Table of Contents TOC o “1-3” h z u 1.0 ACKNOWLEDGEMENT PAGEREF _Toc518942943 h 22.0 INTRODUCTION PAGEREF _Toc518942944 h 32.1 INDEFEASIBILITY OF TITLE AND INTEREST PAGEREF _Toc518942945 h 4-53.
0 CASE STUDY 1: BOONSOOM BOONYANIT V. ADORNA PROPERTIES SDN. BHD. 19953.1 Background of the Cases PAGEREF _Toc518942947 h 63.2 Cases issue73.3 High Court8-93.
4 Court of Appeal10-113.5 Federal Court12-133.6 Discussion PAGEREF _Toc518942951 h 144.0 CASE STUDY 2: TAN YIN HONG VS TAN SIAN SAN & ORS 20104.
1 Background of the Cases154.2 Cases issue164.3 High Court17-184.4 Court of Appeal PAGEREF _Toc518942955 h 194.5 Federal Court20-214.6 Discussion225.0 DISCUSSION23-256.
0 CONCLUSION26-277.0 References: PAGEREF _Toc518942959 h 281.0 ACKNOWLEDGEMENTI would like to thank my beloved lecturer for guiding me in doing this assignment.
I couldn’t have be done it without her help. This assignment has been pieced together via the entire team and everyone played a part in making this research a success. I would like to personally thank the entire team for participating in this purposeful activity.2.
0 INTRODUCTIONMalaysia land law refers to the National Land Code 1965 (NLC 1965) which enacted to improve and strengthen the laws relating to land and land tenure, the registration and dealing with the title to land and the collection of revenue of the land. NLC 1965 consists of total 447 sections to govern the land. The purpose of National Land Code 1965 is to provide a uniform land holding and management system in all eleven states in Peninsular Malaysia to solve the complexity of management by 7 separate land laws in Peninsular Malaysia before this. NLC 1965 modelled based on Australia Torrens System and came into force on 1 January 1966 in Malaysia. The defining feature of the Torrens System of registration as compare to previous models of land registration practiced by common law systems. Meanwhile Torrens System is not a system of registration of title but a system of title by registration.
The publish of this system is to save persons dealing with registered proprietors from the trouble and expense of going behind the register, in order to investigate the history of their author’s title, and to satisfy themselves of its validity. Section 340 of the NLC 1965 provides the concept of indefeasibility of title and interest. The function of this section is to protect the registered owner immune from attack by adverse claims affecting the particular land and secure his/her interest.
The indefeasibility of title is either in immediate or in deferred. The immediate indefeasibility states that a land titles system creates a system of title by registration that is designed to protect innocent parties such as purchasers and lenders who rely on the land titles register. Once a void instrument is registered, its defects are cured and it is effective to give good title even if acquired by fraud. As a result, the interest of a party acting in good faith without notice of the fraud is immediately indefeasible on its registration if it takes from the person that the register showed to be the registered owner, even if that person committed fraud.On the other hand, the deferred indefeasibility is defined into three classes of parties which the original owner, intermediate owner and the person who dealt with the fraudster. Only a deferred owner defeats the original owner’s title. The registration of a void instrument does not cure its defects, and so registration does not give good title.
In deferred indefeasibility, the loss will fall to the intermediate owner because the intermediate owner had an opportunity to investigate the transaction and avoid the fraud.2.1 INDEFEASIBILITY OF TITLE AND INTEREST Section 340 of NLC1965 – Registration to confer indefeasible title or interest, except in certain circumstances. Section 340(1)The title or interest of any person or body for the time being registered as proprietor of any land, or in whose name any lease, charge or easement is for the time being registered, shall, subject to the following provisions of this Section, be indefeasible. Explanation The effected proprietor’s registration will obtain an indefeasible title to the land or interest in the land.Section 340(2) The title or interest of any such person or body shall not be indefeasible- In any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy; or Where registration was obtained by forgery, or by means of an insufficient or void instrument; or Where the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law. ExplanationIf the land has been obtained by fraud or forgery under Section 340(2), the title or interest of the land so acquired is liable to be set aside.In the case of fraud or misrepresentation, the title or interest obtained will become defeasible where the proprietor or his agent is a party or privy to the fraud or representation under Section 340(2)(a).
