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LAND LAW

LAND LAW

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  • 1. MUHAMMAD AIZAT AFIFI BIN ZAINUDDIN 2010746161 TEST 2 LAND LAW 2 QUESTION (a) The issue is whether Toman can challenge the indefeasibility of charge in favour of Bank Haruan Berhad on the ground of fraud. Indefeasibility is fundanmental to the torrens system as in the case of PJTV Denson (M) Sdn Bhd v Roxy (M) Sdn Bhd stated that the concept of indefeasibility of title is so deeply embedded in our land law that it seems almost trite to restate it. Based on section 89 of National Land Code (NLC), the register is conclusive evidence of entries thereon so long as the instrument had complied with 3 conditions precedent which are the transaction was one which was recognized by NLC as one capable of being registered, the instrument used for registration was in statutory form and the IDT has been produced at the time of registration and the transaction was not void or otherwise defective. In the case of Mohammad Buyong v Pemungut Hasil Tanah Gombak it was observed by the court that registration is perfected by the making of a prescribed memorial of the dealing in the register document title under the hand and seal of the registering authority. Based on the case of Frazier v Walker, 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. Indefeasibility concept is used to protect the registered owner or interest against adverse claims. Moreover, there are two types of indefeasibility. Firstly, immediate indefeasibility is one of the indefeasibility. It is the concept when a person is registered as owner or interest holder the he is immediately guaranteed that his title or interest is free and immune from any claim. This principle confirmed in Frazier v Walker whereby apart from fraud of the registered proprietor, his title on registration is immediately indefeasible subject only to his personam (means any relief granted could result only in an enforceable claim against the proprietor personally but not against the land). This concept in not applicable in Malaysia. Secondly, deferred indefeasibility is applied in Malaysia. 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
  • 2. instrument until it is transferred to a bona fide purchased for value. Based on the Tan Ying Hong case, the indefeasibility only comes to be attached to the title or interest upon a subsequent transfer. If immediate transferee, it is still defeasible. In this case, without the knowledge of the appellant, the State Government had alienated and issued the document of title of a piece of land in Kuantan in favour of him. A dispute arose when a defendant used a forged power of attorney of the appellant, the original registered owner, to charge the Appellant’s property to the bank to obtain overdraft and loan facilities in favour of Cini Timber. When Cini Timber defaulted in payment, the bank commenced foreclosure proceedings against appellant. In an unusual move, the counsels for both parties in this case called on the Federal Court to re-examine and overrule the Adorna’s case, because Eusoff Chin had erred as it was very clear in section 340(3) that the proviso only applied to “this sub-section (3)”. On the facts of Tan Ying Hong case, the Federal Court held that as the bank is an immediate chargee as well as an immediate purchaser within the meaning of section 340(2), the proviso in section 340(3) that protects a subsequent bona fide purchaser for value will not assist the respondent bank. The Court added that it is immaterial that the land was alienated to the appellant without his knowledge as the validity of the alienation was not even challenged by the respondent bank. The Court then awarded a sum of RM75,000 as costs to the appellant, and the ownership of the land which now should be worth a few millions of ringgit reverts to the appellant. Under NLC, section 340(1) of provides that upon registration, the title or interest shall be indefeasible and immune from attack by adverse claim. In addition, under section 340 (2), it stated that the title or interest will be defeasible if the title is obtained by way of fraud or misrepresentation, forgery, insufficient or void instrument or unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law. Furthermore, under section 340(3) stated that the title or interest will be indefeasible if transfer to third party which is bona fide purchaser for value. Generally, only subsequent transferee may claim bona fide purchaser under section 340(3) if fulfilled two requirements which are pays consideration and acts in good faith. On the other hand, exceptions to indefeasibility based on section 340(2) stated three exception which are fraud or misrepresentation, forgery or void instrument and unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law. The title or interest will be defeasible if fall under those exception. Firstly, under fraud there are three elements to consider as fraud which are actual fraud, intention to cheat and party or privy to the fraud or misrepresentation. Misrepresentation is also part of fraud as what stated in Datuk Jaginder case. Actual fraud is defined as
