised. Any variation of the order of sale or the
terms and conditions made thereunder in the absence of and without
the service of the required notice to the first respondent was ultra vires
the authority to sell under the NLC. Therefore, as the alteration of the
completion date was made without giving notice to the first respondent,
the subsequent order made by the SAR was void as being ultra vires the
NLC.
(5)Indefeasibility can be rebutted not only in instances of fraud but also
in cases where registration is obtained by the use of an insufficient or
void instrument or where the title or interest is unlawfully acquired. In
the present appeal, failure to comply with the statutory requirements of
paras (a) and (b) of s 258 and para (c) of s 261(1) of the NLC was not just
a mere irregularity, but was an illegality which struck at the root of the
first respondent's right to be heard. Therefore, the certificate issued by
the SAR was ultra vires the statutory provisions of the NLC and the title
was unlawfully acquired by the first appellant. The title of the first
appellant was defeasible under s 340(2)(c) of the NLC and the learned
judge had arrived at a correct decision when he made the order for the
cancellation of the registration of transfer.

• Whose right shall prevail between the successful bidder or the

subpurchaser(a beneficial owner)?
• Hong Leong Bank v Tan Siew Nam & Anor [2014] 5 MLJ 34
At page 59: “yet another known as foreseeable risk is the fact that the
master title will be charged by the developer to a bank for a bridging
loan. Consequently, the purchaser runs the risk that his right over the
parcel is subject to the registered charge on the master title. In the
event of the developer’s default, the entire land will be sold in a

91
 foreclosure proceeding and to borrow the words of Buckley LJ in the
John Walker’s case: “this is a risk of a kind which every purchaser should
be regarded as knowing that he is subject to when he enters into his
contract of purchase.” In brief it means the bidder’s registered
ownership shall prevail over the right of a beneficial owner.

SECOND TYPE OF REMEDY AVAILABLE TO CHARGEE UNDER NLC 1965

2. TAKING POSSESSION
Sec. 270 – The second remedy available to chargees is taking possession. It can
be carried out by two methods:
(i) Constructive possession – Sec. 271(1)(a)
(ii) Actual possession/physical possession – Sec. 271(1)(b)

Constructive Possession:
Sec. 272(2) - by giving notice to the tenant/lessee of the land to notify them
to pay rents/ fees to the new possessor, ie the chargee. The form used is
Form16J.

Actual/Physical Possession:
Sec. 274(1) -> by serving notice in Form 16K to the chargor and the chargee is
allowed to ‘take over’ the land by managing it and taking profits from it but
chargee is also liable for any act where the capital value is affected.

Woon Foon Ho v Muttiah Chetty (1934) MLJ 121

The chargee took physical possession of the land but did not tap the
rubber trees on the land for two months. Later on, when he did tap, the
chargee overtapped the trees which caused it to be damaged. The Court
held the chargee was liable and had to pay compensation.

a. Conditions before application for taking possession is made by chargee:

There are 4 conditions.

92
 • S.270(1)(a) The chargee can only exercise this right if the title of the
land is Registry Title.
• S.270(1)(aa) The charge must be on the whole piece of land.
• S.270(b) The land must not be occupied by the chargor.
• S.270(2) Only the first chargee of the land may apply.

b. Duration of right to possession

Sec. 273 – The chargee can stop being in possession at any time and may also
continue to be in possession until the full repayment of the loan by the
chargor.

3. Assignment to Danaharta
It is governed under the 15th Schedule. Danaharta is an entity formed by the
Government to curb the recession that occurred in 1998. The purpose of this
organization was to liquidate non-performing loans. This is because during
recession, many loans were left unsettled by the borrowers. The effect is it
will affect the ability of the banks to provide more loans to others. Thus, the
government injected capital to Danaharta to buy off the unsettled charges
from the banks. The Danaharta was given the right to sell of the properties by
private treaty besides OFS (public auction) and taking possession. This is
remedy is no longer enforceable but it has not been repealed until todate.

93
 LAND DEALING
EASEMENT
▪ Definition:
• S.282(1) NLC – rights granted by one proprietor to another -for the
beneficial enjoyment of his land.
• S.282(3) – land for the benefit of which any easement is granted –
dominant land and land of the proprietor by whom it is granted –
servient land. EASEMENT LAND : DOMINANT LAND / PROPRIETOR
LAND : SERVIENT LAND
• Formation of Easement:
• Common Law:
o RE ELLENBOROUGH PARK (1955) 3 All ER 667.
TODRICK V WESTERN NATIONAL OMNIBUS (1934)Ch 561
CLAPHAM V EDWARDS (1938) 2 All ER 507
CABLE V BRYANT(1908) 1 Ch 259 ;

• Statutory easement.
o RE ELLENBOROUGH

o TAM KAM CHEONG V STEPHEN LEONG KON SANG(1980)1

MLJ
36.
o DATIN SITI HAJAR V MURUGASU (1970)2 MLJ 153. o EW

TALALLA V NG YEE FONG (1985) 1 MLJ 261.

o TAN WEE CHOON V ONG PECK SENG (1986) 1 MLJ 322.

• Effect of Easement:
o Remedies to dominant land owner:

o Termination of Easement:

94
 ▪ CHIN & SONS SDN BHD V WILLIAM CROCKET (2000) 5 MLJ
497
• The position of easement in Sabah differs from Sarawak and Peninsular
Malaysia.
▪ WANGSA TIMBER INDUSTRIES SDN BHD V ADULFAST
ANTHONY ROBERT IGNATIA LEE (2001) 4 MLJ 438
EASEMENT
Definition:
• S.282(1) NLC – rights granted by one proprietor to another -for the
beneficial enjoyment of his land.
• S.282(3) – land for the benefit of which any easement is granted –
dominant land and land of the proprietor by whom it is granted –
servient land.
• Easement can be negative or positive easement.
• Positive easement – S.283(1)(a) o Gives the dominant land proprietor the
right to do something on the servient land. E.g walking over the land or
depositing rubbish.
• Negative easement – S.283(1)(b) o Prohibits the servient land proprietor
from doing certain acts on his own land. E.g not to fence the area where
easement had been granted.

Formation of Easement:
• Common Law:
o The dominant land owner needs to prove the existence of the
following characteristics:
o RE ELLENBOROUGH PARK (1955) 3 All ER 667.

1. servient land and dominant land;

-proximity between dominant and servient land as
illustrated in the case of TODRICK V WESTERN
NATIONAL OMNIBUS (1934) Ch 561 in this case the

95
 court decided that dominant and servient land could
be separated by another land, they should be
sufficiently close to each other for the dominant
land to derive benefit from the right granted by the
servient land.

2. dominant and servient land owner must be different

person;
- it simply means that owner cannot have an
easement over his on land.
3. rights granted must be able to benefit the dominant land
owner;
-right is not easement if it is merely personal right to
the dominant land owner.
-it can only exist as an easement if right granted connected to the
use of the dominant land.
-in the case of CLAPHAM V EDWARDS (1938) 2 All ER 507 right to
use a wall on the building owned by the servient land owner for
general advertising purpose and not in connection with a business
carried on the dominant land is NOT easement.
- in brief easements are rights which is connected with the land
and enhance the value and enjoyment of the dominant land.
4. rights capable of forming the subject matter of easement.
-Salleh Buang examine this characteristic by looking from three
aspects:
i. right granted must be definite.
-in the case of CABLE V BRYANT (1908) 1 Ch 259; right to flow
of air in respect of some definite location, such as ventilator in a
building is considered as a valid easement.
ii. there must be a competent grantor. -S.282
refers to registered proprietor only.

96
 iii. there must be a competent grantee. -S.282
refers to registered proprietor only.

• Statutory easement.
o Our courts adopt the characteristics in RE
ELLENBOROUGH as seen in the case of TAM KAM
CHEONG V STEPHEN LEONG KON SANG (1980)1 MLJ
36; Salleh Abas FJ noted that the four characteristics
must be fulfilled before they can determine the
existence of easement.
o Under NLC two requirements must be complied with by
the parties:
▪ S.284-no right by way of prescription or implied grant.
• In the case of DATIN SITI HAJAR V MURUGASU (1970)2 MLJ
153. –it was decided by the court that the metalled road
constructed by the defendant was not easement eventhough
the plaintiff never objected to it because S.284 NLC provides
no easement by prescription. (it MUST BE REGISTERED in order
to become effective).
• NG YEE FONG & ANOR V EW TALALLA [1986] 1 MLJ
25 SC o
Facts:
Plaintiff/Respondent owned a land which had
been encroached upon by the defendant’s
house and septic tank. The
defendant/Appellant claimed that the
plaintiff was aware of the encroachment for a
long time. No objection raised therefore
easement had been created.
Held:

97
 Easement MUST BE CREATED BY EXPRESS GRANT
THAT IS BY REGISTRATION OF THE RELEVANT
INSTRUMENT BEFORE IT CAN BECOME EFFECTIVE.

• See also TAN WEE CHOON V ONG PECK SENG (1986) 1 MLJ
322. o Facts:
Plaintiff bought land over which there was a
path used by the defendant for access to their
land. Plaintiff fenced the land.
Held:
NO EXPRESS GRANT therefore NO EASEMENT
created. Furthermore, it was NOT
REGISTERED.
▪ S.286 –easement will only be effective UPON
REGISTRATION OF FORM 17A.
▪ Case: Cottage Home Sdn Bhd v Wong Kau @ Wong Kong
Lin & Anor [2014] 3 MLJ 580 COA
The appellant and the respondents owned lands adjacent to
each other. The respondents claimed the only access to
their land was a 12-foot wide laterite road over the
appellant’s land which they had been using for about two
decades with the consent of the former owner of the
appellant’s land. The respondents alleged that when the
appellant became owner of the land it cut off the access
road by erecting a 10-foot high metal gate across it. The
appellant also fenced up its land and dug a deep trench
which, the respondents claimed, not only encroached onto
their land but diverted the course of a natural stream
resulting in floods that damaged the respondents’ property.

98
The High Court granted the respondents various reliefs
which included a declaration that they were entitled to an
equitable right of way over the appellant’s land and
mandatory injunctions directing the appellant to remove
the metal gate, provide for a 12-foot wide tarred road over
its land as a right of way to the respondents, and to
execute the Form 17A granting the respondents an
easement under s 286(1) of the National Land Code (‘NLC’)
coupled with a right to access the appellant’s land under s
288 of the NLC. Mandatory injunctions were also granted
directing the appellant to restore the respondents’ land to
its original state by refilling the trench and restoring the
original course of the natural stream. The trial court also
awarded the respondents RM100,000 as general damages,
RM150,000 as special damages and RM50,000 as exemplary
damages.
The High Court dismissed the appellant’s counterclaim
for a declaration that the respondents had no right to
access its land, an injunction prohibiting the respondents
and their servants/agents from entering upon its land and
for general damages.
The appellant appealed against the whole of the
decision of the High Court including the dismissal of its
counterclaim.
Held:
In view of the express provisions in the NLC and case
authorities on the point, the trial court erred in granting
the respondents an equitable right of way. The
respondents’ claim was for an equitable right of way in the
nature of an easement and not for right of way under S.390

99
 of the NLC. Section 284 expressly stated that no right in the
nature of an easement was capable of being acquired by
long and uninterrupted user. For an easement to come into
effect it had to expressly granted by registration of an
instrument in Form 17A pursuant to S.286(1) of the NLC.
The respondents had never formally applied to the owner of
the appellant’s land for a right in the nature of an
easement

• No statutory remedies provided by the Code but they have to

resort to the agreement. Express grant i.e by executing an
agreement and attached the same to Form 17A, may be
accompanied by implied ancillary rights which are necessary
for the use of the easement. Registration of Form 17A must
be accompanied by IDT belonging to the servient and the
dominant land owner.
• S.286(1) NLC provides that easement shall only be effective
upon registration of Form 17A.
• The parties may determine the terms of easement such as
payment, duration etc as a contract between the dominant
and servient land owner.
• S.286(2) NLC provides grant may either be in perpetuity or
for any terms of years.
• S.286(3) The express grant of easement may be accompanied
by implied ancillary rights which are necessary for the
enjoyment and use of easement. For example, if easement is
for using the servient land as a road for cars to go across
then the ancillary rights is to build a road that can be used
by cars.

100
Effect of Easement:
• S.286(4) NLC provides that any grant may contain an
agreement to pay as a consideration, cost etc and this
agreement is binding on both parties.
• S.286(5) easement is binding on successors in title.
• S.287(1) NLC benefit of easement shall be enjoyed by
proprietor, tenant, lessee or chargee in occupation of
dominant land.

Remedies to dominant land owner:

• No statutory remedies provided by NLC.
• In the event the servient land owner refuses to allow the
dominant land owner to exercise easement, DL may:
o Abatement – but may not use force more than necessary.

o Damages – for substantial interferences with the enjoyment of

easement.
o Equitable relief such as injunction or SP.

Termination of Easement:
• S.289(1) NLC – release by the dominant land owner at any time.
o It may be done by using Form 17C [S.289(2)] and upon
registration of the form easement shall cease to exist.
o Consent is required from lessee, tenant or chargee in
occupation of the dominant land.
• S.290 NLC – terminated by operation of law when the following
conditions are satisfied:
o Dominant and servient land registered under the name of the
same person;
o No lessee, tenant or chargee receive the benefit of the

101
 Easement; o No chargee, tenant or lessee occupy the
dominant land.

• S.291 NLC- cancellation by registrar subject to S.315NLC based on:

o Easement has been extinguished due to factors in S.290; o
Expiry of terms agreed in granting of Easement; o Abandoned;
o Obsolete.

• In order to prove that the Easement is obsolete- servient land owner

need to show an express intention preferably documented, that the
Dominant Land Owner no longer requires the Easement or in
alternative he may show that the Easement has not been used for
such a long period or abandoned.

• The factors to be considered in deciding that the Easement is

obsolete:
o Balancing the conflicting interest of the servient and the
dominant land;
o Whether easement is now valueless since the objective cannot
be achieved;
o Whether it will obstruct the use of the servient land without
any benefit accorded to the Dominant land;
o Easement is not relevant;

o Whether new proprietor of dominant land acknowledges the

existence of the easement and intends to use it.
o Teo Sui Chin & Ors v Lim Siok Luan [2020] 1 MLJ 670 Facts:
This was an appeal against the decision of the High Court
which dismissed the appellants’ claim and allowed in part the
respondent’s counterclaim. The appellants were the current
registered proprietors of Lot 255 Section 18 Kuching Town and
District (‘Lot 255’) and the defendant was the current

102
registered proprietor of Lot 254, Section 18 Kuching Town
Land District (‘Lot 254’). Both Lots 254 and 255 adjoined each
other. Lots 254 and 255 were initially part of a parent lot
described as Lot 29 Section 18 Kuching Town Land District. The
parent lot was applied to be subdivided into six parcels of land
which included both Lots 254 and 255. It was a condition for
the approval of the survey plan for the subdivision by the
Kuching Municipal Counsel that an access road of an uniform
width of feet was registered as an easement right of way
appurtenant to Lot 255 over Lot 254 because it was a land in a
development area by the survey plan. Both appellants and
respondent had houses on the respective lands. Their houses
faced Green Road, a busy thoroughfare in Kuching but that of
the respondent was in front whilst the house on the
appellants’ land was behind. Being right behind that of Lot
254, Lot 255 was granted an easement or right of way over Lot
254. That right of way was registered before the issuance of
the title on 23 March 1966 by a memorandum of endorsement
of condition of survey plan approved under the Land (Control
of Subdivision) Ordinance. For years, the appellants had
enjoyed the use of that access road, concreted no less until
June 2014 when the respondent constructed a concrete base
fence along their property which rendered the access road was
less than 16ft, and thereby deprived them of a right which
they had enjoyed for decades. The appellants contended that
the respondent had no right to build the fence, to remove the
same and sought for damages to be accessed. The High Court
dismissed the appellants’ claim and granted the respondent a
declaration that the respondent was entitled to maintain the
fence. The appellants appealed.

