land law

1. Lien
Definition
 HalsburyLaws of England(Vol 19 p2.):“Right of one man to retainthe propertybelongingto
anotherman until certaindemandof the maninpossessionof the goodsare satisfied”
 Section 281(1) NLC: lien as the act of any proprietor depositing histitle or duplicate lease to
anotherpersonas securityfora loan.
 A liencreatesan“equitable”interestinthelandorleasewhichgivesthe holderof thatinterest
the right to enterLHC.
 It is transaction wherein the Proprietor/co-proprietor/lessee intends to use the appropriate
documentassecurityfora loanthenadvanced.
Modus Operandi
1. Borrower;
2. Lender;
3. Borroweristhe registeredproprietorof a piece of landor the registeredlesseeof aland;
4. Loan amountreleasedtoBorrowerbyLender;and
5. In return,the Borrowerused hisIDT or duplicate lease assecurityby depositingthe same to
the Lenderuponreceiptof the loan.
Types oflien
1. StatutoryLien;and
2. Equitable Lien.
Essential Characteristics/ Elementsofa Statutory Lien
1. RegisteredProprietor/Lessee
2. Depositof IDT/Duplicate lease
3. Intentiontocreate Lien
4. Entry of Lien-HolderCaveat
RegisteredProprietor/Leasee
 The right to create LienbelongsonlytoProprietorof the appropriate interest.
 IDT must be registeredinthe name of Borrower.
 Priorto2008, 3rd Partycannotcreate alienonbehalf of the Borrower.(borrower=proprietor)
 It wasdecidedbythe courtthatthe rightto depositthe title assecurityforaloanisrestricted
onlyto the proprietor(PeterP’ChientvRamasamy Chetty(1923) 3 FMSLR 220)
 In the case, the IDT had beendepositedwithacreditor.That creditorthensought to use the
IDT as securityforalieninhis favour.However,thiswasnotsuccessfulandthe courtaffirmed
that the rightto use IDT forthe purposesof creatingalienbelongedonlytothe Proprietor.

2. Casesbefore 2008:
Perwira Habib Bank (M) Bhd v Megat NajmuddinMegat Khas & Ors (1999) 5MLJ 334
P grantedan overdraftfacilitytoBorrowerto be securedby 3rd party legal charge overthe Property
(whose registered owner was Loo & Sons Realty Sdn Bhd-the owner/chargor). In the meantime the
chargor had enteredintoS&PAgreementtosell the propertytoLand HoldingSdn Bhd. The property
was subjected to restrictionin interest-SA approval/consent. One of the termsof the letter of offer,
the utilization of overdraft may be allowed only after the execution of all security documents and
presentation of charge for registration. It takes about 2 months to obtain the consent from SA, the
borrower proposed to P the creation of LHC over the property and allowed the drawdown of the
facility. DfurtheradvisedPtowithdrawLHCoverthe propertyandto relodge the same toenable the
transferof the propertyfromthe owner/chargorto Land HoldingsSB. (D had beennegligentintheir
advice toP). Held:since the borrowerwasnotthe ownerof the subjectpropertyandsince the request
to create LHC came from the borrower and not the registered owner of the property, clearly the D
were negligent in advising that LHC was sufficient security for both overdraft facilities (allowing P’s
claimfor breachof contract andon negligence)
Perwira Habib Bank (M) Bhd v Loo & Sons Realty Sdn Bhd & Anor (No. 1)(1996) 3 MLJ 409
Proprietor had entered into a conditional contract to sell the land (obtaining consent from State
Authority (SA). Consent was not given. However, Purchase paid the balance of the purchase money
and was givenIDTprior to obtainingof consent. The PurchaserdepositedIDTwithcreditorwhothen
entered LHC. On default, LH sought a declaration that LHC was valid and that it had the right to sell
the land. Held:Court of Appeal wasfirmthatonlythe registeredProprietorhadaright todepositIDT
for the purposes of creating a lien. As this had not happenedhere,the caveat was invalidand there
was no rightfor the creditorto sell the land. “ditekankanolehpeguambahawasebelumseksyen281
KTN,hanyatuanpunyaberdaftarbolehmendepositkansuratikatanhakmilikuntukmewujudkansuatu
lien (kes Peter P’Chient…)”(Ahmad Fairuz HMR affirmed). Perwira Habib Bank (M) Bhd v Loo & Sons
RealtySdnBhd (No.2),COA orderedthe returnof IDT to the Proprietor
Hong Leong Finance Bhd v Staghorn Sdn Bhd (2005) 5 MLJ 101
The Vendors(registeredownerof the land) enteredintoS&PwithD, wherebyDpaid depositof 10%
of purchase price. However the sale was completed by the associate company (Teck Lay Realty Sdn
Bhd- TLR) which paid the full balance purchase price and received IDT to the land and MOT duly
executed by the Vendors. To finance the balance purchase price, TLR secured a loan from BBMB.