  • 3. dishonesty of some sort (mens rea) and it was affirmed in the case of Assets Co v Mere Roihi whereby fraud means actual fraud that is dishonesty of some sort and not merely constructive fraud. Example of actual fraud can be seen in the case of Apoo v Ellamah whereby the registered 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. That show a dishonesty on the part of the transferee. The constructive fraud could not considered as fraud where in the case of Ong Tin v Seremban Motor Garage the court of appeal decided that mere notice of the unregistered interest could not amount to fraud. Moreover, intention to cheat is the intention to commit fraud on the part of the fraudulent party. It can be seen on the case of Jasbir Kaur v Tarumber Singh, whereby a transferee had intention to cheat when he fraudulently obtained 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. Last element is 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 party or privy to the fraud then the title will be indefeasible. Based on the appeal case of Abu Bakar Ismail v Ismail Mohamad whereby the plaintiff was the former registered proprietor of the land sold the land to the defendant for 7.5 million. Unknown to him the land was charged to secure a loan amounting to 16 million (higher than the purchase price offered to him). The charged and the money was in favour of another defendant. The plaintiff claimed for recovery of the said land and for cancellation of the charge with the 4th defendant. The court of appeal held that the charge in favour of Bank Kerjasama Berhad be removed on the ground of fraud. It was concluded by the judge that the 2nd defendant was privy to the fraud and the legal firm was an agent of the 4th defendant also agent to the fraud, therefore the charge should be rendered defeasible in the hand of 4th defendant as the agent fraudulent conduct could be imputed to the chargee bank. Next, forgery is also one of the exception to indefeasibility. Forgery is act of one person(forger) to sign in the name of a registered proprietor or any instrument dealings. The forger falsely represented to a third party that he is registered proprietor and later sign the transfer form in the name of the registered proprietor. The registered proprietor has no knowledge at all of the transaction. In the case of Ong Lock Choo v Quek Shin, the registered proprietor gave his IDT to solicitor and the clerk forged his signature and charged to third party. The court held that the forged transfer was a nullity and the transaction can be set aside on the ground of void instruments. On the other hand, last exception to section 340 (2) is the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law. It can be seen in the case of M&J Frozen Sdn Bhd v Siland Sdn Bhd
  • 4. where the payment of balance of auction price was made after the extension od time given by chargee without first obtaining consent from chargor. The court of appeal decided the registrar was ultra vires the section 258(c) and the title was unlawfully acquired by the first appellant. The title was defeasible under section 340(2)(c). In applying to the situation, Toman is the registered proprietor and Mahmud is not yet registered proprietor as the transfer transaction is still pending. It is because Mahmud still not paid the full amount of the land as Toman only received rm90,000. The agreement stated that Mahmud should paid the balance within 3 months but Mahmud still not paid the balance. Moreover, Bank Haruan Berhad is considered as immediate transferee as the execution of transfer between Toman and Mahmud is still pending. Its make the title can be challenge under section 340(2) as Bank was immediate transferee. Bank cannot claim for bona fide purchaser under section 340(3) as bank was immediate transferee. Based on section 340(2)(a), Toman may challenge the indefeasibility of charge in favour of Bank Haruan Berhad on the ground of fraud. Based on first element of fraud, there is actual fraud on the land dealings as Mahmud entered into a sale and purchase agreement with Toman and without Toman knowledge, the said land would be charge to a financial institution as security for a loan in favour of Mahmud. That show the dishonesty of Mahmud and Messrs Midah & Partners who prepare the charge. The charge also higher than a price of the said land as the purchase price was only rm900,000 but the charge loan worth rm 2 million. Futhermore, there is also intention to cheat on the part of Mahmud and Messrs Midah & Partners when they already planned to defraud Toman even before the signing of the sale and purchase agreement. In addition, the fraudulent act had been committed by the party or privy to the fraud. It can be seen Mahmud is the privy to the fraud. While, Messrs Midah & Partners is agent of fraud to the Bank Haruan Berhad. Thus, the charge in favour of Bank Haruan Berhad should be removed as bank is party to fraud and the agent’s fraudulent conduct could be imputed to the chargee bank. Therefore, the charge can be considered as defeasible as all the elements fraud is fulfilled. The land dealings itself is void on the ground it contain fraud element that make Toman suffers loss. Conclusion, Toman can challenge the indefeasibility of charge in favour of Bank Haruan Berhad on the ground of fraud.