103
 Held:
Appeal allowed.
The court was of the opinion that the registered easement was
not lost merely by effluxion of time due to the alleged
nonaction. As a general rule, an easement depends entirely for
its existence on the grant which created it for a certain
duration, when that time had elapsed the grant is gone. Since
the grant of the easement did not contain any provision as to
time limitation, the determination or extinguishment by
effluxion of time did not arise or applied. There was no
justification to interpolate by putting into the concept of
effluxion of time, either as to its duration or due to the
inaction of the appellants, to defeat the very purpose it was
given.
In the absence of any written contract or deed to the
contrary, there was no provision in the Sarawak Land Code
providing for the release or abandonment of only part of the
land. There was no intention proved that the appellants no
longer required the easement or that it had not been used for
such a long time. The easement must mean the entire
easement and not merely partial easement. In any event,
mere non-user of the part of the easement due to having no
exact knowledge of the terms of the easement did not amount
to partial abandonment or release of the easement

• Can the court extinguish easement?

CHIN & SONS SDN BHD V WILLIAM CROCKET (2000) 5 MLJ 497
Facts: Owner of dominant land abandoned the easement. The
plaintiff (the servient land owner) sought a declaration from court

104
 that the easement ought to be extinguished since the dominant
land owner had an alternative access.
Issue:
Whether court has power to extinguish easement?
Held:
NO POWER TO WIPE OUT EASEMENT.

• The position of easement in Sabah differs from Sarawak and

Peninsular Malaysia.
o Case:
WANGSA TIMBER INDUSTRIES SDN BHD V ADULFAST ANTHONY
ROBERT IGNATIA LEE (2001) 4 MLJ 438
COA – Appeal from Kota Kinabalu High Court.
There were no specific provisions found in respect of easement
in the Sabah Land Ordinance. For NLC S.282 –291 deal
specifically with easement and Sarawak Land Code - S.132,
137 and 141 deal with easement. Thus, English common law,
rules and equity are applicable.
Therefore, the respondent had acquired easement of right of
way even though it was not registered. (common law
easement)

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 LAND ADMINISTRATOR’S RIGHT OF WAY

LIST OF CASES
• DEFINITION
• TYPES OF LAROW
• LAROW V EASEMENT o LYE THEAN SOO V SYARIKAT WARSAW
(1990) 3 MLJ 369

• CREATION OF LAROW:

• MEANING OF EXPEDIENT. S.390(2)(a) NLC 1965

o SIRUSA INN SDN BHD V THE COLLECTOR OF LAND REVENUE

PORT DICKSON (1987) 1 MLJ 147 o LIOW TOW THONG V
PENTADBIR TANAH ALOR GAJAH (1998)
1 MLJ 79 o CHE NIK BTE BAKAR V PENTADBIR TANAH KUALA

KRAI(1997)

5 MLJ 516
o KELAB RENANG PULAU PINANG v PENTADBIR TANAH, DAERAH TIMUR
LAUT, PULAU PINANG & ANOR [2014] 6 MLJ
134
• EFFECT OF CREATING A LAROW
• EXTINCTION OF LAROW

LAND ADMINISTRATOR’S RIGHT OF WAY

Definition:

106
 • S.388(2) NLC – LAROW is a right of way granted by the Land
Administrator to pass and re pass from any alienated land or state
land to the public terminal.
• In S.387 NLC -public terminal means the foreshore, river, railway
station or public road.
• Land Administrator grants LAROW when the land is land locked by not
having access to the public terminal.

Type of LAROW
• Private right of way:
o S.389(1)(a) – LAROW created for the benefit of the State
authority, proprietor or occupier of any alienated land.
o S.389(2) it is created for the state authority to:

▪ pass and re pass between a reserved land or forest reserve

to the public terminal, or
▪ removing rock material from any land, to pass re pass
between the land to a public terminal.

• Public right of way:

o S.389(1)(b) – a right created for the benefit of the public.

o S.389(4) – the purpose is authorizing the public to pass and re

pass between any specified area of land to public terminal.

LAROW V Easement
1. LAROW – imposed right on the proprietor of any alienated land

107
 Easement – ACQUIRED RIGHT (S.284 –286 NLC)

2. LAROW – Land Administrator grants LAROW upon application made by

proprietor. See 388(2) proprietor and occupier of land.
Easement – agreement between the servient land and dominant land
owner.

3. LAROW – Land Administrator will determine the extent of usage of the

right of way.
Easement – both parties may agree on the extent of usage of the
servient land. Servient land owner may be able to limit the easement as
he wishes.

4. LAROW – amount of compensation is determined by Land Administrator

[S.393(2)]
Easement – the servient land is at liberty to require the dominant land
owner to pay any amount of consideration.

5. LAROW – is only a right to pass and re pass.

Easement – wider right may be granted not limited to right of way.

6. Easement – only between two proprietors

LAROW – may be applied by proprietor or occupier. See LYE THEAN SOO
V SYARIKAT WARSAW(1990) 3 MLJ 369.

Creation of LAROW
• S.390(1) the state authority or proprietor or occupier of any alienated
land may apply to the land administrator by using FORM 28A.

108
 • S.390(2) – the Land Administrator, where o Receives an application for a
private right of way; or o He is of the opinion that creation of a public
right of way is expedient
He shall hold an enquiry or make investigation.

What is the meaning of “expedient”?

• Case:
o SIRUSA INN SDN BHD V THE COLLECTOR OF LAND REVENUE PORT
DICKSON (1987) 1 MLJ 147 Facts:
Proprietor owns a piece of a second layer land from the seashore.
Land was sandwich between the appellant’s land and a land
belonging to the Royal Malaysia Police Force. He wanted a
shorter route to sea across the appellant’s land. There was an
alternative route via the public road to sea between 1 to 2 km.
LAROW was granted. Appellant appealed.
Held:
Appeal allowed.
Peh Swee Chin J.
There must be something more than just mere inconvenience, it
must be of urgent necessity to grant a collector right of way.
(example:Landlock)

LIOW TOW THONG V PENTADBIR TANAH ALOR GAJAH(1998) 1

MLJ 79

Facts: The second to fourteenth defendants had two right of way.

One cut through the plaintiff’s land, while the other cut through
the defendant’s and a third-party land. The second right of way
was subsequently closed to the defendants. The defendants made
an application to the land administrator for an order of right of

109
way over the plaintiff’s land because it was closer and more
convenient. LAROW granted. The plaintiff appealed.
Held: Appeal allowed.
Augustine Paul JC:
…it is now settled law that where there is an alternative right of
way available, the land administrator must take that into
consideration. …it is wrongful exercise of discretion if LAROW
granted when another one already exists though less convenient.

CHE NIK BTE BAKAR V PENTADBIR TANAH KUALA KRAI(1997) 5 MLJ

516.
Facts:
Since 1973, Great Eastern Mill had used the road known as Jalan
Great Eastern which ran across the appellant’s land. She forced
GEM to pay monthly toll of RM500 for the use of the road. GEM
made an application to Land Administrator for LAROW. Land
Administrator granted the order. Appellant appealed against the
order. Appellant argued there was an alternative route available,
namely a reserve road which was mapped on paper.
Held: Dismissing the appeal.
Nik Hashim JC
The reserved road was not a road in the sense that it was
practical and readily available for use by the public. Not
reasonable to treat as an alternative route. In the absence of the
alternative route, there was an urgent public necessity.

KELAB RENANG PULAU PINANG v PENTADBIR TANAH, DAERAH

TIMUR LAUT, PULAU PINANG & ANOR [2014] 6 MLJ 134 Facts:
Lots 417 and 418 were adjacent lots of land situated alongside
Jalan Tanjung Bungah, Pulau Pinang ('the public road'), but Lot

110
418 did not have direct access to the public road. When the
appellant bought Lot 417 it executed a deed of indenture ('the
deed') wherein it agreed to provide the owner of Lot 418 a right
of way over Lot 417 as access to the public road. The second
respondent purchased Lot 418 for purposes of development after
being satisfied that it had a right of way over Lot 417 by way of
the deed. The second respondent then entered into negotiations
with the appellant to construct a road over Lot 417 as access from
its land to the public road. The appellant had no objections to the
second respondent's proposal but proposed another shorter route
and pointed out that under the deed it had the right to determine
the position of the right of way. The second respondent disagreed
and applied to the land administrator ('the LA'), the first
respondent, for a private right of way over Lot 417 based on its
initial proposal to the appellant. The LA granted the second
respondent's application for a private right of way based on its
proposal. The appellant appealed to the High Court against the
decision of the LA on, inter alia, the grounds that the private
right of way granted by the LA had greatly prejudiced the
appellant as it consumed about 1/3 of its land; that Lot 418 was
not landlocked as it already had an existing right of way over Lot
417 by virtue of the deed; and that the private right of way
granted by the LA was in reality tantamount to granting a public
right of way over Lot 417. The High Court found that the LA had
not erred in exercising his discretion in granting a private right of
way over Lot 417. Hence the present appeal, which was based
substantially on similar grounds as submitted by the appellant
before the High Court.
Held, allowing the appeal with costs:
(1) The LA had wrongly exercised his discretion and exceeded his
jurisdiction in granting the second respondent the private right of

111
way over Lot 417. This had greatly prejudiced the appellant. The
purpose of a private right of way was to allow the proprietor of
landlocked land or persons acting with its express or implied
consent to pass and repass between the land and a public
terminal only and not for the benefit of any member of the
public. It is a stringent requirement that the discretion should be
exercised for a proper purpose and where it was wrongly
exercised, it became the duty of the courts to intervene. In the
present appeal the second respondent's primary intention in
applying for the LA's private right of way over Lot 417 was for
commercial development of its land and not solely for its own
benefit or for the benefit persons acting with its express or
implied consent. Further, the engineering report tendered by the
second respondent showed that 60% of Lot 418 was usable for
building development and the adverse effect of the right of way
on Lot 417 was obvious.
2. The word 'landlocked' is interpreted as 'fully or almost enclosed
by land'. In the present case the engineering report tendered by
the second respondent had stated that there was an existing
access path to Lot 418 from the public road via Lot 417 except
that the path was not tarred and impassable to motor vehicles. It
is settled law that where there was an alternative right of way
the LA should take that fact into consideration. In the
circumstances the trial judge had erred in holding that the second
respondent's land was landlocked with no access to the public
road.

SEONG CHOON HOLDINGS SDN BHD & ORS v EAC PROJECT

MANAGEMENT SDN BHD & ORS [2015] MLJU 1947

112
Facts: The Plaintiff’s land has been acquired under the Land
Acquisition Act. As a result, the Plaintiff lost its right of way and
had to use the neigbouring land as a right of way. This right of
way is not able to cater for the Plaintiff’s machinery equipment.
Held: The High Court decided it is expedient to grant LAROW and
also compensation for lost of right of way.

BADAN PENGURUSAN BERSAMA KRISTAL HEIGHT 2 & ANOR v

SYARIKAT SRI MALAWATI SDN BHD & ANOR [2019] MLJU 584
Facts: LAROW was approved by the Land Administrator without
first OBTAINING CONSENT FROM THE PROPRIETOR OF THE LAND.
Held: As against D3 and D4, the case is very clear. As the Land
Administrator, D4 may create rights of way over land, which is
in legal parlance known as Land Administrator’s right of way.
This power is provided in section 388 of the NLC. The creation of
the right of way and the procedure for such creation is governed
by section 390 and 391 of the NLC, wherein D4 is mandated by law
to carry out an enquiry and conduct a survey to identify the
affected land and when the decision is made to grant the right of
way, he is to memorialize that grant by endorsement on the
register document of title and the issue document of title.
Further, section 393 of the NLC. provides for compensation to be
paid to the landowner on whose land the right of way is created.
See Kelab
Renang Pulau Pinang v. Pentadbir Tanah, Daerah Timur Laut,
Pulau Pinang & Anor [2014] 5 CU 341 CA.
Suffice to say that none of these statutorily mandated procedures
were complied with when D4 created the ROW over the Plaintiffs
land. The evidence shows that D4 did not give any notice to the
Plaintiff to hold an enquiry as required under section 390 and 391

113
 of the NLC nor did the Plaintiff consent to the ROW in favour of
D1 and/or for the Plaintiff’s land to be used as an access road for
Krista I Heights 2. There is clear deprivation of the Plaintiff’s
rights over its land. Hence, I find that the ROW is invalid,
unenforceable and is contrary to the law and is a breach of its
statutory duty owed to the Plaintiff. The decision of D4 has led to
trespass of the Plaintiff’s land and the
Plaintiff losing peaceful enjoyment of its rights to possession and
utilization of the said Land.

• S.390(4) NLC – the order of Land Administrator shall:

o Describe the land and the public terminal between which the
LAROW is to run;
o The route of the
way;
o Whether those using the route may pass and re pass with or
without animals and vehicles; and
o Such other conditions as he thinks fit.

• S.391- endorsement will then be made in the RDT and IDT

Effect of creating a LAROW

• S.388(2) – the right shall run with the land and shall be binding on the
proprietor or its occupier.
• S.392 – cost will be borne by authority or person who benefits from the
private right of way and for public right of way shall be borne by state
authority.
• S.393 – compensation will be paid to the relevant land owner for
damage suffered in respect of trees, crops or building.

Extinction of LAROW

114
 • S.395 –when Land Administrator is of the opinion that:
o The person benefits from LAROW breached the conditions attach
to it; or
o It is not practical for LAROW to continue to exist.

INDEFEASIBILITY OF TITLE/INTEREST
LIST OF CASES
o INTRODUCTION

o MOHAMMAD BUYONG V PEMUNGUT HASIL TANAH GOMBAK

(1982) 2 MLJ 53
o DEFINITION OF INDEFEASIBILITY

o FRAZIER V WALKER (1967) 1ALL ER

649
o TYPE OF INDEFEASIBILITY

o o IMMEDIATE INDEFEASIBILITY

o o DEFERRED INDEFEASIBILITY

o MALAYSIAN POSITION- DEFERRED INDEFEASIBILITY

▪ OCBC BANK V LEE LEE FAH (2000) 1 MLJ 134

▪ MOHAMMAD BUYONG V PEMUNGUT HASIL TANAH
GOMBAK(198) MLJ 53.
o TIME LIMITATION OF CHALENGING INDEFEASIBILITY

▪ CHEAH KIM TONG V TARO KAUR (1989) 3 MLJ 352

▪ NG YEE FONG V EW TALALLA (1986) 1 MLJ 25
o GENERAL EXCEPTIONS TO INDEFEASIBILITY CONCEPT

115
o o EXCEPTIONS UNDER S.340(2)NLC- FRAUD

▪ WAIMIHA SAWMILLING CO LTD V WAIONE TIMBER CO LTD

(1923) NZLR 1137
▪ ASSETS CO V MERE ROIHI (1905) AC 176
▪ MOHD ISA V HJ IBRAHIM (1968) 1 MLJ 186.
▪ EXAMPLE OF CONSTRUCTIVE FRAUD
• TAI LEE FINANCE SDN BHD V OFFICIAL ASSIGNEE&
ANOR (1983) 1 MLJ 81
• ONG TIN V SEREMBAN MOTOR GARAGE(1917)1
FMSLR 308
▪ EXAMPLE OF AN ACTUAL FRAUD
• APOO V ELLAMAH (1974) 2 MLJ 201
• JASBIR KAUR V TARUMBER SINGH (1974) 1 MLJ 224
• OWE THEN KOOI V AU THIAM SENG (1990)1 MLJ
234
• KOH THONG CHUAN V THE OFFICIAL ASSIGNEE OF
THE PROPERTY OF KOH LIANG HEE, A BANKRUPT
(2003) 1 MLJ 113
• MOHAMED ISA V HAJI IBRAHIM (1968)1 MLJ 186
• DATUK JAGINDAR SINGH V TARA
RAJARATNAM(1983) 2 MLJ 127
▪ FRAUD BY THE PERSON OR HIS AGENT
• DOSHI V YEOH TIONG LAY (1975) 1 MLJ 85
• ISMAIL BIN MOHAMAD V ISMAIL BIN HUSIN (2005) 7
MLJ 103
• H AISHAH V YAH BT TAIB(1949) MLJ 128
• HJ JUNUS V CHIK (1964) MLJ 343
▪ FRAUD MUST BE PLEADED IN PLEADING
• WAN NAFI B WAN ISMAIL V HAJJAH LIJAH BT
OMAR(1996)5 MLJ 534

