The document discusses liens and lien holder's caveats under Malaysian land law. It provides definitions and discusses key cases that have helped define: - What constitutes a valid lien under section 281 of the National Land Code, including whether the loan can be to a third party rather than just the registered proprietor. - The effect of a lien holder's caveat, including that it has a similar prohibitive effect as a private caveat in preventing subsequent dealings on the land. - Issues around who can create and enter a lien holder's caveat, as well as the requirements and procedures around creating and removing caveats. Cases have found equitable rights can still exist even if statutory requirements are not fully met.

1. NOR ASIAH MOHAMAD
LIEN AND THE LIEN
HOLDER’S CAVEAT

2. WHAT IS A LIEN?
• A security transaction
• Elements of lien:
• Depositing of land title or duplicate lease with the lender
• Intention to create a lien
• Entry of lien holder’s caveat
• Paramoo v. Zeno Ltd. [1968] 2 M.L.J. 230,
• Zeno Ltd. v. Prefabricated Construction Co. (Malaya) Ltd. & Anor.
[1967] 2 M.L.J. 104, at page 105, where Raja Azlan Shah J
(as His Majesty then was) observed that the intention to
create a lien may be inferred from all the relevant
circumstances of the case.

3. HALSBURY’S LAWS OF ENGLAND,
VOLUME 28, 4TH EDITION,
REISSUE, P. 352
• defines a “lien” in this way:
“In its primary or legal sense ‘lien’ means a right at
common law in one man to retain that which is
rightfully and continuously in his possession
belonging to another until the present and accrued
claims of the person in possession are satisfied.”

4. NATURE AND EFFECT OF LIEN
HOLDER’S CAVEAT
• PERWIRA AFFIN BANK BHD v. SELANGOR PROPERTIES
SDN BHD & ORS
COURT OF APPEAL, PUTRAJAYA [2010] 3 CLJ
• The IDT need not necessarily be deposited by the
registered proprietor
• The word ‘proprietor’ in s. 281(1) of the NLC should
include a beneficial owner. The equitable doctrine
of bare trustee is applicable in Malaysia
• UNITED OVERSEAS BANK (MALAYSIA) SDN BHD v UJA

5. TITLE MUST ALWAYS WITH THE LENDER
• Sithambaran Chetty v Ramanathan Chetty
(1922) – a lien is a mere retention of title for
security thus if the title is surrendered, the lien
is no more

6. THE LAW
• S 281
• S 330-333

7. WHO CAN CREATE LIEN?
• Perwira Habib Bank (M) Bhd lwn Loo & Sons Realty
Sdn Bhd & satu lagi (No 1) [1996] 3 MLJ 409, only the
registered proprietor…

8. WHO CAN ENTER LHC?
• Who can enter a lien?
• United Overseas Bank v Uja (2010) CA
• Issue: w/er a reg’d owner can create lien on behalf
of third party borrower – extend to third party
• Distinguished with Hong Leong Finance Bhd v
Staghorn Sdn Bhd [2005] CA – only the re’g
proprietor

9. • Palaniappa Chetty v Dupire [1919] 1 FMSLR 370
• A person who lends money to a borrower (who is
also a registered proprietor of the land) may enter a
LHC
• Perwira Habib Bank (M) Sdn Bhd v Loo & Sons Realty
S.B [1996]

10. THE CODE - ONLY THE DEPOSITEE CAN
ENTER LHC S 330– CAN THE DEPOSITEE USE
THE TITLE TO CREATE A LIEN?
• Peter P Chient v Ramasamy Chetty (1923) 3 FMSLR
220
• -no, this right only belongs to the caveator who is
the registered proprietor of the land
• Cases:

11. S 331
• Only the original depositee alone has the right to enter LHC
• The caveat may be entered at any time because the
retention of title by the depositee creates a right in equity to
the lien
• Case: Mercantile Bank Ltd v The Official Assignee of How Han
Teh [1969] 2 MLJ 196
• the lien-holder who retains possession of the issue document
of title or the duplicate lease or even a copy of the issue
document of title may feel free to enter the lien-holder’s
caveat at any time during the currency of the loan without
losing priority over subsequent purchasers of the land or lease
– the subject matter of the lien.
• Case: Mercantile Bank Ltd. v. The Official Assigneee of The
Property of How Han Teh [1969] 2 M.L.J. 196.

12. PRIORITIES IN CLAIMS
• However as the interest is ‘equitable’ thus the
principles of first in time prevails, all other things are
equal applies – RAS
• This case followed the decision in Vallipuram
Sivaguru v Palaniappa Chetty [1937]MLJ 59

13. IF THERE IS NO CAVEAT, THE RIGHT OF
THE CREDITOR LIES IN PERSONAM
• “In my view that case is authority for the
proposition that although no lien is created
under the land Code until the caveat is
registered, the court in the absence of
express words in the statute is not prevented
from doing justice between the parties by
giving effect to equitable rights by way of
contract. In other words although failure to
lodge a caveat does not entitle the
depositee to a lien under the Code, he still
possess a right to it in equity..