  • 5. QUESTION (b) The issue is whether Toman can challenge the indefeasibility of charge in favour of Bank Haruan Berhad on the ground of forgery and whether Bank Haruan Berhad can claim bona fide purchaser for value. Based on the case of Frazier v Walker, 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. Indefeasibility concept is used to protect the registered owner or interest against adverse claims. Moreover, there are two types of indefeasibility. Firstly, immediate indefeasibility is one of the indefeasibility. It is the concept when a person is registered as owner or interest holder the he is immediately guaranteed that his title or interest is free and immune from any claim. This principle confirmed in Frazier v Walker whereby apart from fraud of the registered proprietor, his title on registration is immediately indefeasible subject only to his personam (means any relief granted could result only in an enforceable claim against the proprietor personally but not against the land). This concept in not applicable in Malaysia. Secondly, deferred indefeasibility is applied in Malaysia. 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 purchased for value. Based on the Tan Ying Hong case, the indefeasibility only comes to be attached to the title or interest upon a subsequent transfer. If immediate transferee, it is still defeasible. In this case, without the knowledge of the appellant, the State Government had alienated and issued the document of title of a piece of land in Kuantan in favour of him. A dispute arose when a defendant used a forged power of attorney of the appellant, the original registered owner, to charge the Appellant’s property to the bank to obtain overdraft and loan facilities in favour of Cini Timber. When Cini Timber defaulted in payment, the bank commenced foreclosure proceedings against appellant. In an unusual move, the counsels for both parties in this case called on the Federal Court to re-examine and overrule the Adorna’s case, because Eusoff Chin had erred as it was very clear in section 340(3) that the proviso only applied to “this sub-section (3)”. On the facts of Tan Ying Hong case, the Federal Court held that as the bank is an immediate chargee as well as an immediate purchaser within the meaning of section 340(2), the
  • 6. proviso in section 340(3) that protects a subsequent bona fide purchaser for value will not assist the respondent bank. The Court added that it is immaterial that the land was alienated to the appellant without his knowledge as the validity of the alienation was not even challenged by the respondent bank. The Court then awarded a sum of RM75,000 as costs to the appellant, and the ownership of the land which now should be worth a few millions of ringgit reverts to the appellant. Under NLC, section 340(1) of provides that upon registration, the title or interest shall be indefeasible and immune from attack by adverse claim. In addition, under section 340 (2), it stated that the title or interest will be defeasible if the title is obtained by way of fraud or misrepresentation, forgery, insufficient or void instrument or unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law. Furthermore, under section 340(3) stated that the title or interest will be indefeasible if transfer to third party which is bona fide purchaser for value. Based on the case of Owe Then Kooi v Au Thiam Seng, the land was transferred to transferee by fraud. Later it was charger to the bank. The court held that the charge created in favour of the bank is indefeasible as chargee is bona fide purchaser for value. Generally, only subsequent transferee may claim bona fide purchaser under section 340(3) if fulfilled two requirements which are pays consideration and acts in good faith. First requirement is person who pays consideration. It must be valuable or real (money or money worth) and it is not merely for natural love and affection or nominal consideration. It can be seen in the case of Chu Choon Moi v Ngan Siew Tin, the husband transferred his late father property to the wife and without consideration. Thus, she is not considered as bona fide purchaser for value. Second requirements is person who acts in good faith. It means that he had no knowledge whether actual or constructive that the title or interest is bad in law. It can be referred to the case of Au Meng Nam v Ung Yak Chiew whereby the judge stated the purchaser was under failed to investigate properly all matters relating to the sale of land as defendant purchase property beloiw market value. On the other hand, exceptions to indefeasibility based on section 340(2) stated three exception which are fraud or misrepresentation, forgery or void instrument and unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law. The title or interest will be defeasible if fall under those exception. Firstly, under fraud there are three elements to consider as fraud which are actual fraud, intention to cheat and party or privy to the fraud or misrepresentation. Misrepresentation is also part of fraud as what stated in Datuk Jaginder case. Actual fraud is defined as dishonesty of some sort (mens rea) and it was affirmed in the case of Assets Co v Mere