Instead of favouring BBMB with 1st legal charge over the land, IDT and duly executed MOT were
handedoverbyTLRtoPto secure 3rdpartylegal charge forfacilitiesgrantedbyPtoanotherassociate
company of D, Park Avenue Homes Sdn Bhd (‘Park Avenue’). BBMB was only protected its interest
with private caveat. When P attempted to register the charge with the transfer from the Vendor to
TLR, itwas preventedbyprivate caveatof BBMB.ThusPregisteredLHCoverthe land.Issue:Whether
a beneficial owner, other than the registered proprietor could hand over the IDT for the creation of
LHC. Held: it is material inthe creationof a LHC underSec 281 NLC to have the registeredproprietor
to deposit IDT to the lender for it is the registeredproprietor who intendsto surrender his rightsto
the Lenderto deal withthe landin the eventof defaultinrepaymentof the loanwhich he obtained
fromthe lender.Itdoesnotextendtoabeneficial ownerwhoisyettobecome aregisteredproprietor.

3. After 2008:
 3rd partycan create lien withthe instruction,consentorauthorizationof the proprietor.
 Thus,the actual act of depositingmaybe done bysomeone else.
Casesafter 2008:
*Hong Leong Bank Bhd (Formerlyknown as Hong Leong Finance Bhd) v Staghorn Sdn Bhd (2008) 5
MLJ 101
UJA Sdn Bhd v UnitedOverseasBank (Malaysia) Bhd (2008) 4 CLJ 779
Pisthe RPof apiece of landdepositeditsIDTtothe Lenderassecurityforaloangrantedtoaborrower,
Union Plastics Sdn Bhd. The borrower defaulted in the repayment of the loan. Subsequently, the
lenderobtainedajudgmentagainsttheborrowerandappliedforanorderforsale undersection281(2)
againstthe P’s land. Held: that since the judgmenthad beenobtainedandnot beensatisfiedandall
sums due under the lien had not been duly paid, the lender was entitled to the benefit of the lien.
Section281(1) didnot specificallyprohibitthe creationof lienbyRPtosecure a loangranted to a 3rd
party.
Depositof IDT/ Duplicate lease
Literally:the actof the borrowerhandlingoverthe subjectmatterof lientothe Lender.
The act of keepingthe subjectmatterof lienbythe Lenderwill giverise toalien
Subjectmatter:
1. IDT-RegisteredProprietor(Sec281(1) NLC);
2. Copyof IDT- co-proprietor(Sec343(6) NLC);and
3. Duplicate lease-Registeredlessee(Sec281(1) NLC).
Parting with IDT?
 AllowpartingwithIDTprovidedthe entryof LHC onthe land
 Section281(4) brieflyallowedthe lienholdertopart withIDT upon writtenrequestmade by
proprietoror lessee butitonly restrictedto produce the IDT or lease at any Registryor Land
Office.
 Partingwiththe possessionof IDTforpurpose forwhichitis requiredunderNLCoranyother
laws,will notcause the lientobe lost.
