The document discusses the definition of "cause to the contrary" under Section 256(3) of the National Land Code. It summarizes a case (Kheng Soon Finance Bhd. V MK Retnam Holdings & Ors S/B) where a housing developer charged land that was intended for a housing development to a chargee as security for a loan. However, the developer had already sold 59 lots to purchasers with an agreement allowing encumbrances only after possession. When the developer defaulted on the loan, the chargee applied for a court order to sell the land, but the court found the chargee's knowledge of the prior sales constituted "cause to the contrary." The Privy Council later overturned this,

1. Sharifah Zubaidah
Sem. 2 (2008/2009)
CHARGE: 'Cause to the Contrary'

2. S.256(3) NLC:
“On any such application, the Court shall order the sale of
the land or lease to which the charge relates unless it is
satisfied of existence of cause to the contrary”
Q: What constitutes ‘cause to the contrary’?

3. Kheng Soon Finance Bhd. V MK
Retnam Holdings & Ors S/B (1983)
Chargor= housing developer , owned a piece of land in Ulu
Kinta, intending to develop into housing estate.
59 lots sold to the public.
SPA allowed creation of encumbrances on land provided at
time of giving possession such land is free from
encumbrances.
Chargor charged land to chargee to secure a loan of
RM600,000.
Chargor defaulted. Chargee sent 3 demand notices, then
began foreclosure proceedings in court.

4. Chargee applied for order for sale. HC dismissed the
application on that the agreement evidenced that the chargee
had extended the period of the loan.
Federal Court also dismissed the appeal by the chargee on
the ground, inter-alia, that: the knowledge of the chargee of
existing contracts of sale to the purchasers during creation of
the charge constituted ‘cause to the contrary’ within the
meaning of s.256(3) NLC.

5. Salleh Abbas CJ:
“It is clear that notwithstanding the proof of default by a
chargor, the chargee is NOT AUTOMATICALLY entitled to
an order for sale nor would the court without scrutiny allow
his application. The court must decide whether there are
circumstances in the case before it which would amount to a
‘cause to the contrary’ within the meaning of subsection (3)
which would be sufficient in its opinion to refuse the
chargee’s application although the charge is lawfully and
validly created and the chrgor’s default is proved.”

6. Privy Council:
That the registered charge overrides the equity of the
purchasers.
That a charge may only be defeated through one of the
exceptions to indefeasibility of title under section 340(2)
NLC. i.e. fraud, forgery, etc.

7. Privy Council:
That the registered charge overrides the equity of the
purchasers.
That a charge may only be defeated through one of the
exceptions to indefeasibility of title under section 340(2)
NLC. i.e. fraud, forgery, etc.