The document discusses express and implied conditions in land charges under the National Land Code (NLC) of Malaysia. It outlines the fixed obligations of a chargor under section 249 of the NLC, including paying the loan, land revenue, and complying with conditions on the land. Upon default, the chargee's remedies are to sell the land by public auction or take possession. The document details the procedures for obtaining a court order for sale and conducting the public auction. It also analyzes issues around serving the proper notice of demand and the effect of failing to comply with service provisions in the NLC.

1. Sharifah Zubaidah
Sem.2 (2012/2013)

2.  1) Express and Implied Conditions
 2) Void Charges

3.  Express conditions to charges can be found in the
Charge Annexure (charge agreement).
 These are conditions imposed by the parties that
are not mentioned in the NLC provisions.

4.  S.249 – Fixed obligations of chargor:
 1) To pay all sums secured. i.e. repay the loan.
 2) Pay rent (land revenue) to the State Authority.
 3) Observe and perform all conditions to which the
land is subject.
 (see s.250 for obligations of the chargor that can be
altered or amended.)

5.  S.251:
 A chargee must not without reasonable cause,
withhold consent to the granting by the chargor of
any lease/tenancy.

6.  A charge that fails to comply with fixed requirements is
VOID.
 Examples:
 1) Where the charge is to secure an
UNENFORCEABLE LOAN. (e.g. a loan that does not
follow the provisions of the Moneylenders Ordinance
1951 – see Phuman Singh’s case and Associated
Finance Corp Ltd. v. Poomani.

7.  2) Where title of
the chargee is
defeasible due to
fraud in the transfer,
the charge is
also null and
void. (Owe Then
Kooi’s case)
 3) Where
consideration for the
charge over the
land is PAST
CONSIDERATION
(See Lau Ngiik
Ping’s case)

8.  Upon default of the charge (i.e. non-payment of
loan and interest), the chargee can enforce the
charge and has 2 remedies:
 1) Sale by public auction of the land. (Pt. 16,
Ch. 3 NLC))
 2) Possession. (Pt. 16, Ch. 4 NLC)
 Both remedies can be applied for simultaneously.
(s.253(2))

9.  This remedy is also popularly referred to as
‘foreclosure proceedings’.
 NLC prescribes different procedures for the
application for an order of sale in respect of
Registry Titles and Land Office Titles. ( See
difference in these titles in s.77(3))
 Registry title (ss256-259)
 Land Office Title (ss266-269)

10.  1. Where breach of charge agreement hs
continued for more than a month, the chargee
will serve on the chargor a Notice in Form
16D.

11.  Contains 3 things:
 a) specifies the breach in question.
 b) requires it to be remedied within 1 month.
 c) warns the chargor that if the notice is not complied
with, the chargee will take proceedings to get an
order for sale.
 However, if the principal sum secured is payable ON
DEMAND (must ascertain this from the Charge
Annexure), the chargee will issue Form 16E (see).

12.  2) After the period to remedy the breach or to
pay the sum has lapsed, the chargee may make
an application to the High Court by way of
Originating Summons supported by an
affidavit for an order for sale of the land. (See
s.256(2), cross refer to Rules of the High Court
1980, Order 83)

13.  3) Court will grant order for sale. (See 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 the existence of
cause to the contrary.”

14.  See s.257(1):
 a) provide for sale to be by public auction.
 b) will require the sale to be held on a date not
less than 1 month from the date of the order.
 c) specify the total amount due to the chargee at
the date of the order.
 d) require the Registrar of the court to fix a
reserve price for the purpose of sale.

15.  (e) that a bidder during the auction must
have 10% of the reserve price;
 (f) that the 10% is deposited into the chargor’s
account.
 (g) specify that the balance purchase price be
paid within 120 days from the date of the sale,
with no extension.
 (h) that is not paid within 120 days, the deposit of
10% will be forfeited.

16.  4) The Court Registrar will serve a copy of the
order for sale on the chargor. (s.258(1)(a))
and advertise the order for sale to be done
by public auction. (newspapers and posters).
 5) Chargee will prepare the conditions of sale
according to the court order and shall
deposit the IDT/duplicate lease to the court a
week before auction date.