Sitambaram Chettyv Ramanathan Chetty(1922] 3FMSLR 8
Loh Chin Thye,the RegisteredProprietorof the landcreateda lienbydepositingIDTinfavourof D. D
protectedhisinterestbylodgingacaveat.Dthengave up IDT at the requestof LohChinThye andthe
same executed a charge over the land in favour of P. The registrar refused to register the charge
because of the caveat. P applied to remove the caveat which was then removed from the RDT.
Held:that D losthisrightas a lienholderthe momenthe partedwithIDTandhiscaveatwasremoved
from RDT. The Respondent/D is no longer a secured creditor. The Respondent having elected to
substitute forhislienaholdof attachment,he was nolongera securedcreditor,andthe charge took
priorityof the attachment.

4. Manickawasagam Chettyv Mc Gregor(1933) MLJ 295
Uponrequestmade bythe Collectorof LandRevenue,thelienholderhandedoverthe IDTtothe Land
Office for the purpose of partitioning the landon application made by the co-proprietor. The caveat
remainedonRDT.Whenthe newIDTwasissued,therewasnoendorsementof LHCandwasreturned
to the Proprietor.The Proprietorcontendedthatlienhasbeenterminated. Held:the lienholderhas
notlosthislienoverthe landbythe factthat he was nolongerinphysical possessionof the title since
his caveat remained on the RDT. “I find therefore that the Respondent has not lost his lienover the
landoriginallycomprisedinthe Grant13272 or any part of itby virtue of the fact that he isno longer
inphysical possessionof the title forpartof thatland” (HerefordJ)
Intentionto Create Lien
 The intentionneednotbe expresslydocumented.Itcan be inan oral or any writtenform.
 Can be inferredfromthe relevantcircumstancesof the situationortransaction.Inferencecan
be made from the conduct of the partiesas a whole.
 The depositmustbe withthe intentionof creatinglien.
 Thus,if there is a depositforsafe-keeping,nolienwill be created
 The element of intention is not satisfied if possession of IDT was obtained through fraud or
misrepresentationandthe depositof IDT as securitywas neverauthorisedbythe Registered
Proprietor.
(Nallamal vKaruppanan(1993) 3 MLJ 476)
Examples:-
(1) Transactiondoesnotinclude anyloanarrangement.
Master Strike Sdn Bhd v SterlingHeight Sdn Bhd (2005) 3MLJ 585
Appas purchaserandResas vendorexecutedS&Prelatingforseveral piecesof land.Apppaid10%of
the purchase price (deposit) atthe time of executionof S&P.App failedtopay the balance purchase
price. Therefore Res terminated the agreement and forfeitedthe deposit. Held: the Res’s refusal to
consentforthe creationof a LHC infavourof Maybankwas justified.Clause 30of the saidagreement
didnot provide forthe creationof a lienandby the omissioninthe saidagreementfor sucha lien,it
wasnot opento the Appto requestforthe creationof the lien(dismissingthe appeal)-theycouldnot
convertthe sale agreementintoloanagreement.
2) Depositingof title byBorrowertoLenderoriginatedfromaloantransaction
Standard CharteredBank Ltd v Yap SingYoke & Merchantile Bank v Official Assignee

5. (3) The agreementexecutedbetweenthepartiesincorporatethe intentiontouse thetitle asasecurity
Palaniappa Chettyv Dupire Brother (1922) Vol 1 FMSLR 370
D borrowed $2,000 fromAppon a promissorynote anddepositedwith AppIDTto his landas
securityforthe loan.AppobtainedjudgmentagainstDandappliedforanOrder forSale of the land.
Resbeinganothercreditorof D had attachedthe land. Court of Appeal (Earnshaw JC) heldthatthe
Appwas entitledtoalien.The existence of acontract of loan underwhichthe lenderwasentitledto
possessionof the borrower’sIDTassecuritygave rise tothe presumptionthatthe depositbythe
borrowerinsuch an instance wasmade withthe intentionof creatingalien. “The Phas carefully
compliedwithall the provisionof section80and has become the holderof alien.Touse the words
of the sectiona“lien”has been“created”inhisfavour.”
