Ben obtained a loan from Bob and used his land as security. They signed an agreement allowing Ben to redeem the land by paying back the loan by 31/3/2012. Ben failed to pay by the deadline. The question is whether Ben can now redeem the land using a loan from a bank. The summary is that Ben can redeem the land, as the original agreement was intended as an equitable mortgage, giving Ben the ongoing right to redeem even after missing the repayment deadline. Dol provided a loan to Ben and held the title document as security but later returned it at Ben's request. The question is whether Dol still has rights as a lien holder. The summary is that Dol lost his rights as an equitable lien holder

1. Question 1
(a) Could Ben redeem the land from Bob, should he utilize the loan he received from Bank
Pinjamlah Berhad to pay Bob on 1/4/2012. (10marks)
The issue in this situation is whether Bob have the right to refuse Ben from redeeming the said land,
on the basis of the agreement being strictly a contract.
According to the law, ‘jual janji’ can be defined as a sale of promise or conditional sale, where the
land is used as a security to secure the loan which is small in size and value. In Tengku Zahara v Che
Yusuf, Briggs J mentioned that “the whole purpose of jual janji transaction is to provide a procedure
for securing a loan without infringing the prohibition of usury which is binding on the conscience of
all good Muslims”.
There are two interpretations taken by the judiciary in regards to jual janji, namely strict and liberal
interpretation. Under strict interpretation, the agreement between borrower and lender is only valid
as a contract, where time is of the essence. If a term of contract stipulates that time is of the
essence, hence the parties are bound by it. In this instance, if the borrower had failed to pay back
the loan within time stipulated, therefore the court will not assist to invoke terms to obtain the
retransfer of land. In the case of Hj Abdul Rahman v Hassan, it was held that the agreement is not
regarded as a security transaction or mortgage, as the only form of mortgage in Malaysia is charge
or lien.
Another approach taken by the court is the liberal interpretation. In this regard, the collateral
agreement for a retransfer in a jual janji transaction is in nature of an equitable security transaction
whereby the right to redeem remains irrespective whether the period for repayment has lapsed. In
the case of Yaacob bin Lebai Jusoh v Hamisah binti Saad, the question raised was whether the
intention of the parties of the agreement to resell the land is treated as a security or a contract of
sale. On appeal, the court decided that as the agreement was in nature of a mortgage the right to
redeem still remained, although the period within which it was specified the loan should be repaid
has expired.
Applying the law to the given situation, Ben had obtained a loan from Bob for RM 10,000, and
subsequently signed a sale and purchase agreement contending to sell his land in Bangi. Both parties
then signed a collateral agreement whereby Bob had agreed to sell the said land back to Ben for the
same amount should Ben be able to pay the loan by 31/3/2012. Ben however had failed to do so. In
this instance, if Ben is to utilize the loan he later received from Bank Pinjamlah Berhad in order to
pay Bob after the final date of repayment, he can still do so. This is due to the fact that the collateral
agreement signed by both Ben and Bob had an intention of mortgaging the land to secure the
repayment of the sum of RM 10,000 and give Ben the right to redeem. Therefore it can be said that
the right to redeem remained, although the final date of repayment has expired.
To sum up, Ben could redeem the land from Bob by utilizing the loan he received from Bank
Pinjamlah Berhad to pay Bob, even after the final date of repayment, which is 31/3/2012.
(b) Advise Dol as to his right as a lien holder.