116
 • VIJAYALAKSHMI V ANANDA CHETTIAR(1990) 2
MLJ.
▪ BURDEN OF PROOF
• SAMINATHAN V PAPPA(1981)1 MLJ 121
• CHU CHOON MOI V NGAN SEW TIN (1986) 1 MLJ 34
• ADORNA PROPERTIES V BONSOON BOONYANIT
(2001) 1 MLJ 241
• HOO KOK CHONG V YONG TIM (2004) 1 MLJ 305
• LEE WAI FAY V LEE SENG EIN (2005) 4 MLJ 701
• ABD RAHIM BIN AKI V KRUBONG INDUSTRIAL PARK
(1995) 2 MLJ 130

o MISREPRESENTATION

▪ DATUK JAGINDAR SINGH V TARA RAJARATNAM(1983) 2

MLJ 127
▪ LOKE YEW V PORT SWETTENHAM RUBBER CO LTD(1913)
AC 491 o
FORGERY
▪ ONG LOCK CHOO V QUEK SHIN (1941) MLJ 88
▪ LIM PANG GEOK V SOCKALINGAM CHETTY (1907) INNES
90
▪ QUAH HONG LIAN NEO V SEOW TEONG TECK (1936)MLJ
161
▪ ONG LIAN V TAN ENG JIN (1917) 1 FMSLR 325
▪ CHIEW LIP SENG V PERWIRA HABIB BANK M BERHAD
(1999) 1 AMR 789
▪ OCBC V PENDAFTAR HAKMILIK NEGERI JOHOR(1999)2
MLJ 511
▪ ADORNA PROPERTIES SDN BHD V BOONSON BOONYANIT @

117
 SUN YOK ENG (2001) 1 MLJ 241
▪ AU MENG NAM V UNG YAK CHIEW (2007) 5 MLJ 2005
▪ LIEW YOK YIN V AGS HARTA SDN BHD (2006) 7 MLJ 49
▪ TAN YING HONG V TAN SIAN SAN & ANOR(2010)CLJ SE 1
▪ BONA FIDE PURCHASER FOR VALUE
• PEKAN NENAS INDUSTRIES SDN BHD CHANG CHIN
CHUEN & ANOR(1998) 1 MLJ 465
• SUBRAMANIAM A/L NS DHURAI V SANDRAKASAN A/L
RETNASAMY (2005) 6 MLJ 120
▪ WHO IS BONA FIDE PURCHASER FOR VALUE?
• OWE THEN KOOI V AU THIAM SENG(1990) 1 MLJ
234
• MOHAMED MOIDU MOHAMED V HASAN KADIR
(2001) 4 MLJ 292
• CHU CHOON MOI V NGAN SIEW TIN (1986) 1 MLJ 34
• ADORNA PROPERTIES SDN BHD V BONSOON
BOONYANIT (2001) 1 MLJ 241
• ADORNA PROPERTIES SDN BHD V KOBCHAI
SOSOTHIKUL (2005) 1 CLJ 565
o INSUFFICIENT OR VOID INSTRUMENT

▪ VOID CONTRACT - MINOR

• TAN HEE JUAN V TEH BOON KEAT (1934) MLJ 96
▪ INVALID POWER OF ATTORNEY
• PURAN SINGH V KEHAR SINGH(1939) MLJ 71
• STATE TAILOR SDN BHD V NALLAPAN (2005) 2 MLJ
589
▪ AGAINST ANY EXISTING LAW
• UMBC V SYARIKAT PERUMAHAN LUAS (1988) 3 MLJ
352

118
 • APPOO V ELLAMAH (1974) 2 MLJ 201

o TITLE/INTEREST WAS UNLAWFULLY ACQUIRED

▪ M&J FROZEN FOOD SDN BHD V SILAND SDN BHD (1994) 1

MLJ 294 o POSITION OF SUBSEQUENT PURCHASER
TAKING A DEFEASIBLE
TITLE
INDEFEASIBILITY OF TITLE/INTEREST.
Introduction:
• Torrens System is based on the system of registration
whereby all land dealings will only be considered as
effective and enforceable under the National Land Code
1965 once the dealings have been registered at the
relevant land/registry office where the land is situated.
• The relevant provisions:
o Transfer –Section 214(1) NLC 1965

o o Lease –Section 221(4) NLC 1965

o o Charge – Section 242(1) NLC 1965

o o Easement – Section 286(1) NLC 1965.

• The registration process of instrument of dealing is explained in detail by

the NLC 1965, amongst other the form presented for registration must
be duly stamped. See Section 294 (1)(a) NLC 1965.
• In the case of MOHAMMAD BUYONG V PEMUNGUT HASIL TANAH
GOMBAK (1982) 2 MLJ 53 it was observed by the court that registration
is perfected “by the making of a prescribed memorial of the dealing in
the register document of title under the land and seal of the
registering authority.”
• Since the registration process is tedious and expensive, therefore the
Code award a shield of protection known as indefeasibility of

119
 title/interest to provide a security of tenure. Section 340(1) of NLC
1965 provides that upon registration the title/interest shall be
indefeasible.

Definition of indefeasibility:
• In a case of FRAZIER V WALKER (1967) 1All ER 649, indefeasibility is – a
convenient description of the immunity from attack by adverse claim to
the land or interest in respect of which he is registered.
• Indefeasibility means that the state guarantees the title or interest is
unimpeachable, unchallengeable and unquestionable. In brief it means
once registered, he can be sure that no one is able to question his title
or interest.
• Indefeasibility concept is used as a shield to protect the registered
owner/interest against adverse claims. (See Salleh Buang(2007)
Malaysian Torrens System, 2nd Edition at page 183).

• The relevant provisions that emphasize the conclusiveness of

registration are Section 340(1) read together with Section 89 NLC
1965.
• The rationale for the concept of indefeasibility under TS – is to give
security of tenure to the registered title or interest.
• However, it is to be noted that the indefeasibility concept is not
absolute since there are circumstances where the registration could
still be challenged.

Types of Indefeasibility:
1. Immediate Indefeasibility
• When a person is registered as owner or interest holder then he is
immediately guaranteed that his title or interest is free (immune)
from any claim.

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 • Example in our early legislation – Registration of Titles Regulations
1891 (Selangor) - no provision for insufficient or void instrument.
Therefore, immediate indefeasibility concept was applied.

2. Deferred Indefeasibility
• Deferred indefeasibility means upon registration the title or interest
obtained can be challenge if certain circumstances exist.
• It will remain potentially attacked if it is obtained by way of fraud,
forgery,insufficient or void instrument until it is transferred to a bona
fide purchaser for value.
• When Sir Robert Torren introduced Torrens System in Australia, he
also included the compensation to proprietor in the event he lost his
title not due to his fault. But Malaysia did not provide for state
compensation when adopting the Torrens System.

• In Malaysia we adopted deferred indefeasibility concept.

• Dr David Wong in his book was of the view that Section 340(1) read
together with Section 340(2) NLC 1965 showed that West Malaysia
applied the concept of deferred indefeasibility.
• This is affirmed by the decision in the case of OCBC BANK V LEE LEE
FAH (2000) 1 MLJ 134 where Siti Normah Yaacob JCA indicated that
“the company and the bank have acquired indefeasible titles and
interests to the land by virtue of S.340(1) NLC….the only way the
title and interest can be challenged is for the respondents to
establish any of the circumstances in sub-s (2) as to render the titles
and interests defeasible.”
• Under the deferred indefeasibility, registration of documents will not
cure any irregularity.
• Case: MOHAMMAD BUYONG V PEMUNGUT HASIL TANAH GOMBAK
(198) MLJ 53.

121
 • Time limit to challenge defeasible title:
• Any defeasible title/interest must be challenge timeously because if
it is passed to a bona fide purchaser for value it will be indefeasible.
See Section 340(3) proviso.
• Any applicant can file a claim under Section 340(3)(a) to challenge
any transfer or Section 340(3)(b) any interest i.e lease, charge and
easement registered in favour of the new person.
• Section 341 provides that a claim for recovery of land can be made
for any length of time because there is no limitation of time. Under
Limitation Act, any claimant who intends to file a claim must do it
within 12 years. However, Section 341 NLC provides that it shall not
constitute a bar to the bringing of any action for the recovery thereof
by the proprietor or any person entitled to an interest therein. •
case: CHEAH KIM TONG V TARO KAUR (1989) 3 MLJ 352
• NG YEE FONG V EW TALALLA (1986) 1 MLJ 25.

Exception to indefeasibility:
❑ Exceptions under NLC (also known as statutory exception).
❑ General exceptions.

GENERAL EXCEPTIONS TO INDEFEASIBILITY CONCEPT

EXCEPTIONS UNDER S.340(2) NLC.

❑ FRAUD :
• There must be proof that the person in whose name the property is
registered or his agent, was a party or privy to the fraud or
misrepresentation.
• No definition of fraud is given by NLC.
• From cases:

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1. Actual fraud – dishonesty of some sort (means rea)
▪ WAIMIHA SAWMILLING CO LTD V WAIONE TIMBER CO LTD
(1923) NZLR 1137
Fraud is defined as dishonesty..
“if the designed object of the transfer be to cheat a man of
known existing right, that is fraudulent and fraud may also be
established by deliberate and dishonest trick causing an
interest not to be registered, thus keeping the register clear.”
*it simply means an active concealment of the truth.

• ASSETS CO V MERE ROIHI (1905) AC 176 fraud means actual

fraud that is dishonesty of some sort and not merely
constructive fraud.
• The Federal cited with approval the definition of fraud in the
above case in the case of MOHD ISA V HJ IBRAHIM (1968) 1
MLJ 186.
• Example of constructive fraud:
o TAI LEE FINANCE SDN BHD V OFFICIAL ASSIGNEE&
ANOR (1983) 1 MLJ 81 Interveners contended that
chargee having notice of the sale of lots to sub
purchasers, could be deemed a party or privy to fraud
committed on the sub purchasers when they still
proceed in registering the charge despite having
knowledge of the existence of the equitable interest.
Held:
Mere knowledge of existence of unregistered interest
shall not of itself constitute fraud. It is constructive
fraud not an actual fraud. The purchasers in failing to
caveat the land lost their priority of their interests.

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 o ONG TIN V SEREMBAN MOTOR GARAGE(1917)1 FMSLR
308
The Plaintiff purchased a piece of land with the
knowledge that the seller leased the same to the
defendant, who then entered into possession of the
land. Soon after the land was transferred to him, he
took step to eject the defendant Issue: whether
knowledge of the lease amounted to fraud on part of
the defendant.
Held:
The court of appeal decided that mere notice of the
unregistered interest could not amount to fraud. The
defendant’s title was indefeasible.

• Example of an actual fraud:

o APOO V ELLAMAH (1974) 2 MLJ 201 where the
registered proprietor thought he was executing a charge
document but instead the transferee asked him to sign
a transfer form and subsequently obtained registration
of a transfer.

o JASBIR KAUR V TARUMBER SINGH (1974) 1 MLJ 224

where a transferee fraudulently obtained a transfer
signed by registered proprietor, falsely declared to the
registrar that IDT is missing, upon receipt of new title
deed transfer the property to himself.

o OWE THEN KOOI v AU THIAM SENG (1990)1 MLJ 234

where a registered proprietor can only read Chinese
but signed document written in English which he

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 thought made his brother as trustee instead a document
allowed the land to be transferred to the brother.

o KOH THONG CHUAN V THE OFFICIAL ASSIGNEE OF THE

PROPERTY OF KOH LIANG HEE, A BANKRUPT (2003) 1
MLJ 113 where the property of a bankrupt was sold to
his son and a loan was obtained to finance the purchase
of the property. It was decided by the court that the
transfer between the transferor and transferee
constitute fraudulent conveyance in the context of
bankruptcy legislation because the transfer was
intended to defeat or delay creditors and would prevent
the distribution of the bankrupt’s property in
accordance with the bankruptcy law.
However, on appeal the court decided in favour of the
chargee because the chargee has acted in good faith in
granting the loan. Furthermore in Section 53B of
Bankruptcy Act bona fide purchaser for value is
protected.

o MOHAMED ISA V HAJI IBRAHIM (1968)1 MLJ 186 where

the property is used as security in a jual janji
transaction. The lender sold the land to a purchaser
who knew of the existence of the jual janji transaction
even before the expiry of time to repay the loan. It was
decided by the court that it was a fraudulent
conveyance.

o DATUK JAGINDAR SINGH V TARA RAJARATNAM(1983)

2 MLJ 127

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 Plaintiff agreed to transfer her land to the defendant as
security for an advance of RM220,000-00. The money
was used to pay off an existing where she stood as
surety for her brother’s loan. She was assured at all
time that the land will not be transferred to any third
party without her consent. After 18 days, the
defendant transferred the property to third defendant
and later was transferred to a developer, wholly owned
by the first defendant. The land was sub divided an
eventually sold to public.
Held:
Fraudulent act.

2. Fraud must be committed by the person or his agent and as a result

his name was registered in the RDT/IDT.
• If the person is NOT the party or privy to the fraud then his
title will be indefeasible.
• DOSHI V YEOH TIONG LAY (1975) 1 MLJ 85
Three appellant was formerly the registered proprietor of the
property. As security for a loan obtained from a lender (who is
a solicitor by profession) he deposited his title together with
two blank transfer form duly executed by him. When he failed
to pay the lender transferred the land to a purchaser.
Subsequently the purchaser sold the land to respondent. The
respondent brought an action for the recovery of possession.

It was argued by the appellant that since the loan is money

lending transaction, it is void and the transfer if was void and
constituted fraud since the transfer is made in favour of a
company where the lender is the shareholder. Since the same

126
 lawyer who had knowledge of the previous transaction was
being engaged by the respondent to purchase the said
property, it should be imputed to him.
Held:
Appellant was unable to prove that there was fraud to which
the respondent or his servant or agent was a party or privy.
Since the appellant failed to establish his case, the title is
indefeasible.

• ISMAIL BIN MOHAMAD V ISMAIL BIN HUSIN (2005) 7 MLJ 103

Facts: The plaintiff was the former registered proprietor of the
land sold the land to the defendant for RM7.5 million. Unknown to
him the land was charged to secure a loan amounting to
RM16million (higher than the purchase price offered to him). The
money was later released to another defendant.

The plaintiff claimed for the recovery of the said land and for
cancellation of the charge with the 4th defendant.

HELD:
At first instance by Ariffin Zakaria FCJ , it was decided that
the all the defendants except 4 th defendant were liable. The
High Court was of the view that since the fraudulent conduct
of the solicitor (2nd defendant) and the legal; firm(3 rd
defendant) could not be imputed to the bank even though the
solicitor was an agent of the said bank.

On appeal to the Court of Appeal in March 2007:

ABU BAKAR ISMAIL V ISMAIL MOHAMAD (2007)

127
 It was decided by the court that the charge in favour of Bank
Kerjasama Rakyat be removed on the ground of fraud. It was
concluded by the judge that the 2 nd defendant was privy to the
fraud and since the legal firm was an agent of the 4 th
defendant, therefore the charge should be rendered
defeasible in the hand of the 4 th defendant. In addition to this,
the judge observed that Section 340(2)(a) NLC 1965 did not
require that registered interest holder to have knowledge or
notice of the agent’s fraud or authorize the commission of it.
In brief the agent’s fraudulent conduct could be imputed to
the chargee bank.

• H AISHAH V YAH BT TAIB(1949) MLJ 128

An illiterate woman was induced to sign an instrument of
transfer but was told that it was a charge document.
Held:
Defendant’s title who was privy to the fraud can be set aside.