Paramoo v ZenoLtd (1968) 2 MLJ 230
P advancedmoneyto D and theyhad agreedto create a charge.The charge was neverregistered.It
was providedinclause 6 “the mortgagor furtherherebydepositthe title forthe landconcernedwith
the lenderas securityforprincipal and interestandthe lendermaylodge a caveat withthe Collector
of Land Revenue to create a lien”. Held: Federal Court, “the Land Code makes it quite clear that a
charge isquite distinctfromalien.A lienunderthe Code isastatutorylienandithas an independent
existence apartfroma charge so that if a charge is avoidedfornon compliance withthe law,the lien
is not avoided also provided of course it complied withthe law. It is clear therefore that the P’s lien
has priorityoverthe D2’s claim.”(dismissingthe appeal)
ZenoLtd v PrefabricatedConstruction Co (M) Ltd (1967) 2MLJ 104
D1 tooka loanfromP and executedamortgage and gencharge. Asa securityDdepositedwithPIDT
of landinKlang.Thecharge wasneverregisteredinthe landofficealthough itwasregisteredwithROC.
P lodged a caveat in respect of the said land and duly recorded in the RDT. D2 obtained judgment
againstD1 and obtainedPOagainst the saidland. SubsequentlyD2 obtainedOFSagainstthe land by
publicauction.Held:High Court,“in my view,since intentionisalwaysamatter of inference fromall
the relevantcircumstances,once the IDTisdepositedwiththe depositeethatisevidence of intention
tocreate astatutorylien forthe purpose ofthe section”(RajaAzlanShahJ). “The nature ofP’sinterest
in the land was a lien analogous to an equitable mortgage: and an equitable interest in land was
capable of beingcaveated.”“the caveatestablishedpriorityandthe onuswasthereforeonthe holder
of a subsequentequitytoshowfactswhichrendereditinequitable forthe holderof apriorequityto
insistasagainsthimon that priority”
Sarojeanne @ Sulochana d/o Duraisamy & Anor v Dr DM Thuraiappah [2000] 2MLJ 472
P (a lawful widow&Son) were jointadministratorsof the estate of the deceased.Amongthe estate
of the deceasedwasa propertyinAmpang.P’sname have beenendorsedonIDT (Ampangproperty)
as representatives. UABB(the Bank) hadgrantedDa creditfacility,tobe securedby3rdparty charge
on Ampangproperty by P.Registrationof charge was rejectedasP’s name were registeredonIDTas
representatives,notregisteredowners.BankreturnedIDT to D. D refusedto returnto P and argued
that he had a lien in respect of the loan given to P2. P denied receipt of any advance.
High Court held:“Upon evidence adduced,the court foundthat P2 did not borrow any moniesfrom
D. The court accepted the evidence of P1 that…..at the request of D, P lent the title to be used as
security to enable D to borrow money from the Bank. Therefore, there was no Q of lien setting in
because there wasnoborrowingof any moneybyP”.

6. Entry ofLHC
 Lodgmentof LHC in pursuantof Section330(1) NLC
 Lieniscreateduponthe entryof LHC andnot before.
 Effectof lodgmentof LHC
o same effectasa private caveat- itwill restraintall dealingswiththe land
o In the event of default by the Borrower, the Lender is entitled to invoke remedy
available underSection281(2) NLC
 X lodgmentof LHC-equitable lien(LHCcanbe enteredatany time)
 Failure tocaveat timeouslywill not,forthatreasonalone,cause the prioruncaveatedliento
lose priority against later caveatedinterest (LH able to overrule the usual priorityprinciples
because LH retainsthe IDT)
RHB Bank Bhd (as executorand trustee of the estate of WongKwonh Wah, deceased) & Ors [2017]
4 MLJ 281
Federal Courtheld:unlike private caveat(whichcouldlapse-onthe expiryof aperiodof 6 yearsfrom
the time itwas lodged) alien-holder’scaveatdidnotlapse underNLCexceptuponthe registrationof
the certificate of sale of the land which had been sold pursuant to a court order. The 54 titles were
still held by the defendant as security for the outstanding amount of Teng Kon’s loan for which
judgmenthasbeenobtainedbutnotfullysatisfied. Thus,the defendant’slien,continued.