17.  6) Under section 259, sale will be carried out
by an officer of the court or a licensed
auctioneer. (see s.259(2) as to duties of the
auctioneer).

18.  7) The successful bidder (‘purchaser’) in the
public auction, upon paying the full purchase
price, will receive from the auctioneer 2 things:
 i) Form 16F (CERT. OF SALE BY COURT)–
registrable as an instrument of dealing at
the Land Registry office.
 ii) The IDT/duplicate lease.

20.  4 Issues:
 1) Whether serving the wrong notice of
demand effects the charge action?
 2) Whether failure to specify the exact breach
rendered notice ineffective?
 3) Whether duration of notice of demand can
be changed?
 4) Effect of failure to serve the Notice of
Demand according to provisions of the NLC.

21.  V.A.M Hussain v BP Malaysia Sdn. Bhd. [1970]
 Held:
 The proper notice to issue where the principal
sum is payable on demand should be Form 16E.

22.  Fed. Cit. held:
 “Form 16D can be used whether or not the
principal sum is payable on demand. Form 16E
can only be used where the principal sum is
payable on demand.”
 Result? CONFUSION.

23.  Federal Court cleared the confusion and held:
 (a) Where there has been a breach of any
obligation Form 16D may be used, regardless
of the nature of the obligation, including the
payment of the principal sum on demand; and
 (b) where the principal sum is payable on
demand then either notice in Form 16D or
Form 16E may be served.

24.  If Form 16E has been served, and there is non-
compliance by the chargor, there is no need to
follow up with Form 16D.
 Can straightaway apply for an order for sale.
 (See Bank Bumiputra Malaysia Bhd. v. Mahmud
[1989] 1 MLJ 381.)

25.  No. If the details of the breach had been specified
in detail in an earlier letter of demand, failure to
specify the details of the breach in Form 16D will
not effect its validity.
 (See RHB Bank Bhd. lwn Syarikat Sungei Nal
Timber Industries Sdn. Bhd. [2007] 4 MLJ 567.)

26.  S.254(1)(b) stipulates the period to pay the
amount demanded in the notice of demand (Form
16D) to be ‘within 1 month… or such alternative
period as may be specified in the charge.’
 Q: whether the chargee could stipulate a period
lesser than one month?

27.  Court of Appeal (literally interpreting the words in
s.254(1)(b)) held that the chargor and chargee
may agree to accept a statutory notice of less than
one month.
 NLC expressly permits this.

28.  See s. 431(1) NLC on method of service.
 What is the method of service for a company?
 S.431(1)(b)(ii) – delivering the notice at the body’s
registered office or usual or last known place of
business to its servant or agent – or leaving it in a
cover addressed to the registered office or last
known place of business – or pre-paid registered
post at the body’s registered office or last known
place of business .

29.  In Kekatong Sdn. Bhd v BBMB [1998] , the
App./chargor had changed its registered office
address and had duly informed the Registrar of
Companies in Form 44.
 Chargee enforced the charge and sent Form 16D to
the previous registered address.
 Order for sale given. App. applied to set it aside on the
ground that there was failure to serve the notice of
demand.

30.  Such service was not in accordance with the NLC
and was therefore VOID.
 Ratio: (Gopal Sri Ram, JCA):
 1) Ownership of land is a fundamental right under
Art. 13 FC. Any deprivation must be in strict
compliance of both, substantial and procedural
law.
 2) Effect of order for sale and the subsequent
public auction, etc. are designed to
permanently deprive a registered proprietor of his
land.

31.  3) The provisions of the NLC that govern the
enforcement of registered charges exist not
only as a means of a lender recovering his money
but also for the protection of the chargor. The
court, by treating the service provision in s. 431(1)
NLC as mandatory will ensure that the protection
given by the NLC is not rendered illusory.
 Thus, the order for sale was void as F.16D was
not served in the manner prescribed by the NLC.