• HJ JUNUS V CHIK (1964) MLJ 343

Co-owner sold undivided share in a piece of land to the
plaintiff who then paid in full. The first defendant purchased
the remaining half shares and obtained a transfer of the whole
with the understanding half shares will be transferred to the
plaintiff. He failed to do so.
Held:
Defendant was privy to the fraud, therefore not entitled to
keep the plaintiff’s half share.

• In establishing actual fraud – the onus is on the party

alleging fraud.

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• Particulars of fraud must be pleaded in the pleading. In
the case of WAN NAFI B WAN ISMAIL V HAJJAH LIJAH BT
OMAR(1996)5 MLJ 534 In this case the plaintiff in pleaded
fraud by alleging that his thumbprint was obtained by the
defendant without his consent. It was decided by the court
that since no evidence was adduced to show that fraud had
been committed.

• Burden of proof- previously was balance of probabilities.

o SAMINATHAN V PAPPA(1981)1 MLJ 121.

o CHU CHOON MOI V NGAN SEW TIN (1986) 1 MLJ 34 Per Syed
Agil Barakbah SCJ:
“proof beyond reasonable doubt does not mean
proof beyond the shadow of doubt. The degree of
proof need not reach certainty but it must carry a
high degree of probability. What it means is that
the evidence adduced is such that the court believes
its existence….if such proof extends only to a
possibility but not in the least a probability, then it
fall short of proving beyond reasonable doubt…”
• But in ADORNA PROPERTIES V BONSOOM BOONYANIT
(2001) – it was decided that burden of proof is only
balance of probabilities.
• In the case of HOO KOK CHONG V YONG TIM (2004) 1 MLJ
305. it was observed by the court that the burden of
proof is balance of probabilities and not beyond
reasonable doubt as applied in Saminathan v Pappa.
• In HOO KOK CHONG the plaintiff’s grandfather (deceased)
was the owner of several pieces of land in Selama. The
deceased died in November 1969. The plaintiff’s father

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took over control of the land and allowed the defendant
the use of the land. In 1984 the plaintiff approached the
defendant for the return of the lands. The defendant
refused claiming, he was the legal owner of the land,
having purchased the same from the deceased in June 1969
for valuable consideration. There was admittedly no sale
agreement or receipt of acknowledgement for the alleged
consideration. The defendant claimed that after waiting
for three years for the title from the plaintiff’s father to
hand over the IDT, he applied and obtained title in
continuation in 1976.

At first instance, High Court rejected his claim since he

could not proof his case beyond reasonable doubt.

On appeal, the plaintiff adduced fresh evidence in a

form of letter from the Land Office confirming that the
original RDT had been removed from the possession of
the Selama Land Office and that the transfer of the
lands to the defendant was presented for registration
on March 1975 vide presentation number 71/75.
Therefore it is not possible for the deceased to sign the
transfer form furthermore there was no penalty
charged on late transfer assuming the transfer was
signed by the deceased.

The Appeal Court allowed the plaintiff’s appeal and

affirmed that the burden of proof is balance of
probabilities. (Adorna’s case followed).

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• In another case decided by the Court of Appeal, it was
observed by the court the burden of proof should be
beyond reasonable doubt, case LEE WAI FAY V LEE
SENG EIN (2005) 4 MLJ 701 where the plaintiff alleged
that the defendant had induced him to sign some
documents which he thought were loan documentation.
He deposited his title with the defendant and the
defendant lodged a lien holder’s caveat. The
documents turned out to be sale agreement and
transfer form. At first instance, he claimed that he is
an illiterate.

The trial judge allowed his claim and ordered for the
transfer of the property to him.

On appeal, it was decided by the court that the trial

judge had committed grave error in applying the test of
balance of probabilities by following the case of Ang
Hiok Seng v Yim Yut Kiu(1997) 2 MLJ 45.

• Since we are bound by stare decisis, the decision of

Federal Court in the case of ABD RAHIM BIN AKI V
KRUBONG INDUSTRIAL PARK (1995) 2 MLJ 130 is
applicable. In this case, THE COURT DECIDED THAT
BURDEN OF PROOF IN FRAUD CASES SHOULD BE BEYOND
REASONABLE DOUBT.

• Fraud must be specifically pleaded in the pleadings.

• Case: VIJAYALETCHIMY v ANNAMALAI CHETTIAR (1990)
2 MLJ 492.

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 MISREPRESENTATION:
• No definition in NLC.
o DATUK JAGINDER – suggested that misrepresentation is
fraudulent misrepresentation. That means it is part of fraud.
o LOKE YEW V PORT SWETTENHAM RUBBER CO LTD(1913) AC
491
Defendant managed to get owner to sign the transfer form by
way of misrepresentation that the land belonged to plaintiff
will be excluded from the transfer. Plaintiff bought part of
the land in cash but did not register his name in the title
deed.
Held
Since he was aware that if not for his statement/undertaking,
he could not obtain execution of transfer, therefore by
denying the plaintiff’s interest in the land will render his
title defeasible.

FORGERY:
• Forgery is:
o act of one person (forger) to sign in the name of a registered
proprietor or any instrument of dealings.
o Impersonation – the forger falsely represented to a third party
that he is the registered proprietor and later sign the transfer
form in the name of the registered proprietor.
o defined as the act of the crime by creating a false document,
altering a document, or writing a false signature for the illegal
benefit of the person making the forgery

132
 o is described as the fabrication of a false document or thing in
order that it may be used as genuine
• The registered proprietor has no knowledge at all of the transaction.
• Upon discovery of forgery, the registered proprietor may lodge a police
report and applied to registrar for entry of registrar’s caveat.

• In the case of ONG LOCK CHO V QUEK SHIN & SON (1941) MLJ 88 where
the registered proprietor gave his IDT to solicitor and the clerk forged his
signature and charged to third party. It was decided by the court that
forged transfer was a nullity. Since it was a nullity it cannot confer a
good title to the immediate party. Void document will render the charge
defeasible.

• LIM PANG GEOK V SOCKALINGAM CHETTY (1907) INNES 90

The person who deals with a forger cannot acquire an indefeasible title
or interest. But he can pass a good title/ interest to subsequent bona
fide purchaser.

• QUAH HONG LIAN NEO V SEOW TEONG TECK (1936)MLJ 161

A person through trickery and impersonation obtained a transfer of a
piece of land and later charged the property.
Held:
The forger’s title is defeasible. Since forged document is a nullity,
therefore the chargee’s interest is also defeasible.

• ONG LIAN V TAN ENG JIN (1917) 1 FMSLR 325

The title is defeasible but the forger can pass a good title to bona fide
purchaser for value.

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 CHIEW LIP SENG V PERWIRA HABIB BANK M BERHAD (1999) 1 AMR 789
Where in this case the court decided that the charge was defeasible
as a result of forgery because the Plaintiff was able to prove that he
never executed the charge documents and the hand writing expert
confirmed that the Plaintiff did not sign those documents.

• OCBC V PENDAFTAR HAKMILIK NEGERI JOHOR(1999)2 MLJ 511 Ng See

Chow is the current registered owner of the land. He charged the land to
OCBC(appellant).The respondent in this appeal is the Registrar of Titles.
The appellant’s solicitor received a notice from the registrar informing
them of the entry of registrar’s caveat. The appellant bank, as chargee,
applied to High Court citing the registrar as respondent to set aside the
registrar’s caveat. The high court dismissed the bank’s application.
Held:
Appeal dismissed.
The registrar had more than ample grounds for him to exercise his
discretion to enter registrar’s caveat.The document is tainted with
forgery, therefore the title and interest is liable to be set aside.

• But with the case of ADORNA PROPERTIES SDN BHD V BOONSON

BOONYANIT @ SUN YOK ENG (2001) 1 MLJ 241. The principle in the
above mentioned cases had been changed. In this case it was decided by
the Supreme Court that an immediate party to forgery would still be
able to get indefeasible title if he can prove that he is a bona fide
purchaser for value.
• Despite many criticisms, Adorna’s case was still being followed by High
and Court of Appeal because of the “stare decisis” concept where lower
courts are bound by the decision of the higher court.
• It was observed by the court in the case of AU MENG NAM V UNG YAK
CHIEW (2007) 5 MLJ 2005 where the judge was reported as saying that

134
 the Court of Appeal is not ready to ignore or disregard the Federal
Court’s decision in Adorna’s case despite non agreement with the
outcome of Adorna.
• In the case of AU MENG NAM the former registered proprietor discovered
that the land had been transferred to the purchaser. They never entered
into any sale agreement and sign any transfer form. The court decided
that the title obtained was defeasible by virtue of 340(2)(b) as the
registration was obtained by forgery.
• In the case of LIEW YOK YIN V AGS HARTA SDN BHD (2006) 7 MLJ 49,
the registered proprietor claimed that the original title deed had all
along been in her possession and that she never parted with it. She also
contended that she never signs any transfer form. The court decided
that the transfer is defeasible.
• It is interesting to note that in the more recent case, the court viewed
that forged documents are to be considered as void and insufficient
instrument that could not convey any title to the transferee and is not
binding on the transferor.
• As a conclusion the principle adopted in the string of cases before
Adorna is still the same that is the title will be defeasible if the
documentation is tainted with forgery except with the new introduction
of immediate party to the forgery could still be protected by the shield
of indefeasibility if he can prove that he is a bona fide purchaser for
value.
• The burden of establishing that he is a “bona fide purchaser for value”
lay on the purchaser. See PEKAN NENAS INDUSTRIES SDN BHD CHANG
CHIN CHUEN & ANOR(1998) 1 MLJ 465.
• It was noted by Gopal Sri Ram JCA in the case of SUBRAMANIAM A/L NS
DHURAI V SANDRAKASAN A/L RETNASAMY (2005) 6 MLJ 120 that the
duty to prove that he is a bona fide purchaser is one of a pure fact based
on the credibility of the witness.

135
 • Recently, in 2010 the following case was decided by the Federal Court
that reversed the decision of Bonsoon:

In the case of Tan Ying Hong V Tan Sian San & Anor 6 the issue whether an
acquirer of an interest or title under the National Land Code 1965 by way of
forged documents can obtain an indefeasible title has been addressed by the
Federal Court. In an overwhelming decision of the learned judges, it was
decided that the decision of the Federal Court in Bonsoom’s was erroneous.
It further reiterated that any transaction arising from void instrument, it
automatically follows that they are liable to be set aside at the instance of
the registered proprietor. The pertinent effect of this decision is that there
will be certainty in determining section 340(3) of the National Land Code 1965
and that the registered proprietor’s title is indefeasible vis a vis bona fide
purchaser for value in land dealing tainted with forgery.
The facts of Tan Ying Hong have a striking similarity with the case of Puran
Singh v Kehar Singh7, where in both cases the defendants had forged the
signature of the registered proprietor in the Deed of Power of Attorney and
represented to the purchaser that they were entitled to sell and execute
dealing documents on behalf of the donors. The purchasers appointed their
own solicitors in preparing and perfecting the instrument of transfer, only to be
served with an application by the registered proprietors for the recovery of the
said land and cancellation of the registration of transfer.

At the court of first instance in Tan Ying Hong, it was argued by the counsel for
the plaintiff who is registered as the proprietor of the land that his client has
no knowledge as to how his name is registered as proprietor of the land. In
addition to that he alleged that he has never signed any power of attorney in
favour of the defendant. Therefore, it was contended that the charge created

6 (2010) CLJ (SE) 1

7 (1939) MLJ 71

136
in favour of the defendant bank was not valid since it was executed by using a
forged power of attorney.

In deciding the issues the honourable judge agreed with the plaintiff’s
argument that the charge was created and perfected by using a forged
instrument and it is defeasible within the ambit of Section 340(2)(b) of the
National Land Code 1965. However, since the plaintiff claimed that he is not
the actual owner of the land and had no knowledge as to how he was
registered as proprietor of the land, the court was of the view that it is
inappropriate and wrong to nullify the charge based on the plaintiff’s claim
because he is not within the category of persons entitled under Section 340(3)
(a) and (b) of the National Land Code 1965 to seek an order to nullify the
charge8. In addition to that he further reiterated that to conclude the charge
as void would be prejudicial to the third defendant’s right as the chargee.

On appeal, the Appellate Court judges were of the view that the third
respondent’s (the bank) interest in the charge was indefeasible except if there
was evidence to prove that that they have knowledge of the fraudulent
conduct or the charge was obtained by forgery or the title was unlawfully
acquired. The interest of the chargee is protected by virtue of the proviso
under Section 340(3) of the National Land Code 1965. It is further decided by
the honourable judges that the chargee who was a bona fide purchaser and
acquired the interest in good faith with consideration obtained an immediate
indefeasibility of interest following the case of Adorna Properties Sdn Bhd v
Bonsoom Boonyanit. The appellant’s appeal was dismissed with cost.

In brief, the decision of Tan Ying Hong by the Federal Court provides certainty
to the status of registered proprietor vis a vis bona fide purchaser in land
dealing by using a void instrument. However, the issue that might arise from

8 Anyone who intends to challenge the registration of title or interest under Section 340(2) of the
National Land Code 1965 must be the previous registered proprietor whose title was affected by
the registration of the dealing.

137
 this situation is the duty imposed on the purchaser’s solicitor acting for a bona
fide party. The solicitor’s prime duty is to make sure that his client will be able
to obtain an indefeasible title or interest upon registration of the title or
interest as stated in Section 340(1) of the National Land Code 1965.

In the case of Low Huat Cheng v Rozdenil Toni & Another Appeal [2017] 3 CLJ
257, A forger had forged the signature of the administrator and subsequently
transferred the land to the purchasers. The transfer of the said land to an
immediate party to the forgery was void ab initio by virtue of Section 340(2) of
the NLC. The immediate party only obtained a defeasible title, which can be
recovered by the original proprietor.

In the case of CIMB Bank Berhad v Ambank (M) Berhad & Ors[2017] MLJU 1169
the discharge of charge form (Form 16N) was forged by a forger even though
full payment of the loan has not been paid to the bank. Upon receiving of the
Form 16N, the land office proceeded with the registration of the form. The
same situation arose in the case of Lee Choon Hei v Public Bank Bhd & Another
Appeal9 where Form 16N was forged to enable the proprietor to transfer the
land to the purchaser in a sale and purchase of the land. In another case,
Malayan Banking v Tho Siew Wah & Anor 10 a more perplexing situation
occurred. The forger not only forged the signature of the proprietor in the
Memorandum of Transfer (Form 14A), but the stamp certificate for the
payment of the ad valorem stamp duty of the Memorandum of Transfer was
also being forged by using a fake number on the certificate. In a more recent
case of Kamarulzaman Omar & Ors v Yakub Husin & Ors11 the land fraud was
committed by the first to the fourth defendant who claimed to be the lawful
beneficiaries of the deceased. The land was sold and transferred to the fifth
and sixth defendants by its administrators. The imposters’ title was nullified
by the court and the fifth and sixth defendants were immediate parties to

9 [2017] MLJU 272

10 [2017] MLJU 119
11 [2014] 1 CLJ 987 FC.

138
 the land fraud that caused ownership to be defeasible and liable to be set
side.

In the case of T Sivam a/l Tharmalingam (sebagai wakil pentadbir kepada

harta pusaka mendiang Nagamuthu a/l Periasamy) v Public Bank Berhad 12, the
son of the deceased had committed land fraud by forging the signature of
the late father in a Memorandum of Transfer and transferred the land to
himself. The late father subsequently filed a court proceeding to recover the
land but died before full disposal of the case. The son, Nagarajan a/l
Nagamuthu, proceeded with obtaining a bank loan and using the said land as
the collateral. Subsequently, the Administrator of the estate of the deceased
claimed for the recovery of the land free from the charge created in favour of
the chargee. The court found that the bank is the subsequent party to land
fraud but it failed the test of bona fide purchaser since it appointed the same
solicitor who assisted the forger to commit the fraudulent land transaction.