Remedy available under Section 281(2) NLC / right to recover debt (judgment debt) is still within
limitationallowedunderLimitationAct.Delaywill renderthe actionstatute barred. AllagappaChetti
v Perianayagam (1908) Innes 117
Whenthe borrower defaults,the LH has 2 stepsin hisbid to sell the land to repay the debt:
 He mustobtaina judgmentdebt(specifyingthe amountdue);and
 If the loanis to a 3rd party borrower,the judgmentagainstthe 3rdparty borrowermustfirst
be obtainedbefore anorderforsale can be granted.
He mayapplytoHighCourtforanOrderForSale (OFS) pursuanttothe termsof sec253to 269. (follow
the procedure providedforsale of chargedland)
Equitable lien
 A liencreatesan“equitable”interestinthe landorlease.
 Failure to enter Lien-Holder caveat (LHC)-the act of keeping the title as security create an
equitable lien.(fulfillmentof element1,2&3)
 Creditorpossessarighttoalieninequitywhichisenforceablebywayof specificperformance
(contract enteredbythe parties-goodinlaw underSection206(3) NLC.
 As an equitable LH, Lender/creditor cannot part with IDT (the only proof that he is a LH-in
possessionof IDTinpursuantto advancementof loangiventothe proprietor)
 The LH must ensure that his LHC is not removed (if already entered on land) if he part with
IDT.
Merchantile Bank Bhd v The Official Assignee ofthe Property of How Han Teh (1969) 2MLJ 169
“In otherwords,althoughfailure tolodge acaveatdoesnotentitle the depositeewithwhomthe
issued document of title is deposited, to a lien under the Code, he still possessesa right to it in
equity,he canexercise thatrightbyregisteringthe caveat….atany time”( RajaAzlanShahJ)

7.  In 1964 How Han Teh depositedIDToverthe said landwiththe applicantsforthe purpose of
securingaloan.He failedtorepaythe loan.On28.4.1966 judgmentwasenteredagainsthim.
A bankruptcynotice wasissuedandhe committedanact of bankrupt.He wasthenadjudged
a bankrupted and died. There is a contest of priority between the official assignee and the
applicant over the land. High Court held: that at the time when the act of bankruptcy was
committedthe applicant had an equitable rightto a lien”in otherwords,althoughfailure to
lodge a caveatdoesnotentitle the depositee withwhomthe IDTisdeposited,toalienunder
the code,he still possessesarightto it inequity.He can exercise thatrightbyregisteringthe
caveat…atany time.”(RajaAzlanShahJ)
Standard CharteredBank Bhd v Yap Sing Yoke (1989) 2 MLJ 49
Lamin J stated:“as the IDT wasat all time in the custodyof the P, it had acquireda lieninequity
overthe land.The equitableinterestisnot affectedbythe absence of acaveat.The Phad byright
to lodge a caveatand may doso at any time underthe provisionof the NLC,1965”
Conclusion
Advantagesof Lien:-
 Simplerformof security
 Securitycan be perfectedinashortertime
 Cheaperandless time consuming(nopaymentof stampduty)
Lienisuseful asan interimmeasure priortothe preparationof a charge
Differencesbetweenlienandcharge:-
 A statutory lien has an independent existence apart from a charge so that if a charge is
avoided for non-compliance with the law, lien is not avoided also provided it complies
withthe law;
 In lien, there must be an intention to create a lien. Failure to enter LHC not necessary
deprive the lenderof the right to a lieninequityprovidedthe pre-requisite are fulfilled;
and
 There is only 1 lien created at one time. However several charges may be registered/
enteredonthe same land.