CONVEYANCING LAW

2. Bina Cepat S/B (Vendor) was the developer of an exclusive housing project known as
Heavenly Homes which was to consist of 15 units of individually designed houses to be built
on a 3 acre piece of land owned by it. All 15 units were sold upon launching and standard
SPA’s were executed with the buyers. Each SPA contained a provision that the Vendor could
subject the land to encumbrances provided that upon delivery of vacant possession in 24
months, it would be free of encumbrances. The Vendor took a loan of RM 1 million from
Wangsenang Bank Bhd.(WBB) to finance the project. As security for the loan the land was
charged to WBB. According to the loan agreement WBB would release an initial sum of
RM20,000/- to the Vendor upon registration of the charge and the balance would be
released progressively according to the Architect’s Certificate of Completion. It was also a
term that interest was to be paid on all amounts released by WBB. The charge was duly
registered and the initial sum of RM200,000/- was released to the Vendor. However Vendor
ran into financial difficulties and was unable to service the interest. Nevertheless, Vendor
managed to complete the progressive construction of the project and tendered its
Architect’s certificate for payment. However WBB refused to release further monies unless
the interest was paid. Consequently the project was stalled. WBB meanwhile applied to court
for sale of the land on the basis of the charge held by it. The Purchasers are naturally anxious
and seek your advice. Advise the Vendor and the Purchasers the application for sale by WBB
could be resisted.
Question 5

4. § Co-operative Central Bank Ltd v Y&W
Development Sdn Bhd
- it was established that upon default by the
chargor the remedy of the chargee is not
against the person of the chargor but
against the property charged which is the
remedy of possession and sale as under the
National Land Code.
Rules….

5. § Yee Sin Cheong v UMBC
- held that if parties’ default in payment,
bank can straight go to court for an order for
sale where the parties end up losing
undivided interest over land.

6. § Bariam Singh v Pegawai Pentadbir Tanah
Pesaka Malaysia
- it was provided that a registered charge
constitutes an indefeasible interest in land
as a security which the chargee could
enforce by way of sale where the bank can
apply based on charge for court order.

7. the plaintiff has the position to apply for the
order of sale considering the fact that the
defendants who is the chargor had fail pay
up interest. Failure to honour the loan
agreement shall render the defendant to be
accountable thus because of the
defendant’s difficulties in making interest
payments, the plaintiff decided to call off
the deal by for refusing to release further
loan.
Application :

8. the plaintiff is not in default for refusing to
release further loan as the defendant did
not pay up the interest thus the application
for order of sale should be allowed.
Conclusion :

10. § Section 256(3) of the National Land Code
- 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.
The defendant is of the stance that the
plaintiff is in default for refusing to release
further loan.

11. § Murugappa Chettiar v Letchumanan Chettiar
- established that “Section 149 of the Land Code
obviously contemplates that there may be cases in
which charged land should not be sold, even though
there has been a default in payment of the principal
sum or interest thereon secured by the charge; and it
seems to me that a chargor may 'show cause' either
in law or equity against an application for an order
for sale, and that the Courts should refuse to make
an order in every case where it would be unjust to do
so. By 'unjust' I mean contrary to those rules of the
common law and equity which are in force in the
Federated Malay States."

12. § Public Finance Bhd v Narayanasamy
- Ong J who delivered the judgment applied the
common sense principle of fairness when he posed
the following question in order to dismiss the
appellants'/chargees' appeal "… can the appellants in
all good conscience apply to the court for an order of
sale to include property over which the respondent,
to their knowledge, has no power of disposal?”

13. § Kheng Soon Finance Bhd V Mk Retnam Holdings
Sdn Bhd & Ors
- held that on an application for sale of the land
charged the court has not only to apply the law but
also to invoke the aid of equity in order to be
satisfied whether a cause to the contrary has been
shown or not in accordance with section 256(3) of
the National Land Code. The chargee must not only
come to court with proof that the chargor has
defaulted but also with proof that the chargee
himself is free of fault and that he was not guilty of
any unreasonable conduct, and that there was no
right of innocent third parties to be affected by the
order.

14. the plaintiff had defaulted its obligation,
when it did not make the loan release
despite the fact that architect's certificates
were presented to it. Its insistence that
release would be made only after the
arrears of interest were settled is not
tenable because there is nothing in the
terms of the loan which requires the release
to be made conditional upon interest
payment. The action of the plaintiff in
withholding the loan release may well be
moved by a consideration to preserve its
own position, but this can never be justified
if it in turn leads to a breach of its
Application :

15. In regards to the rights of the purchasers which are the 2nd
defendant, it is thus clear that at the time of the loan and
charge transactions the appellant not only knew that the
land to be charged for the loan was parcelled into several
housing lots and sold to various purchasers, but it also had
knowledge of the contents of the Sale and Purchase
Agreement itself, although it might not know the purchasers
personally or individually. Now, that the 1st defendant has
failed to pay the interest and is unable to repay the capital,
should the plaintiff be allowed to pull out from the deal,
leaving innocent purchasers in the lurch? Certainly not.

16. the plaintiff is in default for refusing to
release further loan despite providing the
Architect’s Certificate of Completion thus
the application for order of sale should be
resisted.
Conclusion :