Bona Fide Purchaser For Value:

• Who is bona fide purchaser for value?
• Purchaser is not only restricted to transferee but also
include chargee or other interest holder.
o Case: OWE THEN KOOI V AU THIAM SENG(1990) 1 MLJ 234 The
land was transferred to transferee by of fraud.
Later it was charged to the bank.
Held:
The charge created in favour of the bank is
indefeasible. i.e chargee can be considered as bona
fide purchaser for value.
• Bona Fide Purchaser must have the following factors:
• Person who pays consideration. If not he will become
a volunteer.

12 [2018] MLJU 580.

139
▪ MOHAMED MOIDU MOHAMED V HASAN KADIR (2001) 4
MLJ 292 the court observed that the defendants were
volunteers by reason of the registration of title into
their names being through devolution. They cannot be
considered as a bona fide purchaser since they did not
pay any consideration. In Mohamed Moidu, the father
of the defendant( a deceased) entered into a sale
agreement with plaintiff’s father. The purchase price
had been fully settled but the registration of the
transfer did not take place until he passed away. The
plaintiff claimed for the specific performance of the
sale agreement. The defendant claimed that they are
bona fide purchaser and their title is indefeasible.
▪ In the case of CHU CHOON MOI V NGAN SIEW TIN
(1986) 1 MLJ 34, the husband transferred his late
father’s property to the wife and without any
consideration. She is not considered as bona fide
purchaser.
▪ ADORNA PROPERTIES SDN BHD V BONSOON
BOONYANIT (2001) 1 MLJ 241.
▪ ADORNA PROPERTIES SDN BHD V KOBCHAI
SOSOTHIKUL (2005) 1 CLJ 565.

• Person who acts in good faith.

▪ In brief it means that he had no knowledge whether
actual or constructive that the title or interest is bad
in law.

140
• ELIZABETH CHIEW YEE FUNG V LEONG FOOK NGAN
(2001) 6 MLJ 403, where the knowledge of forgery
could be imputed to the managing director of the third
defendant at the material time. There was no dispute as
to the involvement of the said MD in the said transfer. It
was concluded that he must have known of the falsity of
the purported signature of the deceased. The court
decided that he is not a bona fide purchaser for
value.
• LIEW YOK YIN V AGS HARTA SDN BHD (2006) 7 MLJ 49
(HC) it was decided by the court that the
defendant(purchaser) had on balance of probabilities
failed to discharge the burden that they were
purchasers in good faith. Evidence established that the
circumstances in concluding the sale without proper
investigation into the title or the person claiming to be
owners of the property and the unexplained delay in
completing the sale and transfer the title out of time
clearly negatives the bona fide of the defendant.
• On appeal (2010) 1 MLJ 305 COA; COA affirmed the
decision of the HC.
• SUBRAMANIAM A/L NS DHURAI v SANDRAKASAN A/L
RETNASAMY & ORS [2005] 6 MLJ 120 it was decided
by the court that the knowledge of the defendant that
the property was a trust property showed that he was a
not purchaser in good faith.
• AU MENG NAM V UNG YAK CHIEW (2007), Raus JCA and
Hasan JCA decided that the defendant (purchaser) was
under the obligation to investigate properly all matters
relating to the sale of the land and not to just blindly

141
 accept what was claimed by the “vendor” as correct
and genuine. When he failed to take the ordinary
precautions, which ought to be taken in such a matter
he was not entitled to the protection of the court.
• LIPUTAN SIMFONI SDN BHD v PEMBANGUNAN ORKID
DESA SDN BHD [2018] 1 CLJ 61
Facts:
Impostor claiming to be PODSB obtained a replacement
of title from PTG in 2004. Entered into SPA with Chai Sit
Trading (CST) for RM680,000 on 23/1/2006. CST was
registered as proprietor. On 25/8/2006, CST sold the
land to LSSB. Before registration of the transfer,
impostor caveated the land alleging that balance
purchase price has not been fully settled. LSSB is not
able to register the transfer.
At this juncture, the genuine POSDSB found out about
the transfer. It lodged a police report and notify PTG.
CST applied to court to remove the caveat, PTG
applied to include the real POSDB as party to the
application. It was opposed by LSSB and CST.
Issue: whether LSSB was a purchaser in good faith and
for valuable consideration within the meaning of the
proviso of S.340(3) of the NLC to acquire indefeasibility
of title?
HELD: Azizul Azmi Adnan JC:
“ If a purchaser enter into a transaction in good faith,
but before registration commits an act, or acquire a
state of mind that vitiates good faith, he may no
longer claim to be a purchaser in good faith, at the
point of registration…in order to discharge the burden

142
 showing that it was a purchaser in good faith and for
valuable consideration, the purchaser must not only
show the absence of fraud, deceit or dishonesty but
also that it had taken the ordinary precautions that a
reasonably prudent purchaser would have taken in the
circumstances..”
High Court: By resisting the application to add PODSB
as a party to the proceedings to remove the
Registrar’s caveat, LSSB had not acted in good faith. A
person acting in good faith, or honestly would have
taken steps to ascertain who the true owner was.
COA: LSSB was not a purchaser in good faith. Its
conduct meant to obstruct PODSB from having its
claim to the land being investigated. COA upheld the
decision of HC. Appeal dismissed.
Appeal to Federal Court:[2019] 4 MLJ 141
This was an appeal against the decision of the Court
of Appeal on the following questions of law to be
determined by the Federal Court: (a) whether the
relevant time for the determination of good faith for the
purpose of s 340(3) of the National Land Code (‘the
Code’) was based on the circumstances at the time of
entering into the transaction or at the time of
registration by the land officer; (b) whether the principle
of good faith for the purpose of s 340(3) of the Code was
that of general common law principle of good faith or
some other specific principle of good faith? (c) whether
the test of determining the good faith of a subsequent
purchaser was that the absence of fraud, deceit or
dishonesty, or was there an added imposition of taking
ordinary precautions and investigations of a reasonable

143
prudent purchaser; (d) whether mere knowledge of an
adverse claim vitiated good faith of the subsequent
purchaser who was not fraudulent, deceitful or
dishonest. If yes, at what point in the transaction did
such knowledge vitiate good faith: (i) entering into the
transaction; (ii) presentation of the memorandum of
transfer at the land office; or (iii) registration of title by
the land officer; (e) whether a finding that a sale and
purchase of a sale and purchase agreement was void ab
initio pursuant to s 24(b) of the Contracts Act 1950 (‘the
CA’) rendered the Form 14A under the NLC void, despite
the Form 14A being a valid instrument duly registered in
favour of the subsequent bona fide purchaser with the
land office; and (f) whether ‘instrument’ for the
purposes of s 340(2)(b) of the Code referred to
documents presented to the land office for registration
of title or did it also extend to a sale and purchase
agreement? The background facts were that, the said
land belonging to the plaintiff wrongfully fell into the
hands of an imposter company claiming to be the
appellant after which the said imposter company sold
the said land to the second defendant who subsequently
sold it to the first defendant. A series of caveats were
then entered onto the said land for various reasons.
Prior to the completion of the final sale and the transfer
to the first defendant, the director of the plaintiff found
out that someone had started to clear the land, where
the director then lodged a police report and notified the
third defendant. In February 2013, the plaintiff filed this
suit against all the three defendants seeking for
declarations that the transfers of the subject land to the

144
first and second defendants were void ab initio, and
orders that the subject land be restored to the plaintiff
and the third defendants do rectify the entries in the
document of title of the subject land. The High Court
had allowed the plaintiff’s claim and this decision was
affirmed by the Court of Appeal.

Liputan Simfoni Sdn Bhd v Pembangunan Orkid Desa Sdn

Bhd [2019] 4 MLJ 141
Held, dismissing the appeal with costs (Affirmed the
decision of both HC & COA):
In order to discharge the burden of showing that it
was a purchaser in good faith and for valuable
consideration, the purchaser must not only show the
absence of fraud, deceit or dishonesty but also that it
had taken the ordinary precautions that a reasonably
prudent purchaser would have taken in the
circumstances. The question of whether a purchaser had
acted as a reasonably prudent purchaser or not would
have to be decided on the particular facts of each case
(see para 74).

The relevant time at which to determine whether

a purchaser was indeed a purchaser in good faith and for
valuable consideration would be at the time of the
registration of the transfer. The purchaser could only
seek protection under s 340(3) of the Code if he was
registered as the transferee pursuant to ss 215 or 217 of
the Code. Section 340(3) did not provide protection to a
purchaser who had not been registered as a registered
proprietor of the land. Accordingly, the purchaser’s
conduct until registration was material for the purposes

145
 of ascertaining his bona fides. Cognisance may be taken
of his acts or omissions over period prior to the entry
into the sale and purchase transaction of the land, up to
the point in time when the purchaser was registered as a
proprietor on the Register of Titles (see para 94).
The relevant time for determination of good faith
for the purpose of s 340(3) of the Code was the
circumstances prior and at the time of the registration of
the transfer by the land officer.
The concept of good faith for the purpose of s
340(3) of the Code was wider than the general common
law principle of good faith. In addition to the absence of
fraud, deceit or dishonesty, a subsequent purchaser was
also required to take ordinary precautions and
investigations that of a reasonable prudent purchaser.
Whether a subsequent purchaser acted as a reasonable
prudent purchaser was a question of fact to be decided
based on the facts of each case.
Whether mere knowledge of an adverse claim
vitiated good faith of a subsequent purchaser who was
not fraudulent, deceitful or dishonest would depend on
the facts of each case.

INSUFFICIENT OR VOID INSTRUMENT.

• Void means instrument of dealing is defective as it contrary to rule
of law or illegal.
• Examples:
• In the case of Rajamani Meyappa Chettiar v Eng Beng Development
Sdn Bhd & Ors13 it was decided by the court that the issuance of a

13 [2016] 4 CLJ 510 HC.

146
 second title over the same piece of land is a nullity and the
replacement is void, having no legal effect and incapable of
conferring indefeasibility.14

• In the case of Dr Mahendran, a/l V Markandoo v Jegatheeswary a/p

Markandoo & Ors [2018] MLJU 215, the court viewed the absence of
jurat is fatal when the proprietor who executed the Form 14A only
understood the Tamil language. The solicitor who attested the
signature did not enclose a jurat together with the Form 14A for
registration, to indicate that he has not explained the content of the
form before asking the proprietor to sign the form.Thus, Form 14A is
void.
• in the case of Lau Yong Ying v The Bank of Punjab & Ors and other
appeals15 where the purchaser obtained registration of the
Memorandum of Transfer (Form 14A) after the issuance of a notice of
a writ of seizure and sale was made by the Respondent. The notice of
writ of seizure and sale under the Anti-Money Laundering and Anti-
Terrorism Act 2001 declares any subsequent dealings on the land as
null and void and deemed to be fraudulent conveyance that is liable
to be set aside.
• In the case of Abdullah Ab Rahman v Siti Aminah bt Ab Rahman &
Anor16, the transfer by a bankrupt is considered as fraudulent
conveyance because it is made AGAINST a prohibition imposed under
a Section 3(1) of the Insolvency Act 1967.17

• In the case of Siti Haida binti Ismail v Siti Maznah binti Yahya &
Ors [2018] MLJU 983, the court decided that the mental state of the

14 The Court of Appeal followed the observation by the Peh Swee Chin FCJ in the case Tan Chiw Thoo v
Tee Kim Kuay [1997] 1CLJ 541 FC where it concurred the 2nd title holder was a nullity because once the
title has been alienated and registered in favour of the first title holder and successfully proved that he never
parted with his title, eventually is the true proprietor and his title shall be indefeasible.
15 [2018] 4 MLJ 88.
16 [2018] MLJU 199.
17 The newly amended law is known as Insolvency Act 1967 (Act 360) and the relevant provision that
states about a fraudulent conveyance is Section 3(1)(c) of the Insolvency Act 1967.

147
 party signing the document is relevant in determining the validity of
the signature. The transferor’s mental health is at stake due to
mental illness namely dementia. The court decided that THE
TRANSFEROR HAS NO CAPACITY TO UNDERSTAND the purpose of
signing the document. Thus, the duly executed transfer form is not
valid and not fit for registration.
• Void contract
– contract ENTERED into by MINOR.
▪ TAN HEE JUAN v TEH BOON KEAT (1934) MLJ 96 two
transfers were executed by the infant plaintiff of two
pieces of land in Mentakab to the two defendants
respectively. The court held that the contract entered
0into by minor is VOID. This reason being that a minor
▪ by virtue of Section 10 and 11 of Contracts Act 1950.
Since the transfer was void, the registration will not
confer indefeasibility of title.
• Invalid Power of Attorney.
▪ PURAN SINGH V KEHAR SINGH(1939) MLJ 71
▪ STATE TAILOR SDN BHD V NALLAPAN (2005) 2 MLJ
589 it was decided by the court that since the PA was
not valid, the transfer was defeasible.
• Against any existing law.
▪ UMBC V SYARIKAT PERUMAHAN LUAS (1988) 3 MLJ
352 it was decided by the court that the charge having
registered in breach of a statutory prohibition imposed
on the title to the charged land pursuant to the
provision of Section 120 of the Code, the interest of the
chargee is defeasible since registration had been
obtained by means of an insufficient or void instrument.

148
 ▪ APPOO V ELLAMAH (1974) 2 MLJ 201 where the dealing
document effected by the parties contravened the
Moneylenders Ordinance 1951. (the moneylender must
obtain a license before he can operate a money lending
business)

TITLE/INTEREST WAS UNLAWFULLY ACQUIRED IN PURPORTED EXERCISE OF

POWER CONFERRED BY WRITTEN LAW.
• Unlawfully acquired by the person or body in purported exercise of a
power or authority conferred by any written law.
• M&J FROZEN FOOD SDN BHD V SILAND SDN BHD (1994) 1 MLJ 294
The payment of balance of auction price was made after extension of
time given by chargee without first obtaining consent from chargor.
In doing so the defendant had breached Section 258(c). The Court of
Appeal decided failure to comply with the statutory provision of NLC
was not just mere irregularity, but was an illegality which struck at
the root of the first respondent’s right to be heard. Therefore, the
certificate of sale issued by the SAR was ultra vires the statutory
provision of the NLC and the title was unlawfully acquired by the first
appellant. The title was defeasible under Section 340(2)(c).

POSITION OF SUBSEQUENT PURCHASER TAKING A DEFEASIBLE TITLE.

• General principle: the title is liable to be set aside not only of an
immediate purchaser but also in the hand of subsequent purchaser.
• Exception – however the defeasible title will obtain indefeasibility
status once the title/interest is acquired by a subsequent purchaser
in good faith and for value. (proviso of section 340(3)NLC).
• The requirement of bona fide purchaser for value has been discussed
in the earlier topic.