  • 7. Roihi whereby fraud means actual fraud that is dishonesty of some sort and not merely constructive fraud. Example of actual fraud can be seen in the case of Apoo v Ellamah whereby the registered 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. That show a dishonesty on the part of the transferee. The constructive fraud could not considered as fraud where in the case of Ong Tin v Seremban Motor Garage the court of appeal decided that mere notice of the unregistered interest could not amount to fraud. Moreover, intention to cheat is the intention to commit fraud on the part of the fraudulent party. It can be seen on the case of Jasbir Kaur v Tarumber Singh, whereby a transferee had intention to cheat when he fraudulently obtained 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. Last element is 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 party or privy to the fraud then the title will be indefeasible. Based on the appeal case of Abu Bakar Ismail v Ismail Mohamad whereby the plaintiff was the former registered proprietor of the land sold the land to the defendant for 7.5 million. Unknown to him the land was charged to secure a loan amounting to 16 million (higher than the purchase price offered to him). The charged and the money was in favour of another defendant. The plaintiff claimed for recovery of the said land and for cancellation of the charge with the 4th defendant. The court of appeal held that the charge in favour of Bank Kerjasama Berhad be removed on the ground of fraud. It was concluded by the judge that the 2nd defendant was privy to the fraud and the legal firm was an agent of the 4th defendant also agent to the fraud, therefore the charge should be rendered defeasible in the hand of 4th defendant as the agent fraudulent conduct could be imputed to the chargee bank. Next, forgery or void instrument is also one of the exception to indefeasibility. Forgery is act of one person(forger) to sign in the name of a registered proprietor or any instrument dealings. The forger falsely represented to a third party that he is registered proprietor and later sign the transfer form in the name of the registered proprietor. The registered proprietor has no knowledge at all of the transaction. In the case of Ong Lock Choo v Quek Shin, the registered proprietor gave his IDT to solicitor and the clerk forged his signature and charged to third party. The court held that the forged transfer was a nullity and the transaction can be set aside on the ground of void instruments. By virtue the case of Tan Ying Hong, the Federal Court held that as the bank is an immediate chargee as well as an immediate purchaser within the meaning of section 340(2), the proviso in section 340(3) that protects a subsequent bona fide purchaser for value will not assist the respondent bank. The Court added that it is immaterial that the land was alienated to the appellant without his knowledge
  • 8. as the validity of the alienation was not even challenged by the respondent bank. The court also stated only the subsequent transferee may claim for bona fide purchaser under section 340(3) and immediate transferee cannot do so. On the other hand, last exception to section 340 (2) is the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law. It can be seen in the case of M&J Frozen Sdn Bhd v Siland Sdn Bhd where the payment of balance of auction price was made after the extension od time given by chargee without first obtaining consent from chargor. The court of appeal decided the registrar was ultra vires the section 258(c) and the title was unlawfully acquired by the first appellant. The title was defeasible under section 340(2)(c). In application, Mahmud act by forged Toman signature on the said document and transferred the land to himself before creating a charge in favour of Bank Haruan Berhad can be considered as forgery under section 340(2)(b). After that land dealings, its makes Mahmud as an immediate transferee as he transferred to himself first while Bank Haruan Berhad is subsequent transferee as obtained the interest from Mahmud. The dealings can be considered void and the title will be defeasible. However, as Bank Haruan Berhad was a subsequent transferee, it can claim of bona fide purchaser for value under section 340(3) and the title will be indefeasible. As regard to the bona fide purchaser for value, Bank Haruan Berhad had fulfilled the two elements of bona fide as Bank had pays consideration when giving the rm 2 million loan towards Mahmud and Bank had acted in good faith in that particular land dealing. It is because Bank had no knowledge that the title is bad in law. Based on RDT, it shows that Mahmud is immediate transferee. Thus it makes Bank a subsequent transferee on the RDT. Eventhough, Mahmud obtained the title by way of forgery, Bank Haruan Berhad had no knowledge about that and the title can be considered as indefeasible on the ground of bona fide purchaser for value. Conclusion, Toman cannot challenge the indefeasibility of charge in favour of Bank Haruan Berhad as Bank Haruan Berhad is a bona fide purchaser for value as protected under section 340(3) and the charge created in favour of Bank Haruan Berhad is indefeasible .
