2. “Lien is a right in one man to retain that
which is in his possession belonging to
another man until certain demands of the
person in possession are satisfied.”
-Halsbury’s Laws of England. (Vol. 19)
3. “A lien is one and a
special form of security.
In fact ‘security’ is the
genus of which ‘lien’ is a
species. Its very
meaning..derived
through the French from
the Latin ligo, ‘ligamen’ is
that of binding or
securing something.”
4. Who may create a lien?
See s.281(1) – proprietor/lessee
How created?
2 stages:
1) Prop./lessee deposits IDT/duplicate lease
to a Lender for purpose of securing a loan.
2) Lender enters a ‘lien-holder’s caveat’ on
the said land/lease.
5. At this stage, what is created is an ‘equitable
lien’
A B
Deposits
IDT/Duplicate
Lease
6. At the stage of entry of a lien-holder’s caveat
by the lien-holder, a statutory lien is created
under the NLC.
B
Lodges
Lienholder’s
Caveat
LAND OFFICE
7.
8. Only the registered proprietor or lessee can
deposit the original document of title or
duplicate lease to the lender as security for a
loan.
(COA in Perwira Habib Bank (M) Bhd. v Loo &
Sons Realty Sdn. Bhd. [1996])
9. S.281(2) NLC:
1) Obtain judgment in civil action. (prove the
debt.)
2) Apply to court for an order for sale.
10. Lien is an exception to the general principles
of registration of title because a lien is a
dealing that gives rise to a non-registrable
interest. (see s.206(2)(b) NLC)
There is no special instrument (form) to
create a lien.
In order for a lien to be recognised under the
NLC, the lien-holder must enter a lien-
holder’s caveat to restrain other dealings on
the land.
11. For the purpose of enabling businessmen to
raise money on loan speedily.
A lien can be created faster than a registered
charge.
The creation of a registered charge requires
several procedures. (remember?)
To create a lien, a lien-holder just needs to fill
in Form 19D and lodge it at the Land Office.
12. CHARGE
1) To create a charge,
Form 16A must be
registered.
2) The remedy of a
chargee is to apply for
an order for sale or
possession.
LIEN
1) To create a lien, no
registration form. Lien-
holder must lodge a
lien-holder’s caveat in
Form 19D.
2) Remedy for a lien-
holder is to prove the
debt in a civil action,
then get order for sale.
13. CHARGE
3) Creation of a statutory
charge is onerous.
LIEN
3) Creation of a lien is
speedy.
14.
15. Pf lodged a LH caveat over the 1st
Df’s land in
1962 to secure a loan of RM75,000.
1st
Df had also created a charge on the land to
the Pf. and registered the charge under the
Companies Act but not at the land office.
The 2nd
Df., ws a judgment creditor who hd
obtained a prohibitory order against the 1st
Df. and later obtained an order for sale of the
land.
16. Pf. brought action agst the 1st
and 2nd
Df.
claiming that the lien had priority over the 2nd
Df.’s prohibitory order. HC allowed. Appeal.
2nd
Df. (Appellant) claimed that the lien was
void because there was no intention to create
a lien.
Held: (Sufian, FJ) – The lien has priority over
the prohibitory order. The lien was properly
created and valid.
17. The intention to create a lien can be gathered
from the fact that the IDT was deposited with
the lender only for securing the loan.
18. Mercantile Bank Ltd. v Official Assignee of
How Han Teh [1969] 2 MLJ 196
H deposited his IDT for 2 pieces of land to
Mercantile Bank in 1964 to secure a loan.
He failed to pay the loan. April 1966 –
judgment was entered agst him.
June 1966 – H committed an act of
bankruptcy.
19. Mercantile Bank lodged a LH caveat over H’s
land in Aug. 1966. 3 months later, H was
adjudged a bankrupt.