149
 RESTRAINT ON DEALINGS LIST
OF CASES
• INTRODUCTION
• o ENG MEE YONG & ANOR V LETCHUMANAN (1979) 2 MLJ 212

• ROLE OF CAVEAT UNDER NLC

• o CHIN CHEN HONG V HAMEED & ANOR (1954) MLJ 169

• o BUTLER V FAIRCLOUGH & ANOR (1917) 23 CLR 78 o MAINTAINING

THE STATUS QUO
▪ TEMENGGUNG SECURITIES LTD &ANOR V

150
 REGISTRAR OF TITLES (1976)2 MLJ 44
▪ N.VANGEDASALAM V MAHADEVAN & ANOR
(1976) 2 MLJ 161
▪ DAMODARAN V VASUDEVA (1974) 1 MLJ 128
• NATURE OF CAVEAT
• o ENG MEE YONG & ANOR V LETCHUMANAN (1979) 2

MLJ 212
o ONG CHAT PANG V VALIAPPA CHETTIAR (1971) 1 MLJ

224

o CHNG SIN POEY V QUEK LIAN MENG (1979) 1 MLJ 98

• PROCEDURE FOR THE LODGMENT OF CAVEAT

o INFRA ELITE DEVELOPMENT SDN BHD V PACIFIC TREASURE LAND SDN BHD
(2002) 6 MLJ 545
o CHOR PHAIK HAR V FARLIM PROPERTIES SDN BHD (1994) 3 MLJ 345

o N VENGADASALAM V MAHADEVAN (1976) 2 MLJ 161.

o WONG FOOK SENG V MRS FREDERICKS NEE KHOO SWEE

CHOO (1998) 6 MLJ 321
• CAVEATABLE INTERESTS
o MILLION GROUP CREDIT SDN BHD V LEE SHOO KHOON
(1996) 1 MLJ 315 o WONG FOOK SHANG V MRS
FREDERICKS NEE KHOO
SWEE CHOO (1998) 6 MLJ 321
o OPTION LETTER

▪ SING LIAN EXPRESS V SOH KIM TEE (1974) 2 MLJ

24
▪ CHONG SIAT YONG V YEE MUN YING (1986) 1
CLJ 37

151
 ▪ VALENTINE ELECTRONICS(M) SDN BHD V LONG
KIM (1992) 2 CLJ 1092
o CLAIM IN PERSONAM

▪ EM BUXTON V PACKAGING SPECIALIST (1987)1

MLJ 342
▪ CHONG SIAT YONG (Supra)
▪ ISMAGA BINA SDN BHD V GOVINDASAMY (1994)
1 MLJ 221
▪ NEW SELANGOR PLANTATION SDN BHD V TALAM
MANAGEMENT SERVICES SDN BHD (1996) 4 CLJ
94
o INTEREST UNDER AN UNLAWFUL
AGREEMENT IS NOT
CAVEATABLE
▪ MANANG LIM NATIVE SDN BHD V MANANG
SELAMAN (1986) 1 MLJ 379 o CAVEAT TO
PROTECT PERSONAL INTEREST IS NOT
CAVEATABLE
▪ HEW SOOK YING V HIW TIN HEE (1992) 2 MLJ
189
▪ MAHADEVAN V PATEL(1975) 2 MLJ 207
o REGISTERED PROPRIETOR MAY NOT ENTER CAVEAT ON
HIS OWN LAND
▪ EU FINANCE V SILA
▪ ND SDN BHD (1989) 1 MLJ 195
▪ AFFIN BANK BHD V DATO MOHAMED EMBONG
(2002) 1 MLJ 475 o UNREGISTERED
INTEREST MAY GIVE RISE TO A
CAVEATABLE INTEREST

152
 ▪ – INTER-CONTINENTAL MINING CO SDN BHD V
SOCIETIES DES ETAINS DE BAYAS TUDJUH
(1974) 1 MLJ 145 (FC)
▪ DUNIA RAYA ENTERPRISE SDN BHD V GANESAN
(1993)1 CLJ 196
▪ WOO YOK LAN V LOO PEK CHEE (1975) 1 MLJ
156
▪ POK KEW CHAI V YEOH THIAN SENG (1975) 1
MLJ 220 o VALID SPA CONFERS
CAVEATABLE INTEREST
▪ MACON ENGINEERS SDN BHD V GOH HOOI YIN
(1976) 2 MLJ 53 (FC)
▪ NEW SELANGOR PLANTATION SDN BHD V TALAM
MANAGEMENT SERVICES SDN BHD (1996) 4 CLJ
94
▪ AYER HITAM DREDGING MALAYSIA BERHAD V YC
CHIN ENTERPRISE SDN BHD (1994) 2 MLJ 754
o REMOVAL OF CAVEAT

▪ GOH PAIK SWAN V NG CHOO LUM (1996) 3 MLJ

437
▪ LUGGAGE DISTRIBUTORS (M) SDN BHD V TAN
HOR TENG (1995) 1 MLJ 719
▪ WU SHU CHEN V RAJA ZAINAL ABIDIN RAJA
HUSIN (1997) 2 MLJ 487
▪ PUNCA KLASSIK SDN BHD V ABD AZIZ ABD HAMID
(NO 2) [1996] 5 MLJ 92
▪ AKB AIRCONDITIONING & ELECTRICAL SDN BHD
V HEW FOO ONN (2002) 5 MLJ 391 o
EXTENSION OF CAVEAT
▪ RAP NATHAN V HAJI AB RAHMAN YUSOFF

153
 (1965) 1 MLJ 248
▪ DING NING POI V NAZARUDIN BIN
SAHIE (1999) 6
MLJ 274
▪ DAMODARAN V VASUDEVA (1974) 1
MLJ 128 o ENTRY OF A FRESH CAVEAT BASED ON
THE SAME GROUND
▪ THEVATHASON V KWONG JOON
[1990] 3 MLJ
49

RESTRAINT ON DEALINGS Introduction:

• Caveat is defined as “registered caveat” under NLC.
• It is a mechanism introduced by NLC in order to protect the
“unregistered interest”.
• It is designed to protect those who have dealt with the
registered proprietor either to obtain transfer of land or
creation of an interest in land but have yet to register the
dealings in accordance with the provision of NLC.
• How will a caveat be able to protect the “unregistered
interest” in the land?
o By restraining the registered proprietor from further dealing with
the said land which will be prejudicial to the holder of the
unregistered interest.
o By restraining the registered proprietor from further dealing on
the land, it will help maintaining the status quo of the land.

154
 • The person who lodged caveat –known as caveator and the person whose
land was being lodged with caveat –known as caveatee.
• In ENG MEE YONG & ANOR V LETCHUMANAN (1979) 2 MLJ 212 it was
noted by Lord Diplock that the caveat system in Malaysia has served as
the local substitute for the equitable doctrine of notice under English
law.

ROLE OF CAVEAT UNDER NLC

• The purpose of caveat:
o Restrains the registered proprietor from dealing with his land;

▪ S.322(2) provides that private caveat will prohibit the

registration, endorsement and entry on RDT:
• any instrument by registered proprietor;
• any certificate of sale relating thereto;
• any tenancy granted by registered proprietor and any lien holder’s
caveat in respect thereof.

o Gives interim protection to the caveator until the dispute is

settled or his interest/title in the land is registered;
▪ In the case of CHIN CHEN HONG V HAMEED & ANOR (1954)
MLJ 169 that the caveat system is for the protection of
alleged or proved interests. But it does not itself make a
claim or right either better or worse.
▪ In BUTLER V FAIRCLOUGH & ANOR (1917) 23 CLR 78, that
a caveat “operates as notice to all the world that the
registered proprietor’s title is subject to the equitable
interests alleged in the caveat”.
o As a notice to the world at large that the caveator has interest in
the said land and by caveating he is protecting that interest;

155
 ▪ When anyone deals with the registered proprietor, she has
to conduct a land search to ensure that the title is genuine.
▪ Land search is stipulated in S.384 – where one can either by
way of private search i.e checking the RDT, caveat book
and presentation book or by way of official search i.e apply
to the registrar for a written land search certified by the
registrar.
▪ Land search can reveal any encumbrances on the land
including caveat. Therefore caveat will serve as a notice to
anyone intending to deal with the said land the existence
of a prior unregistered interest.

o It freezes the situation and maintaining the status quo of all

parties until final disposal of issues arising thereto.
▪ In TEMENGGUNG SECURITIES LTD &ANOR V REGISTRAR OF
TITLES (1976)2 MLJ 44 stated that the purpose of caveat
is to preserve the status quo pending the taking timeous
steps by the applicant to enforce his claim to an interest in
the land by proceeding in the courts.
▪ Even though it can freeze the status quo but it is only
temporary in nature as stipulated in N.VANGEDASALAM V
MAHADEVAN & ANOR (1976) 2 MLJ 161. It stated that it is
not final and conclusive…..
▪ But Syed Agil Barakbah in DAMODARAN V VASUDEVA
(1974) 1 MLJ 128 warned that the caveat is not a remedy
for a wrong.
▪ As suggested by Salleh Buang in his book –“caveat is to
suspend the process of registration of any dealing in the
land until conflicting claims have been judicially settled”.

156
 PRIVATE CAVEAT
NATURE OF CAVEAT
• In NG MEE YONG it was stated by the judge that in the
registration of a caveat the registrar acting in an administrative
capacity without intervention of the court and is wholly
unsupported by evidence at all.
• In S.324 (1) it is clearly stated that the Registrar in performance
of his duty in entering a private caveat need not look into the
validity of the claim.
• In ONG CHAT PANG V VALIAPPA CHETTIAR (1971) 1 MLJ 224 it
was decided that so long as the formalities in preparing the
caveat form is complied with, the Registrar has no power to
reject a caveat. He cannot require the caveator to establish his
claim. Therefore the Registrar was mistaken in law in rejecting
the caveat lodged by the caveator.
• However, the Registrar may reject any application for entry of
caveat that does not comply with the provision of NLC i.e the
procedures for lodgement of caveat. See CHNG SIN POEY V QUEK
LIAN MENG (1979) 1 MLJ 98- where the court stated that It must
be said of this application that although under section 324(1) of
the Code the Registrar is not required to enquire into the validity
of the claim, this does not mean that he cannot reject an
application for entry of a caveat when it does not comply with the
substance of the form, or, as in this case, when the application
does not specify whether the caveat is to bind the land itself or a
particular interest. If the Registrar had doubts, he should have
made enquiries from the respondent's solicitors. In any case,
whatever may be said of the wording of the grounds in the
application,

157
 • In the event the caveat lodged is bad in law then it is up to the
registered proprietor or any person affected by the caveat to seek
removal either from the registrar (S.326) or from court (S.327).
• S.329 allows the person who has successfully removed a wrongful
caveat to claim compensation for damage suffered by reason of
the entry of the caveat.
EFFECT OF PRIVATE CAVEAT
PROCEDURE FOR THE LODGMENT OF PRIVATE CAVEAT
• The procedure for lodgment of caveat is stated in S.323(2) & (3)
NLC.
a. Form 19B and such application:
i. shall be attested in accordance with provisions of
S.211;
ii. shall state therein the nature of the claim on
which the application is based;
iii. shall state whether the caveat bind the whole land
or a particular interest only.
b. Statutory Declaration either by the caveator or his
advocate & solicitor; and
c. The prescribed fees.

• This procedure MUST BE COMPLIED STRICTLY; failure to comply

will render the caveat as bad in law.
INFRA ELITE DEVELOPMENT SDN BHD V PACIFIC TREASURE LAND
SDN BHD (2002) 6 MLJ 545
Facts:
The application for the entry of caveat was filed by caveator was
expressed to bind the whole piece of land even though the
caveator’s interest was only in the right to construct the monsoon
drain on the said land.

158
Held:
Wrongful entry of caveat.
THE ACT OF FILING A CAVEAT BINDING THE WHOLE LAND
KNOWING FULLY WELL THAT THE CAVEATOR HAD NO RIGHT OR
INTEREST TO DO SO IS NOT A TECHNICAL DEFECT. IT IS A SERIOUS
AND SUBSTANTIVE DEFECT WHICH FAILS TO COMPLY WITH THE
REQUIREMENT IN S.322 AND IS FATAL.

• CHOR PHAIK HAR V FARLIM PROPERTIES SDN BHD (1994)

3 MLJ 345. – FC had clearly stated how a party claiming to
an interest over a portion of a land should file his caveat.
The caveat must expressly be limited to protect that
claim only which must an interest recognized under NLC
being either registrable or entitled to protection. One
should state one’s interest, give grounds of the claim and
describe the particular interest claimed and the effect of
the caveat.
• See also N VENGADASALAM V MAHADEVAN (1976) 2 MLJ
161.
• In WONG FOOK SENG V MRS FREDERICKS NEE KHOO SWEE
CHOO (1998) 6 MLJ 321 where the caveator’s name is not
the same as in the attestation clause. Instead of inserting
the caveator’s name in the attestation clause, the solicitor
inserted the registered proprietor’s name (who was not the
person executing from 19B).
Held: Fundamental error, the caveat should be removed.

159
CAVEATABLE INTERESTS
• Refer to S.323(1)(a) where it states that anyone claiming
title to, or any registrable interest in any alienated land or
any right to such title or interest is said to have a
caveatable interest.
• What is caveatable interest?
-In MILLION GROUP CREDIT SDN BHD V LEE SHOO KHOON
(1996) 1 MLJ 315 Mahadev Shankar J indicated that it is
absolutely essential for the caveator to establish his interest
is related to the land that he caveated.
-see also WONG FOOK SHANG V MRS FREDERICKS NEE KHOO
SWEE CHOO (1998) 6 MLJ 321

i. OPTION LETTER:
• Whether an option to purchase gives rise to a caveatable
interest is a question of fact.
• Option to purchase in an unconditional binding contract ie
a caveatable interest.

a. SING LIAN EXPRESS V SOH KIM TEE (1974) 2

MLJ 24 – where the defendant is willing to
purchase and paid deposit but the owner
refused to execute SPA and the option did not
mention that its exercise would be subject to
a formal agreement.
b. CHONG SIAT YONG V YEE MUN YING (1986) 1
CLJ 37 – option contains a provision that it is
“subject to the terms and conditions to be
agreed upon”. It was held that the option to
purchase did not give rise to a caveatable

160
 interest because the option is conditional
upon and subject to the prospective purchaser
agreeing to the terms and conditions of SPA.
c. VALENTINE ELECTRONICS(M) SDN BHD V
LONG KIM (1992) 2 CLJ 1092 – the exercise
of an option not according to the prescribed
terms but which in fact amounted to a
counter offer which the caveatee rejected,
was held not to give rise to a caveatable
interest.

ii. CLAIM IN PERSONAM FOR AN UNSECURED DEBT IS NOT

CAVEATABLE.

a. EM BUXTON V PACKAGING SPECIALIST

(1987)1 MLJ 342 – respondent lodged caveat
claiming for an unsecured debt in the civil suit
i.e the refund of deposit payable under the
SPA. SPA was terminated by applicant since
the respondent failed to pay the purchase
price on the due date.
b. CHONG SIAT YONG (Supra) – claim for
commission is only a purely personal debt and
was held not to be a caveatable interest.
c. ISMAGA BINA SDN BHD V GOVINDASAMY
(1994) 1 MLJ 221 – action for a specific
performance of an agreement to purchase a
shoplot which is yet to be built is not a
caveatable interest.

161
 d. NEW SELANGOR PLANTATION SDN BHD V
TALAM MANAGEMENT SERVICES SDN BHD
(1996) 4 CLJ 94 where only price at
RM35,000 per acre has been agreed. It was
decided that that alone is not sufficient.

iii. INTEREST UNDER AN UNLAWFUL AGREEMENT IS NOT

CAVEATABLE.

• MANANG LIM NATIVE SDN BHD V MANANG SELAMAN

(1986) 1 MLJ 379 – it was held that a caveat entered by
a non-native company is against Sarawak Land Code (Cap
81). It was held by High Court and Supreme Court that
there is no caveatable interest.

iv. CAVEAT TO PROTECT PERSONAL INTEREST IS NOT

CAVEATABLE.
• HEW SOOK YING V HIW TIN HEE (1992) 2 MLJ 189 –
caveat entered by the director to protect his interest as
director or shareholder is not caveatable since the
registered proprietor of the land is the company.
• MAHADEVAN V PATEL(1975) 2 MLJ 207 – it was held
that the managing director had a caveatable interest in
the land of the borrower, as an unregistered chargee, as
he was throughout acting on behalf of the company in
the loan transaction.

v. REGISTERED PROPRIETOR MAY NOT ENTER CAVEAT ON HIS

OWN LAND.
• EU FINANCE V SILAND SDN BHD (1989) 1 MLJ 195. –it
was held that a registered proprietor does not fall in the

162
 categories of person claiming title since he is already the
owner of the land. Therefore he is not entitled to caveat
the land.
• AFFIN BANK BHD V DATO MOHAMED EMBONG (2002) 1
MLJ 475 a registered proprietor of the land is not
entitled to caveat his own land unless he is able to
establish special circumstances over and above his status
as proprietor. In this case the pending suit did not give
him right to caveat his own land.

vi. UNREGISTERED INTEREST MAY GIVE RISE TO A

CAVEATABLE INTEREST.
• Unregistered lessee – INTER-CONTINENTAL MINING CO
SDN BHD V SOCIETIES DES ETAINS DE BAYAS TUDJUH
(1974) 1 MLJ 145 (FC) – application to remove caveat by
unregistered lessee is held as an interest capable of
registration under NLC. Therefore the caveator had a
caveatable interest.
• DUNIA RAYA ENTERPRISE SDN BHD V GANESAN (1993)1
CLJ 196 –agreement merely gives right to enter from
time to time to take something from the land (in this case
to excavate and transport the earth) is not caveatable.
The objection is the fact that the right is not precisely
defined. In any event, such a right would appear to be
unregistrable and hence not caveatable.
• See WOO YOK LAN V LOO PEK CHEE (1975) 1 MLJ 156 –
where a written tenancy agreement for a lease which
confers a right to a registrable interest in the land in
respect of which a caveat may be entered.