  • 9. QUESTION (c) The issue is whether Toman is entitled of registrar caveat on his land by virtue section 320 of NLC. Caveat is defined under section 5 of NLC as registered caveat. It is designed to protect the unregistered interest. The person who lodged caveat is known as caveator and the person whose land was being lodged with caveat known as caveatee. Moreover, there are 4 purposes of caveat. First purpose is retrains the registered proprietor from dealing with his land. Second purpose is gives interim protection to the caveator until the dispute is settled or his interest in the land is registered. It can be seen in the case of Butler v Fairclough, it stated that caveat operates as a notice to all the world that the registered proprietor title is subject to the equitable interests alleged in the caveat. Third purpose is caveat as a notice to the world that the caveator has interest in the said land and by caveatingt he is protecting that interest. The party in land dealing must conduct a land search to ensure that the title is genuine. Last purpose is to freezes the situation and maintaining status quo of all parties until the issues is settled. It can be seen in the case of Temenggung Securities LTD, it 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 proceedings in court. Registrar caveat is a privilege accorded to the registrar by the code to assist the person under section 320(1) of NLC to restrain the registered proprietor from further dealing with his land. The applicant must make a request via letters and state the reason for applying registrar caveat. In addition, section 320(1) provides that the registrar may enter registrar caveat and registrar has discretion to enter caveat upon received the application by applicant. By virtue the case of AR Palaniappa Chettiar, Judge Wong Kim Fatt stated that registrar is not bound to act on every information or request made by any applicant as the discretion is on part of registrar. However that power must be exercised reasonably in good faith. In evaluating the application made by the applicant, the registrar will look into the facts supplied or information received by him. The police report also is strong evidence in applying registrar caveat as it is an offence anyone who makes a false report. It can be seen in the case of Lim Ah Hun v Pendaftar Hakmilik Pulau Pinang, it was decided by the court that the registrar had acted rightly when he decided to enter registrar caveat based on police report and information of the court proceedings supplied by the applicant. Based on section 320(1) of NLC, it stated four reasons for entry registrar caveat. First reason is for the prevention fraud or improper dealing. An applicant may request to the
  • 10. registrar to enter registrar 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 must be actual fraud and it has been committed or about to be committed. 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. It can be seen the case of Seet Soh Ngoh v Vebkateswara Sdn Bhd, in this case 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 and the sale agreement and intended to sell the same unit to another purchaser at the same 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 caveat. It was decided by court that the defendant had wrongfully terminated the sale agreement because plaintiff did not breach the agreement. The defendant conduct was improper and therefore registrar should enter registrar caveat. Second reason is for protecting the interest of the federal government or the state authority. Interest of the federal government or state authority must be interest related to the land. If interest is not related to the land, it is not proper for registrar to enter registrar caveat. In the case of Registrar of Title Johore v Temenggung Securities, the court decided that income tax was a personal debt of the proprietor that was not related to the land in question. Thus, the registrar caveat had to be removed. Next, the provision was later amended and a new clause under section 320(1)(ba) was introduced that provides registrar caveat can be entered to protect interest of the federal and state government to satisfy the whole or part of the debt due to the federal or state authority whether such debt is secured or unsecured or whether or not judgment has been obtained. Based on the case of MBF Finance Bhd v Pendaftar Hakmilik Negeri Perak, it was stated that once dect due from the proprietor to the federal or state government is established the registrar can enter caveat. However it was also noted by the learned judge that as for priority between the charge and the registrar caveat, the charge takes priority. Last reason for entry registrar caveat is 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. Based on section 320(2), the operation of registrar caveat is retrospective as it will inhibit any instrument or application for entry from proceeding where that instrument or application has been lodged prior to entry of registrar caveat but not yet finalizes.
  • 11. On the other hand, registrar caveat shall continue in force until it is cancelled by registrar based on 3 factors under section 321(3)(a)-(c). First, removal by registrar on motion as stated in section 321(3)(a). Second, withdrawal by registrar on an application by the proprietor of the caveated land as stated under section 321(3)(b). Last, removal by registrar pursuant to court order under section 321(3)(c) if there is party who aggrieved by the existence of caveat. In applying, Toman had been cheated by Mahmud and Messrs Midah & Partners in the land dealing between Toman and Mahmud. Mahmud and Messrs Midah & Partners had committed fraudulent conduct in the sale and purchase agreement of Toman land and make Toman suffers loss. It can be considered as one of the reason to enter registrar caveat particularly in fraud and improper dealing under section 320(1)(a). The land dealing between Toman and Mahmud is an improper dealing and been carried out not in equitable manner. it is because Toman had no knowledge as regard to the charge been made to the Bank Haruan Berhad that worth rm 2 million in favour of Mahmud and his land as a security. As regard to the Toman lodged a police report against Mahmud and Messrs Midah & Partners upon hearing that his land will be sold in a public auction, it could be considered as the strong evidence to affirmed the application of registrar caveat. It advisable to lodged a police report before apply for registrar caveat as it has high probative value. As a registrar, I can and will enter the registrar caveat for Toman on the ground that Toman been cheated in a improper land dealing by Mahmud and Messrs Midah & Partners plus Toman had lodged the police report to described the seriousness of the claim. Registrar has a discretionary power to enter registrar caveat on that matter. Conclusion, I as the registrar can enter registrar caveat on Toman land by virtue section 320(1)(a) of NLC.