2. The issue in this situation is whether Dol still have the right as lien holder over the land which was
used as security in return for a loan for Ben.
According to the law, Section 281(1) of the National Land Code defines lien as the act of any
proprietor depositing his title or duplicate lease to another person as a security for a loan. A lien is a
transaction wherein the proprietor intends to use the appropriate document as security for a loan. It
creates an equitable interest in the land or lease which gives the holder of that interest the right to
enter lien holder’s caveat. In order to create a statutory lien, there are four elements which must be
adhered.
Firstly, the right to create lien belongs only to Proprietor of the appropriate interest. In this instance,
the issue document of title must be registered in the name of the borrower. Prior to 2008, a third
party cannot create a lien on behalf of the borrower. In the case of Peter P’chient v Ramasamy
Chetty, the court held that the right to deposit the title as security for a loan is restricted only to the
proprietor. However, after 2008, the case of Hong Leong Bank Bhd v Staghorn Sdn Bhd ruled that
registered proprietor may deposit his issue document of title as security for third party loan with
authorisation.
Secondly, there must be a deposition of issue document of title. In this instance, the act of keeping
the subject matter of lien by the lender, which usually is the issue document of title, will give rise to
a lien. A lien holder also may part with the issue document of title, provided that the lien holder’s
caveat had been lodged. Section 281(4) of the National Land Code stated that a lien holder may part
with the issue document of title upon written request made by the proprietor, but only for the
purpose of producing the issue document of title at any Registry of Land Office. In the case of
Sitambaram Chetty v Ramanathan Chetty, it was held that the act of an equitable lien holder parting
with the issue document of title resulted in the lender losing the right as lien holder.
Thirdly, there must be an intention to create lien. The intention need not be expressly documented.
It can be in an oral or any written form. The intention can be derived from the fact that the
deposition of title by borrower to lender originated from a loan transaction. In the case of Standard
Chartered v Yap Sing Yoke, it was held that as the title had all time in the custody of lender, it shows
the intention of the lender that he had acquired a lien, albeit in equity, over the land.
Lastly there must be a lodgement of lien holder’s caveat. Pursuant to Section 330 (1) of National
Land Code, a statutory lien is created upon the entry of lien holder’s caveat. However, if the lender
failed to do so, it did not diminish the right as lien holder. In fact, it creates an equitable interest in
the land. This is due to the fact that a creditor possesses a right to a lien in equity which is
enforceable by way of specific performance under Section 206(3) of the National Land Code.
Applying the law to the situation, it is clearly stated that upon the creation of lien, Dol did not enter
into a lien holder’s caveat. In this instance, Dol had become an equitable lien holder, as the lien had
originated from a loan agreement, and he is entitled to a right to lien by specific performance.
However, Dol had parted with the issue document of title after Ben had requested him to return the
title for the purpose of producing it before the Land Office. However, as Ben did not actually do so,
this means Dol had violated Section 281(4), where it allow lien holder to part with issue document of
title upon written request by the proprietor, and restricted only to produce it to land Office. As Dol is

3. an equitable lien holder, the act of him parting with the issue document of title resulted in him
losing the right as lien holder.
To sum up, Dol has lost his right as a lien holder, based on the fact that he had parted with the issue
document of title whilst being an equitable lien holder.
Question 2
Discuss whether the order for sale should be granted to the bank.
The issue in this situation is whether the court should grant the order for sale of the charged land to
the bank.
According to the law, in order for the court to grant the order for sale, the court should look whether
or not there is any existence of cause to the contrary. In the case of Low Lee Lian v Ban Hin Lee
Banking Bhd, the court had adopted three categories of cases in which the ‘cause to the contrary’
might be established. Firstly, when a chargor was able to bring his case within any of the exceptions
to Section 340; Secondly, where the chargor could establish that the charge had failed to meet the
conditions precedent for the right to seek order for sale; and thirdly, where the charger could show
that the grant of the order for sale would be contrary to any rule of law or equity.
The first category is whether or not the case by the charger falls under the exceptions to Section
340, in regards to indefeasibility. According to Section 340, a title is considered defeasible if it is
obtained via fraud, misrepresentation or forgery. In the case of Tai Lee Finance Co. Sdn Bhd v Official
Assignee, the court held that an application for order for sale will not be granted if the charge had
been fraudulent.
The second category is where the chargor could establish that the chargee had failed to meet the
conditions precedent for the right to seek order for sale. In order to seek for the remedy of order for
sale, there are two conditions precedent that needs to be fulfilled. They are statutory notice and
foreclosure proceeding.
A statutory notice is a mandatory requirement to be complied by the chargee before applying for
order for sale. In the case of National Bank of Australia v United Hand in Hand, it was decided that
failure to give notice would result in the sale cannot be affected and Registrar may refuse to register
any transfer. There are three factors that affect the validity of statutory notice: form of notice;
content of notice; and service of the notice.
There are two forms of notice: Form 16D and Form 16E. Section 254 of the National Land Code
underlined regarding Form 16D, where it is used when there is a breach of any express or implied
obligations of chargor under the loan agreement. The chargee must prove that there is default, and
the breach has been continued at least one month or more. Meanwhile, Section 255 mentioned
regarding Form 16E, where it is applicable if the charge agreement states that the chargee is entitled
to demand the principal sum at any time. In this instance, the chargee need not to specify the
breach. In the case of Jacob v Overseas Chinese Banking Corporation, it was held that either Form
16D or 16E may be used, as there is a breach of obligation on behalf of the borrower, and also it is
stated in the charge agreement that the principal sum is payable on demand.

