The document discusses the nature of liens under Malaysian law. It defines a lien as a right to retain possession of property belonging to another person until a debt owed is satisfied. A lien is a form of security interest created when a property owner deposits the original title document of their land with a lender as security for a loan. For a statutory lien to be valid, the lender must lodge a lien-holder's caveat on the land with the land office. The document analyzes several court cases that discuss issues such as how liens are created, whether consent is needed to lodge a caveat, and priority of liens over other interests like charges or judgments.

1. Sharifah Zubaidah
Sem. 1 (2009/2010)

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

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.

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.

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.