14. EFFECT OF LHC
• Chew Sze Sun v Muthiah Chettiar [1983] 1 MLJ 390
Abdul Razak J – a LHC entered earlier in time will
prohibit the subsequent entry of a private caveat .
• S 330(5) effect of LHC

15. IT IS THE DUTY OF THE PERSON WHO APPLIES FOR
LHC TO PROVE THAT THE TITLE IS HELD
THROUGH A PROPER MANNER
• Case: Nallamal & Anor v Karuppan Anor [1993]
• - to guard agst any fraud, misrepn,
• - the provision for lien in the NLC must be strictly
construed

16. EFFECT OF LHC
• S 330(5) “the like effect”of that of private caveat –
David S Y Wong suggested that LHC shall have the
like effect as that of PC as provided by s 322(2) to
(7).. In brief, it has the same single prohibitive effect
against subsequent registrations of dealings,
endorsement of TER and entry of subsequent LHC..

17. SY KOK
• ..however, the presence of a LHC does not
prohibit an entry of a RC nor does a LHC
prohibit the entries of subsequent PC and
PO..The entry of a LHC will prohibit the entry
of subsequent LHC since the title is already
in the possession of the existing holder, no
application for LHC will be entertained
unless the applcn is supported by the IDT …
no second lien is allowed by the NLC, if the
act amounted to a surrender of the IDT

18. EQUITABLE LIEN
• Mercantile Bank
• The element of intention and possession of title is
sufficient to create a lien
• RAS ..although failure to lodge a caveat does not
entitle him to the right under NLC ..he still possess
the right in equity, he can enter the caveat at any
time..

19. STANDARD CHARTERED BANK V YAP SING
YOKE – SUPER CAVEAT
• The complacent attitude of the Court in
applying the principle of equity
• Ct hd: the bank had priority because it had
possession of the IDT, therefore, the bank has an
equitable interest in the nature of lien.
• Despite the fact that the earlier form submitted
was a charge form but was rejected for
registration (no quit rent paid)
• Ct hd : LHC can be entere at any time by the
LH

20. HONG LEONG FINANCE BHD V.
STAGHORN SDN BHD [1995] 3 CLJ 368. CA
 where the ambit of the provisions in the National
Land Code 1965 on statutory liens over land was
discussed.
 Staghorn wanted to purchase a piece of land but
later Teck Lay Realty appeared as purchaser and
deposited the IDT for loan.
 HL Finance entered a LHC based on a loan for Teck
Lay Realty.
 Borrower defaulted, HL Finance granted OFS, but
Staghorn objected and HCT granted its objection.

21. JUDGE: TUN ABDUL HAMID
MOHAMAD.. AS HE THEN WAS. (2008)
FCT
Lien in its primary sense is a right in one
man (lender) to retain that which is in his
possession belonging to another man
(creditor) until certain demands of the
person in possession are satisfied.
 Subsection (1) of s. 281 speaks of the
registered proprietor depositing his issue
document of title "as security for a loan"
but does not specify the borrower and
neither does it restrict the loan to a loan
to the registered proprietor. I could see
no reason for construing the loan to
mean only a loan to the registered
proprietor. In my judgment the loan may
be a loan to a third party.

22. • That would have been my answer to Question No. 2. Where
the loan is to a third party, it must follow that under subsection
(2) the judgment obtained is a judgment against the third-
party borrower. That would have been my answer to Question
No. 3.
• Subsection (1) of s. 281 is an enabling or empowering
provision. It enables or empowers the registered proprietor to
deposit his issue document of title with any person or body as
security for a loan.

23. NO CLEAR PROCEDURE HOW THE
CAVEAT TO BE DONE…
 It does not lay down the procedure for or the manner of depositing. It ought
not to be construed as requiring that the registered
proprietor himself must do the act of depositing. It is
his will that is important. If he wills that the document
of title be deposited with a person or body as
security for a loan and it is so deposited, then it is he
who has exercised his power under sub-s. (1). He
wills the depositing if he instructs or authorizes it or
consents to it, and the actual act of depositing may
be done by someone else. That would have been
my answer to Question No. 4. It follows that my
answer to Question No. 5 would have been a
negative one.
Staghorn has no interest in the land, thus he has no
right to object…