163
 • Refer to POK KEW CHAI V YEOH THIAN SENG (1975) 1
MLJ 220 –failure to obtain consent from chargee for a
creation of a lease will render the lease agreement as a
valid agreement for a lease and is caveatable.

vii. VALID SPA CONFERS CAVEATABLE INTEREST.

• MACON ENGINEERS SDN BHD V GOH HOOI YIN (1976) 2
MLJ 53 (FC) – so long as there is in existence a valid SPA,
the purchaser is entitled to enter a caveat to protect his
right thereunder.
• NEW SELANGOR PLANTATION SDN BHD V TALAM
MANAGEMENT SERVICES SDN BHD (1996) 4 CLJ 94 where
only price at RM35,000 per acre has been agreed.
It was decided that that alone is not sufficient.

• AYER HITAM DREDGING MALAYSIA BERHAD V YC CHIN

ENTERPRISE SDN BHD (1994) 2 MLJ 754 Edgar joseph Jr
SCJ stated that until and unless a purchaser has an
enforceable contract for sale of land, he can lay no claim
to the title to registered land.
REMOVAL OF CAVEAT
• Three methods:
• o S.325
▪ Withdrawal by caveator by using FORM 19G.
o S.326

▪ Withdrawal by Registrar.
▪ The applicant is the registered proprietor, lessee, sublessee
or chargee of the land in question.
▪ Can only be effected after the expiry of two months notice
from the date of service of Form 19C on the caveator.

164
 ▪ o S.327

▪ Withdrawal by order of court which may be effected at

any time.
▪ The applicant need not necessarily be a person or body
with a registered title or interest in the land but he must
show that he is an “aggrieved person”.
• In GOH PAIK SWAN V NG CHOO LUM (1996) 3 MLJ 437, Gopal Sri Ram
JCA held that there are three factors must be satisfied before a caveat
can remain on the RDT:
o Whether the caveator has disclosed a caveatable interest;
o Whether the grounds in support of his claim disclose a serious
question to be tried;
o If the first two questions are resolved in the caveator’s favour,
then, whether the balance of justice or convenience, lies in
favour of the caveat to remain pending disposal of any dispute.
• See also LUGGAGE DISTRIBUTORS (M) SDN BHD V TAN HOR TENG
(1995) 1 MLJ 719 and WU SHU CHEN V RAJA ZAINAL ABIDIN RAJA
HUSIN (1997) 2 MLJ 487.
• Onus lies upon the caveator in an application to remove a caveat that it
is just for the caveat to remain in the land and that he has a caveatable
interest.
• Court will give consideration of the issues of whether there is a serious
question to be tried and the balance of convenience between the
caveator and the applicant.ENG MEE YONG and the case of MACON
ENGINEERS.
• In PUNCA KLASSIK SDN BHD V ABD AZIZ ABD HAMID (NO 2) [1996] 5
MLJ 92, an aggrieved person means a person is aggrieved by the
existence of a caveat where something wrongful in law has been done to

165
 him that affects his title to the property or where he will suffer loss if
the caveat is not removed.

• AKB AIRCONDITIONING & ELECTRICAL SDN BHD V HEW FOO ONN (2002)
5 MLJ 391 the term “aggrieved person” was wide enough to cover any
person whose interest in land was adversely affected by the existence of
the private caveat. It was decided that successful bidder is included in
the term “aggrieved person”.

EXTENSION OF CAVEAT
• RAP NATHAN V HAJI AB RAHMAN YUSOFF (1965) 1 MLJ 248 per Syed
Agil Barakbah – under S.328 the life span of caveat is 6 years. However,
it can be sooner withdrawn or removed. Once it lapsed the court has no
power to revive, renew or continue a contract as its extinction is final
and irrevocable.
• RAP NATHAN is followed by DING NING POI V NAZARUDIN BIN SAHIE
(1999) 6 MLJ 274.
• DAMODARAN V VASUDEVA
A second caveat may not be entered at the instance of the same
applicant in respect of the same land and reasons where the original
caveats were still in existence.

ENTRY OF A FRESH CAVEAT BASED ON THE SAME GROUND

• THEVATHASON V KWONG JOON [1990] 3 MLJ 49

o After the expiry of six years, the caveator may enter a fresh caveat in
the same land on the same ground provided it is for the bona fide
protection of the caveator’s interest.

166
167
 COMPETING EQUITIES LIST
OF CASES
▪ INTRODUCTION
▪ DOCTRINE OF NOTICE o ACTUAL NOTICE

▪ BUTLER V FAIRCLOUGH (1917) 23 CLR 78

▪ ABIGAIL V LAPIN (1934) AC 491
▪ ZENO LTD V PREFABRICATED CONST CO (MALAYA) LTD o
CONSTRUCTIVE NOTICE
▪ HAROON BIN GURIAMAN V NIK MAH BINTE NIK MAT &
ANOR (1951) MLJ 209
▪ VALLIPURAM SIVAGURU V PALANIAPPA CHETTY,
OFFICIAL ADMINISTRATOR AS ADMINISTRATOR OF THE
ESTATE OF
GAN INN, DECEASEAD (1937) MLJ 59
▪ UMBC V GOH TUAN LAYE [1976] 1 MLJ 169
▪ MOSBERT BERHAD V CHATIB KARI (1985) 1 MLJ 162
▪ SYED IBRAHIM V LIEW SU CHIN (1984) 1 MLJ 160

COMPETING EQUITIES
INTRODUCTION

• The general rule when dealing with competing claims to interest in the
same land is by the interest created first in time shall take the priority.
• But equity requires a high standard of diligence as a prudent purchaser
whereby he has to take all reasonable steps to make searches on the
land before he can be called a bona fide purchaser for value and without
notice. Failure to do so will render him affected by constructive @ actual
notice and he cannot be said to a bona fide purchaser for value and
without notice.

168
DOCTRINE OF NOTICE
*ACTUAL NOTICE – BY ENTRY OF CAVEAT
• The notice element now requires the first purchaser to take appropriate
steps to protect his bona fide interest so as to prevent the registered
proprietor from creating a competing interest.
• For the purpose of the rule ’purchaser’ refers not only to the party
seeking to take the statutory estate but also any other party dealing with
a recognizable interest such as chargee or lessee. It is also assumed that
such a ‘purchaser’ has given consideration and acted in good faith.
• The bona fide of the purchaser can be assessed by reference to the paid
value or that he took his interest without an intention to defeat the prior
or a subsequent interest @ no mala fide.
• In RICE V RICE (1853) 2 Drew 73; 61 ER 646, the rule as between person
ha0ving only equitable interest, if their equities are in all other respects
equal, priority of time gives the better equity.
• As per Judith Sihombing:
o The priority rule has been interpreted to mean that in deciding
whether or not the interest of the purchaser of an equitable
interest created first in time is to have priority over subsequent
purchasers, his conduct is relevant.
o Thus, it is asked:

▪ Has he protected his interest by giving notice of it to the

third party enters into a transaction with the same land?
▪ Has his failure to protect his interest acted to induce a
third party to take an interest in the land?
o Reliance on priority therefore will be treated as a last resort in
any priority battle.

169
• The earlier purchaser will only be the winner if he has not been guilty
of some act or omission which has prejudiced his claim.
• Briefly, in applying the priority rule there are two steps;
o The rule requires that the equities are equal. This is interpreted
to mean that the competing interests must be of the same status
for example both must be unregistered interest.
o The conduct of the parties is examined. To keep his priority, the
earlier person must proof that he did not act negligently and
further allows the proprietor to create a further conflicting
interest.
o Priority will also arise from the conduct of the earlier party by
entering into possession of the land or having custody of the title.
o After determining the above factors then the first in time shall be
favoured.
• Closely related to the function of the caveat may be viewed from two
sides:
o The legal effect of the entry of caveat; and

o The legal effect for non-entry of caveat when there are two
conflicting unregistered interests in land.
• According to Teo in his book, the court will resolve the dispute of
priority of competing claims by examining whether the prior interest
holder has not by any act or omission induced the subsequent claimant
to act to his detriment. Accordingly, where the prior interest holder has
not given notice of his prior claim thereby inducing the subsequent
claimant to act on the belief that there is no existing prior claim, the
position of the prior claimant will be postponed to that of the
subsequent claimant.
• Notice of the prior claim may be given by way the entry of a caveat on
the Register.

170
• In the case of:
o BUTLER V FAIRCLOUGH (1917) 23 CLR 78

▪ The court held that the failure to enter a caveat constitutes

negligence on the part of the prior claimant so as to defeat
the prior equity.

o ABIGAIL V LAPIN (1934) AC 491

▪ The Privy Council held that when transfer has been executed
but not registered and no caveat was lodged, the equity of
the prior claim should be postponed to that of the chargee
(subsequent interest holder) since they have allowed the
proprietor to create a further conflicting interest over the
same land by not giving any notice i.e enter a caveat.
• Actual notice is by way of the entry of caveat:
o ZENO LTD V PREFABRICATED CONST CO (MALAYA) LTD [1967] 2
MLJ 104
▪ It was held that notice of existence of a prior claim may be
given by way of the entry of caveat. Failure to do so
constitutes negligence so as to defeat the prior equity.
▪ Per Raja Azlan Shah:
• In my view the caveat establishes priority and the onus is therefore on
the holder of the subsequent equity to show facts which render it
inequitable for the holder of the prior equity to insist as against him on
that priority. Although priority in time is the ordinary test, the final
analysis where evidence discloses some act or omission on the part of
the holder of a prior equity the rule that ‘who has a better equity’
applies.

CONSTRUCTIVE NOTICE – BY TAKING POSSESSION OF LAND OR HAVING

CUSTODY OF IDT.

171
• However, entering of caveat is NOT the only means to give notice.
Another methods are by either taking possession of land or having
custody of IDT.

• In the case of:

o HAROON BIN GURIAMAN V NIK MAH BINTE NIK MAT & ANOR
(1951) MLJ 209
▪ Proprietor sold the property to Plaintif but no caveat was
lodged and the property was not transferred to Plaintiff.
Subsequently, the proprietor sold the same land to
Defendant. Defendant takes possession of the land. When
the proprietor refused to execute the transfer, Defendant
filed a proceeding for a specific performance. Subsequent
to that, the Plaintiff lodged caveat. It was held that the
Plaintiff’s caveat be removed and the Defendant’s transfer
be registered.

o VALLIPURAM SIVAGURU V PALANIAPPA CHETTY, OFFICIAL

ADMINISTRATOR AS ADMINISTRATOR OF THE ESTATE OF GAN
INN, DECEASEAD (1937) MLJ 59
▪ First defendant had in his possession the IDT and the issue
are that by failing to lodge caveat he had lost his priority in
the land. It was held that a prior claimant may maintain his
priority by way of giving constructive notice of his claim by
taking possession of the land or the IDT eventhough no
caveat was entered.

o UMBC V GOH TUAN LAYE [1976] 1 MLJ 169

172
 ▪ The bank had in their possession IDT as a security for the
loan but did not lodge a caveat because the law i.e
Kelantan Land Settlement prohibited the party from
caveating the land. The intervener purchased the same
land and paid in full but did not caveat the land as well.
▪ Per Suffian L.P:
• In deciding this contest between the bank and the interveners, the
court should decide in favour of the bank as being first in time, but only
if the things are equal. The court should act on this principle in the
absence of caveat and registrations.
• The qualification that other things are equal is important, for an
equitable claimant who is first in time may lose his priority by any act
or omission…
• Since the bank had in their possession the IDT so their priority should
prevail.
• As can be seen from Malaysian cases, the courts have recognized
constructive notice as a factor to be taken into consideration in deciding
the question of priority of competing claims.
• Actual notice by way of entry of caveat is not the sole means to give
notice of a prior equitable claim.
• Where the subsequent equitable claim has actual knowledge of the prior
equitable claim otherwise than by way of the entry of caveat, the
priority of the prior claimant would still remain intact.
• This is supported by:
o MOSBERT BERHAD V CHATIB KARI (1985) 1 MLJ 162.

o In this case the vendors who were originally a partnership

agreed to sell a piece of land part of a housing estate to the
respondent. The respondent paid the deposit and also the
balance of the purchase price by instalments. Whilst the
purchasers of the proposed subdivided lots were waiting for

173
 their titles the appellant company failed in its business. A
winding up order was made and the Official Receiver was
made the Liquidator and Receiver for the appellant company.
During the course of liquidation the Official Receiver sold the
land to a private company, Jet Age. Both the Official Receiver
and Jet Age were aware that there were a number of
purchasers who bought the land on the basis of the proposed
subdivision lots. Jet Age paid for the land but were unable to
effect registration of the land into their name, because the
respondent had lodged a caveat on the land.
o Held:

o (1)the law which has been consistently followed by the court

in this country is that a purchaser of land who has paid the
purchase price, until registered as the legal owner acquires an
equitable interest in it;
o (2)Jet Age in this case also acquired an equitable interest in
the land when they paid the purchase price but as the
respondent's fights were earlier in time they have better
protection than that of Jet Age which was later in time;
o (3)the learned trial judge was therefore correct in extending
the caveat of the respondent until final determination of the
suit.
o o SYED IBRAHIM V LIEW SU CHIN (1984) 1 MLJ 160.

REGISTRAR’S CAVEAT LIST

OF CASES
▪ INTRODUCTION
▪ DISCRETION TO ENTER REGISTRAR’S CAVEAT o AR PALANIAPPA
CHETTIAR (1982) 1 MLJ 232 o LIM AH HUN V PENDAFTAR
HAKMILIK TANAH PULAU PINANG (1990) 3 MLJ 34

174
 ▪ REASON FOR ENTERING REGISTRAR’S CAVEAT o SEET SOH NGOH
V VEBKATESWARA SDN BHD (1976) 1 MLJ 242 o REGISTRAR OF
TITLE JOHORE V TEMENGGUNG SECURITIES
(1977) AC 302 o MBF FINANCE BERHAD V PENDAFTAR
HAKMILIK NEGERI PERAK
(1990) 3 MLJ 437 o PENDAFTAR HAKMILIK NEGERI KEDAH V
OCBC (1991) 2 MLJ 172 o D&C BANK V LAND ADMINISTRATOR OF
WILAYAH PERSEKUTUAN (1991) 2 MLJ 180
▪ POWER OF COURT TO ORDER REGISTRAR TO ENTER OR
WITHDRAW
REGISTRAR’S CAVEAT o ENTRY OF
REGISTRAR’S CAVEAT
▪ SEET SOH NGOH V VEBKATESWARA SDN BHD(1976) 1 MLJ 242
▪ LEONG SENG KIAT V KHAW BEE (1988) 2 MLJ 365
▪ BOONSOM BOONYANIT V ADORNA PROPERTIES SDN BHD
(1990)3 MLJ 444
▪ PENDAFTAR HAKMILIK NEGERI KEDAH V OCBC (1991) 2
MLJ 172 o WITHDRAWAL OF
REGISTRAR’S CAVEAT
▪ D&C BANK V GOVERNMENT OF MALAYSIA (1989) 3 MLJ
359
▪ PUBLIC BANK BERHAD V PENGARAH TANAH GALIAN
JOHOR BARU (1990)3 MLJ 100

REGISTRAR’S CAVEAT
Introduction
Registrar’s caveat is a privilege accorded to the registrar by the Code to assist
the person or body/government under Section 320(1) NLC 1965 to restrain the
registered proprietor from further dealing with his land. Since the Registrar

175
will not be able to detect any of those circumstances in the abovementioned
provision, the applicant must make a request via letters and state the reason
for applying. There is no specific form to apply for the entry of Registrar’s
Caveat.