4. In regard to the content of notice, it must be in accordance with the National Land Code. Form 16D
shall indicate, firstly, the amount due, including the principal and interest. Secondly, an instruction
requiring the chargor to remedy the breach within the time stipulated in the charge agreement. In
the case of Citibank Bhd v Mohamed Khalid bin Farzalur Rahman, the court had applied the golden
rule of the interpretation of statute, which means the period of breach referred to in Section 254(1)
of National Land Code should be at least one month.
Lastly, in regard to the service of notice, Section 431 mentioned that notice can be delivered by way
of personal delivery, by leaving the notice at the person’s last known address, pre-paid registered
post, or substituted service.
Foreclosure proceeding is a phase to determine which tribunal to initiate a foreclosure proceeding,
depending on the title of the land. There are two types of tribunal, which are High Court, according
to Section 256, and also Land Office, based on Section 263. For registry title, it should be initiated in
High Court, meanwhile for Land Office title should be initiated in Land Office.
The third category is where the chargor could show that the grant of the order for sale would be
contrary to any rule of law or rule of equity. One of the situations is when the charge was registered
contrary to restriction of interest. In the case of United Malayan Banking Corp Bhd v Syarikat
Perumahan Luas Sdn Bhd, the court held that where the charge is registered in breach of an explicit
statutory prohibition imposed on the title to the charged land, the title is defeasible since the
registration had been obtained by means of an insufficient or void instrument.
Applying the law to the situation, Oren is a registered proprietor of a bungalow, which is subject to
restriction in interest in which it cannot be charged, leased or transferred without the consent of the
State Authority. Oren then taken a loan from Bank Indah Berhad, and a charge is created to secure
the loan. There are several conditions agreed upon by both Oren and the bank, which are: the
principal sum is payable on demand; the period to remedy the breach (if there is any) is within 14
days; and consent from the chargee must be obtained before the charged property is leased. Other
than that, Oren also created a lease over the bungalow in favour of Ciku.He then received a notice in
Form 16D from Bank Indah Berhad. The Bank applied for order for sale.
In order to determine whether the order for sale should be granted, we must first look whether
there is existence of cause to the contrary. There is no question whether the case falls under the
exception to indefeasibility, as the property is not obtained via fraud, misrepresentation or forgery.
Other than that, in regards to the condition precedent, the Bank had issued a notice in Form 16D,
requiring Oren to pay all outstanding amount on his loan within 14 days. The application of Form
16D is right, as the breach is established. This is due to the fact that Oren had violated the charge
agreement by not obtaining the consent from the Bank before leasing the property to Ciku. Even
though it was stated that the principal sum is payable on demand, either Form 16D or 16E may be
used. However, the problem arose regarding the content of notice: Section 254(1) mentioned that
the period to remedy the breach requires one month. Therefore as the period to remedy the breach
provided by the Bank is 14 days, therefore the notice is considered void. In regards to the
contradiction of rule of law, the property charged by Oren is subject to restriction in interest,
whereby the property cannot be charged without the consent of the State Authority. Despite the
restriction in interest, Oren still went on to charge the property with the Bank. Therefore, this means
that the granting of the order for sale would be contrary to the rule of law.

5. To sum up, the order for sale should not be granted to the Bank, as the chargee had failed to meet
the conditions precedent for the right to seek order for sale, particularly regarding the content of
notice. Other than that, the granting of order for sale would be contrary to any rule of law, as there
is a restriction in interest on the land.