24. APPEAL TO CT OF APPEAL
Court of Appeal held that the sale should be set aside
on the ground that there was no lien validly created
under the Code in favour of Hong Leong Finance,
on the court’s construction of Section 281(1) of the
Code.
The Court held that since a statutory lien can be
created only:
(a) by the deposit of title by the registered proprietor,
and
(b) to secure a loan granted to the registered
proprietor, but not a loan granted to a third party

25. CONDITIONS UNDER S 281 WERE NOT
FULFILLED
In this case, both these conditions were not met in this
case, Hong Leong Finance’s lien-holder’s caveat was
invalid.
However, the court also found that Hong Leong Finance
did have an interest in the land and allowed it to retain
the title.
It would follow that lien-holder’s caveat in such instance
would still be able to protect its right to the land, either
by perfecting a Charge in its favour or by applying for a
court order for a sale of the land and for the proceeds of
sale to be paid to the lender in view of its said interest in
the land.
Appeal to FC

26. APPEAL TO FED COURT – CONSIDER
PROCEEDING FOR OFS FOR LIEN
 In proceedings for an order for the sale of land [pursuant to a
lien-holder's caveat]:
(a) Whether the Court, after the order for sale is made, may
permit or allow a party which is found to have no proprietary
rights in the said land, to intervene in the said proceedings with
a view to setting aside the said order;
(b) Whether an order for sale may be set aside on the
application of an intervener who is found to have no
proprietary interest in the said land and in the absence of any
challenge by the registered proprietor and/or the beneficial
owner of the said land.
2. Whether sections 281(1) and 330 of the National Land Code
(NLC) envisage that a registered proprietor of land may
deposit his issue document of title as security for a loan only to
the said proprietor and never to a third party.

27. JUDGEMENT AGST BORROWER OR
OWNER?
SHD ONLY THE REG PROP TO ENTER
THE TRANSACTION (LIEN)?3. If a registered proprietor of land deposits his issue document
of title as security for a loan to a third party, whether the
judgment that is required to be obtained under section 281(2)
of the NLC is a judgment to be obtained against the borrower
of the loan or against the registered proprietor of the said
land.
4. Does section 281(1) of the NLC require as a condition
precedent for validity of a lien holder's caveat that the
registered proprietor do personally effect the deposit of his
issue document of title or would the requirements of section
281(1) of the NLC be satisfied by evidence that the said issue
document of title had been deposited by a third party (ie, a
person or party other than the registered proprietor) on the
instructions or with the authorization or the consent of the
registered proprietor.
5. Is an order for sale made pursuant to a lien-holder's caveat
created by the deposit of the issue document of title by a third
party with the consent of the registered proprietor considered
to be illegal and consequently liable to be set aside.

28. UNITED OVERSEAS BANK (MALAYSIA) SDN BHD V.
UJA SDN BHD & ANOTHER APPEAL [2010] 6 CLJ 204 CA
 UJA was the registered proprietor of a piece of land. A
company, Union Plastics Sdn Bhd, wanted to borrow money
from United Overseas Bank.
 UJA deposited the title to its land with the bank as for the
loan. The bank entered a lien’s holder caveat against the
title to the land in question and lent money to Union Plastics.
Union Plastics defaulted in making repayment of the loan.
 The bank thus acted under s. 281(2) and moved for an order
for sale. The High Court struck out the bank’s summons on
the ground that a lien under s. 281 could be created by a
registered proprietor of land when and only when he or she
was also the borrower.
 The issue that arose herein was whether the registered proprietor
of land may create a lien over his or her title in favour of a third
party borrower
 Hd: S 281 is not limited to the creation of a security by way of a
lien on title only for the benefit of a registered proprietor. It
extends to third party borrowers as well.

29. DETERMINATION OF LHC
• LHC will continue so long as the person who lodges
the caveat is still in possession of the title
• LHC will distinguish if the LH withdraw or cancel the
caveat
• If the charge is registered in favour of the lien holder
• When the land which is subject to lien is sold based
on s 281(2)

30. REMOVAL OF LHC
• The Court may order the Registrar to cancel LHC - s
331(4) – on what basis?

31. LIEN HOLDER TO PROVE WHY HIS LHC
SHD STAY
• The onus is on the person who applies for removal to
prove that the caveat must not be entered – i.e the
registered proprietor or the aggrieved person
• The lien holder must show why his caveat should
remain
• The court will decide on the balance of probabilities

32. WHAT IS THE EFFECT OF LHC?
• The like effect of a private caveat
• S 330(5)
Sayang Plantantion v Kokh Siak Poo [2003] CA

33. • The test for the removal of LHC is more
enormous as compared to PC.
• The person ask for removal must prove there
is non compliance of sec 281, or the
necessary document not accompanied or
the LHC should not be entered in the first
place.
• Upon ordering for removal, the court may
also order for payment of damages to the
person aggrieved.