Section 320(1) NLC 1965 provides that the Registrar “may” enter Registrar’s
Caveat. Upon receipt of credible information, the registrar will evaluate
whether it is necessary or desirable for him to enter Registrar’s Caveat. In
conclusion, any applicant can request for the entry of Registrar’s Caveat but
the discretion is still with the Registrar.

It was noted by Wong Kim Fatt J in his judgment in the case of AR Palaniappa
Chettiar (1982) 1 MLJ 232 that it is clear under the Code that the Registrar
can act on his own motion or upon information received but the word “may”
indicate discretion on part of the Registrar. Therefore, he is not bound to act
on every information or request made by any applicant. He further stated that
the Registrar performs a quasi judicial function in determining whether
Registrar’s Caveat should be entered or not. However, that power must be
exercised reasonably in good faith.

In evaluating whether the Registrar has performed his duty to enter Registrar’s
Caveat reasonably in good faith, the court viewed as to whether the decision to
enter Registrar’s Caveat by the registrar is done after he is satisfied objectively
with the facts supplied or information received by him.

In the case of Lim Ah Hun v Pendaftar Hakmilik Tanah Pulau Pinang (1990) 3
MLJ 34 it was decided by the court that the Registrar had acted rightly when
he decided to enter Registrar’s Caveat based on police report and information
of the court’s proceedings supplied by the applicant.

176
Police report has a high probative value since anyone who makes a false report
has committed an offence punishable under the Penal Code. Therefore it is
advisable for any innocent party in a land dealing to lodge a police report
before he decided to pursue the matter to court or applied for Registrar’s
Caveat.

Reason for Entering Registrar’s Caveat

Reason for entry of Registrar’s Caveat is provided in Section 320(1) NLC 1965:
a. for the prevention fraud or improper dealing;
An applicant may request to the Registrar to enter Registrar’s Caveat
if he feels that he is being cheated or somebody has committed a
fraudulent conduct in any land dealing that caused him to suffer loss.
Fraud alleged must be an actual fraud and it has been committed or
about to be committed.

For example, A signed a blank document which was conveyed to him

as loan agreement by B. As a result B presented for registration a
memorandum of transfer in his favour. Upon knowing the fact that he
actually signed a transfer form, A may apply to the Registrar for the
entry of Registrar’s Caveat.

Improper dealing includes any land dealing carried out by the parties
not in equitable manner. The aggrieved party suffered lost because
of the unfair terms.

In the case of Seet Soh Ngoh v Vebkateswara Sdn Bhd (1976) 1 MLJ
242. The defendant was a developer, alleged that the plaintiff who
purchased the house will not be able to pay the purchase price in
full. For this reason, the defendant terminated the sale agreement
and intended to sell the same unit to another purchaser at the same

177
 price. On the other hand, the plaintiff had paid the progressive
payment and the payment made is more than the actual progressive
work completed by the defendant. The plaintiff prayed for specific
performance and the Registrar to enter Registrar’s Caveat. It was
decided by the court that the defendant had wrongfully terminated
the sale agreement because plaintiff did not breach the agreement.
The defendant’s conduct was improper and therefore the Registrar
should enter Registrar’s Caveat.

b. For protecting the interest of the Federal Government or the State

Authority.
Interest of the Federal Government or the State Authority must be
interest related to the land. If the interest is not related to the land,
it is not proper for Registrar to enter Registrar’s Caveat.

In the case of Registrar of Title Johore v Temenggung Securities

(1977) AC 302 where in this case the Inland Revenue Department
instructed the Registrar to enter Registrar’s Caveat on the
proprietor’s land who then later sold the said land to a purchaser.
the purchaser was unable to register the transfer due to the
existence of the Registrar’s Caveat. On appeal, the court decided
that income tax was a personal debt of the proprietor that was not
related to the land in question. Therefore the Registrar’s Caveat had
to be removed.

c. The provision was later amended and a new clause under Section
320(1)(ba) was introduced that provides Registrar’s Caveat can be
enterd to protect interest of the Federal and State Government to
satisfy the whole or part of the debt due to the Federal or State

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Authority whether such debt is secured or unsecured or whether or
not judgment has been obtained.

The court observed that inclusion of this new provision that was
intended to supersede the decision of Temenggung Securities is
crystal clear and unambiguous. Therefore, any debt due to the
federal or state authority can be a valid ground to enter Registrar’s
Caveat. In the case of MBF Finance Berhad v Pendaftar Hakmilik
Negeri Perak (1990) 3 MLJ 437 it was noted by Peh Swee Chin J that
the duty of Registrar to enter Registrar’s Caveat is a quasi judicial
discretion and once debt due from the proprietor to the federal or
state government is established the Registrar can enter Registrar’s
Caveat. However, it was also noted by the learned judge that as for
priority between the charge and the Registrar’s Caveat, the charge
takes priority.

Since the main purpose of caveating the land is that it will be able to
satisfy the debt due to federal or state authority, the court also took
into consideration as to whether the Registrar’s Caveat should remain
on the land, when the land is subjected to a charge.

This issue was discussed in the case of Pendaftar Hakmilik Negeri

Kedah v OCBC (1991) 2 MLJ 172. The chargor defaulted in the
repayment of loan. Subsequently the chargee obtained an order for
sale. Meanwhile, the Inland Revenue Department requested the
registrar to enter Registrar’s Caveat since the chargor owed income
tax payment to them. The chargee filed an application against the
registrar’s decision to enter Registrar’s Caveat. It was decided by the
court that since the land is subjected to a registered charge and the
debt due on it exceeded the market value of the land, it will not be

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 able to satisfy the debt due to the federal government. Furthermore,
the registered chargee’s right should prevail over and above the
unsecure
d debt. As such the Registrar had acted ultra vires exceeded his
power under Section 320(1)(ba) National Land Code 1965 and his act
was therefore invalid.

In another case, D&C Bank v Land Administrator of Wilayah

Persekutuan (1991) 2 MLJ 180, a Registrar’s Caveat was entered on
a land that is subject to a charge. Mohammed Azmi SCJ stated that
entry of Registrar’s Caveat is not prohibited on a land subject to a
charge. In brief, Registrar is empowered to enter Registrar’s Caveat
on an encumbered land.

d. For protecting the interest of person under disability including

minority, mental disorder or unsoundness of mind or anyone who is
living within the Federation.

e. By reason of some error appearing to the Registrar have been made in

RDT or IDT.

By caveating the land the Registrar can ascertain as to whether the

error could be ratified or some adjustments need to be done.

Power of Court to Order Registrar to Enter or Withdraw Registrar’s Caveat

1. Entry of Registrar’s Caveat
The court has inherent power to order the Registrar to enter Registrar’s
Caveat on a land under Section 417(1) National land Code 1965. This
power can easily be exercise by the court if the Registrar is made a
party to the proceeding.

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In the case of Seet Soh Ngoh v Vebkateswara Sdn Bhd(1976) 1 MLJ 242 it is
noted by the court that it has power to order the Registrar to enter
Registrar’s Caveat to prevent fraud and improper dealing.

The court can still order the Registrar to enter Registrar’s Caveat even if
the Registrar is not a party to the proceeding. In the case of Leong Seng
Kiat v Khaw Bee (1988) 2 MLJ 365 the plaintiff applied for specific
performance against the defendant for his refusal to complete the sale.
The plaintiff obtained judgment in default on his prayer since the
defendant was not present in court. Subsequently, an intervener
intervened in the proceeding contended that he has purchased the land
before the transaction between plaintiff and defendant took place. The
judge set aside the judgment in default and ordered the name be
retransferred to the defendant. The court also ordered that Registrar’s
Caveat be entered on the land until further order from court.

In the case Boonsom Boonyanit v Adorna Properties Sdn Bhd (1997)3

MLJ 444 the court ordered for the entry of Registrar’s Caveat even
though the Registrar was not a party to the proceeding.

Any aggrieved party by the existence of the Registrar’s Caveat can make
an objection to the Registrar for the entry of Registrar’s Caveat.
Subsequently, if he is not satisfied with the decision of the Registrar can
make an appeal to court under Section 418. In the case of Pendaftar
Hakmilik Negeri Kedah v OCBC (1991) 2 MLJ 172 the chargee appealed
to court against the decision granted the chargee’s application

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2. Withdrawal of Registrar’s Caveat
In relation to power of the court to order the removal of Registrar’s
Caveat, most of the cases showed reluctance on part of the court to
exercise its power to order the Registrar to remove the Registrar’s
Caveat. In the case of D&C Bank v Government of Malaysia (1989) 3
MLJ 359 the court decided that the plaintiff was not entitled to
commence originating motion under Section 417 NLC 1965. In this case
the plaintiff was the chargee who obtained an order for sale against the
chargor. Simultaneously, the Inland Revenue Department requested for
entry of Registrar’s Caveat on the chargor’s land for non payment of
income tax.

In the case of Public Bank berhad v Pengarah Tanah Galian Johor Baru
(1990)3 MLJ 100,the Supreme Court dismissed the chargee’s appeal for
the removal of Registrar’s Caveat on the ground that the chargee is
precluded from making an appeal under Section 321(3)( c) NLC 1965.

From both cases it can be concluded that the court took the literal
interpretation of Section 321(3), that removal of Registrar’s Caveat
could only be exercised either on the Registrar’s own motion or
application made by the proprietor.18 The other method is an appeal
made by proprietor if he is not satisfied with the Registrar’s refusal to
cancel Registrar’s Caveat or appeal made by any aggrieved party against
the Registrar’s decision to enter Registrar’s caveat.

PROHIBITORY ORDER

Introduction

18 Section 321(3)(a) and (b) NLC 1965

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This is a special provision to accord any judgment creditor who does not
come within the category of person who has a registrable interest or
caveatable interest over debtor’s land. In the case of Karuppiah Chettiar
V Subramaniam(1971) 2 MLJ 116 it was noted by Gill FJ that the purpose
of prohibitory order is to attach and sell the judgment debtor’s property
and apply the proceeds to satisfy the debt together with interest and
administrative cost.

The definition of prohibitory order is provided under Section 334 of the

National Land Code 1965. It means, where land or interest in land held
by judgment debtor is to be sold in execution proceedings, an order
made pursuant to rules of court by a court of competent jurisdiction
prohibiting the judgment debtor from effecting any dealing therewith or
from affecting such dealing therewith as may be specified in the order.

Since land matters are within the jurisdiction of the High Court so the
competent court in Section 334 refers to High Court of Malaya. The
procedure for the attachment of property is provided under Order 47
rule 6(1) of the Rules of High Court 1980. It is provided that seizure of
immovable property or any registered interest therein to be made by an
order prohibiting the judgment debtor from transferring, charging or
leasing such property or interest.

The characteristic of Prohibitory Order is equivalent to caveats, where

the main purpose for the entry of it is to restrain further dealing of the
respective land by the registered proprietor. However it defers on the
aspect of who can enter Prohibitory Order. In order to be eligible to

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enter a prohibitory order, he must first file a civil claim against the
registered proprietor of the land. Before prohibitory order can be
entered, the judgment creditor must make an application for a
prohibitory order from court.

In brief, it means prohibitory order is a tool provided by the Code to

restrain the registered proprietor of a land who is indebted to a creditor
over a personal loan from selling off the property. This is possible if the
judgment creditor identified that the judgment debtor owns a piece of
land free from any encumbrances. Based on this knowledge, National
Land Code 1965 provides an avenue to enforce this judgment against the
judgment debtor by selling off the land belonging to the judgment
debtor in an auction. The proceeds of the sale will then be utilized
towards full settlement of the judgment debt. In order to realize this
avenue, prohibitory order is used by the judgment creditor to freeze
status quo of the land.(See Section 334 National Land Code 1965)

Modus Operandi
1. Borrower borrowed money from creditor.
2. The loan is not secured by land or any other collateral.(unsecured
loan).
3. Borrower defaulted in the repayment of the loan.
4. Creditor takes legal action to recover the outstanding amount by
way of civil action in any competent court.
5. Court ordered the borrower to pay the outstanding amount.
Therefore the borrower is now known as judgment debtor, the
creditor is judgment creditor and the outstanding amount is
judgment debt.
6. The paper judgment must be enforced if the judgment debtor
fails to pay the judgment debt.

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7. For the purpose of enforcement of judgment, the judgment
creditor can investigate whether the judgment creditor has any
valuable asset that can be sold by way of public auction.
8. If upon investigation, it was identified that the judgment debtor
owns a piece of unencumbered land, the judgment creditor may
make an application to obtain a prohibitory order from any
competent court of law.
9. Simultaneously, a writ of seizure and sale must be made for the
purpose of selling the land in question by way of public auction.
10. Once prohibitory order is granted and endorsed on RDT, the land
in question will become the subject matter of court order
authorizing its sale to satisfy the debt.
11. Upon issuance of the prohibitory order, the judgment creditor
may lodge the order on RDT thus prohibiting further dealing of the
land by the judgment debtor.

Prohibitory Order Vs Injunction

Even though on the face of it, both prohibitory order and injunction is
almost similar, but they do not share the common purpose. Injunction is
remedy widely used under civil cases other than land issues, whereas a
prohibitory order is specifically for land related issues. Therefore an
injunction granted by court cannot be interchangeably be lodged at land
office to replace a prohibitory order.

In the case of Heng Bak Teong & Anor V Ng Ah Seng (1988) 1 MLJ 406,
the applicant who entered into a sale agreement to purchase of land
failed to obtain registration since the respondent had lodged court order
to restrain the proprietor from further dealing with his land. The
appellant sought to set aside the court order and an order directing the
Registrar to cancel the lodgment of the court order.

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 It was decided by the court that the court order was an injunction to
restrain the proprietor from further dealing with his land. However, an
injunction does not accord statutory protection and endorsable
(registrable) on the register document of title.

From this case it was observed by the court that an injunction is not a
species of statutory protection under the Code. The only mechanism
that can be used to restrain the judgment debtor from further dealing
with his land is prohibitory order.

Validity of Prohibitory Order

Once granted by the court, Prohibitory Order will not automatically be
enforceable on the judgment debtor. It must first be endorsed on the
Register Document of Title and it takes effect upon such endorsement.19

Effect of PO is provided under Section 336 of the National Land Code

1965 where it is similar to that of private caveat. Sale of land or interest
to satisfy the judgment debt cannot be made absolute by the judgment
creditor until an order of sale is obtained from court.

It is common practice for judgment creditor to apply for an order for the
sale of property simultaneously with application for the prohibitory
order. The relevant application (also known as Writ of Seizure and Sale)
can be made under Order 46 Rule 6(1) of the High Court Rules 1981.

Lapse of Prohibitory Order

Section 338(1) provides that the life span of a prohibitory order is six
months unless its duration is extended by an order of court. The issue

19 Section 335(1) of the National Land Code 1965.

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that might arise is the appropriate time for an extension of a prohibitory
order.
In the case of Ban Hin Lee Credit Sdn Bhd V Utama Computer Centre
Sdn Bhd & Anor (1991) 2 MLJ 237 where it was decided by the court
that once prohibitory order has lapsed, it cannot be further extended.
See also case of Airmatech Corporation (M) Sdn Bhd V Equaltra (M) Sdn
Bhd (2002) 6 MLJ 657. In Ban Hin Lee, it is also observed by court that
application for the extension of prohibitory order is made by way of an
ex parte application. Therefore, it is crucial for the applicant to prove
there is special circumstance.

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