Mercantile Bank applied for an order of sale
of the land but the Official Assignee objected
on the ground that at the time Mercantile
Bank lodged the LH caveat, H had already
committed an act of bankruptcy and the OA
had stepped into H’s shoes.
20.
21. Thus, it was alleged that Mercantile Bank had
no lien over the lands.
Held: (Raja Azlan Shah,J.)
Although registration of a LH caveat is
essential for a valid statutory lien, the court
can still give effect to equitable rights
existing between the parties. Thus,
Mercantile bank has an equitable right to a
lien.
22. Perwira Habib Bank M’sia Bhd. v Tin Siang S/B
& 2 Ors. [1992] 4 CLJ 1875
Issue: Whether a financier is entitled to a
lien once the title is deposited?
2nd
Df had stood as guarantor for loan granted
to the 1st
Df. And as security, had deposited
with the Pf. The document of title of a piece
of land.
23. 1st
Df. defaulted in the loan and judgment ws
entered agst the 2nd
Def. as guarantor.
P applied for an order for sale of the land
under s.281(2) NLC.
2nd
Df. opposed on the ground that there was
no agreement betw. the parties that a LH
caveat be entered.
24. As the 2nd
Df. Had deposited the title as
security for the loan, the Pf. is entitled to a
lien under s.281(2) of the NLC.
Implication?
There is no necessity for express consent of
the title depositor for a lien-holder’s caveat to
be entered.
25. If the express consent of the title depositor is
not needed to lodge a valid lien-holder’s
caveat, how do we guard against ‘fraud’ in
creation of the security?
26. The 1st
Pf. And 2nd
Pf. are wife and husband
aged 64 and 71 respectively.
Ist P was illiterate whilst the 2nd
Pf. could only
read and write in Tamil.
1st
Pf. = registered prop. of the land.
Feb. 1977 – 1st
Df. went to the Pf.’s house and
asked to borrow the document of title. He
said he required it to secure a contract job.
27. After being persuaded by her husband, the 1st
Pf. handed over the title to the 1st
Df. to be
returned in 1 or 2 months.
2 years later, the 1st
Df. again went to see the
1st
Pf. And brought with him a letter for the 1st
Pf. to affix her thumbprint.
Unknown to the 1st
Pf. this was a letter from
herself authorising Bank Buruh to lodge a LH
caveat on her land.
28. Not aware of the effect of the document, 1st
Pf. thumbprinted it.
When the 1st
Pf. asked for the title to be
returned, the 1st
Df. told the Pfs. that he had
handed it to Bank Buruh as security for a
loan.
The Pfs. sued the Df. and Bank Buruh and
alleged fraud in obtaining the title.
29. 1) The 1st
Df. did defraud the Pf.’s to get the
title and hence Bank Buruh cannot enforce
the security agst the 1st
Pf.
2) The title was wrongfully taken by the 1st
Df. to create a lien and the LH caveat was
wrongfully lodged.
30. Hong Leong Bank Berhad v Staghorn S/B and
Or. Appeal [2008] 2 MLJ 622
Issues:
1) Whether ss. 281(1) and s.330 of the NLC
envisage that a registered prop. of land
may deposit his IDT as security for a loan
to a 3rd
party?
31. 2) Whether the judgment to be obtained
under s.281(2) NLC is a judgment to be
obtained against the borrower of the loan
or against the registered prop. of the land?
32. 1) S. 281(1) NLC speaks of the registered
proprietor depositing his IDT ‘as security
for a loan’ but does not specify the
borrower and neither does it restrict the loan
to a loan to the registered prop. The loan
may be a loan to a 3rd
party. Where the loan
is to a 3rd
party, the judgment in s.281(2)
must be agst such 3rd
party.
33. 2) The registered proprietor need not deposit
the title himself. He may authorise or
instruct the actual depositing to be done by
someone else.
34. S.Y. Kok “The Nature and Application of the
Torrens Lien and Lien-holder’s Caveats in
West Malaysia”
[1983] 1 MLJ xl.