In the case of forgery or by means of an insufficient or void instrument, the title or interest so acquired by the proprietor or transferee immediately to the forgery or by means of an insufficient or void instrument will become defeasible and liable to be set aside under Section 340(2)(b) regardless of whether the said proprietor or transferee acted in good faith in acquiring the title or interest. Section 340(3) Where the title or interest of any person or body is defeasible by reason of any of the circumstances specified in sub-section (2)- It shall be liable to be set aside in the hands of any person or body to whom it may subsequently be transferred; and Any interest subsequently granted thereout shall be liable to be set aside in the hands of any person or body in whom it is for the time being vested: Provided that nothing in this sub-section shall affect any title or interest acquired by any purchaser in good faith and for valuable consideration, or by any person or body claiming through or under such a purchaser.ExplanationAccording to Section 340(3)(a), if the title or interest is defeasible due to the reason of the circumstances specified in Section 340(2) and is subsequently transferred, then the subsequent proprietor or transferee will similarly obtain a defeasible title or interest.According to Section 340(3)(b), if any interest subsequently granted out of a title which is defeasible under Section 340(2), will have the same consequence.
However, if the subsequent proprietor or transferee gives valuable consideration for the title or interest in question and acts in good faith, the provision to Section 340(3) confers protection on such a subsequent proprietor or transferee such that his title or interest will be indefeasible.3.0 CASE STUDY 1: BOONSOOM BOONYANIT V. ADORNA PROPERTIES SDN. BHD. 19953.1 Background of the Case In 1989, Boonsom Boonyanit, is a woman of Thai national who was living in Bangkok. She owned two plots of land in Tanjung Bungah, Penang.
Without her knowledge, she discovered that two pieces of her land had been fraudulently transacted on, sold and transferred to Adorna Properties. Upon discovering what had happened, and realizing that she had become a victim of somebody’s deceit. After that, Boonsom Boonyanit went to court to challenge the validity of the transfer of her land to Adorna Properties by the imposter. An imposter claiming to be Sun Yok Eng @ Boonsom Boonyanit affirmed a statutory declaration on 18 June 1988 that she had lost the original title to the land.
The imposter then managed to obtain a certified copy of the title from the Land Office. On 6 April 1989, the imposter affirmed a second statutory declaration stating that the names Boonsom Boonyanit and Sun Yok Eng @ Boonsom Boonyanit on the title to the land were one and the same person, that is, Boonsom Boonyanit (imposter) with a different Thai passport number. Boonsom Boonyanit then sued for the return of the land. However, the High Court could not determine whether the signature on the instrument of transfer was a forgery or not. It demanded a higher standard of proof of forgery from Boonsom Boonyanit. The High Court continually held that Adorna Properties had acquired an indefeasible title to the land and dismissed Boonsom’s claim. After that, The Court of Appeal held that forgery was proved by Boonsom Boonyanit, ruling that the standard of proof required to verify forgery in civil proceedings is “on the balance of probabilities”, not “beyond reasonable doubt”. The Court of Appeal then ruled that the title be handed back to Boonsom Boonyanit.
Unfortunately, the Federal Court unanimously decided in Adorna Properties’ favour. It agreed with the Court of Appeal that the standard of proof to prove forgery in this case is on the balance of probabilities and not beyond reasonable doubt.3.2 Cases issueHigh CourtThe learned judge identified the following issues turn up from the joiner expose in the pleadings:whether the memorandum of transfer in favour of the respondent was a forgery; whether forgery, when raised in civil proceedings, had to be established beyond a reasonable doubt or whether it was sufficient to prove it on a balance of probabilities;whether the appellant was the registered proprietor of the said land prior to its transfer to the respondentif it was, then, whether the respondent had acquired an indefeasible titles to the said land (Hba.
org.my, 2016)Court of AppealThe reasoning of the Court of Appeal is that there are actually two kinds of indefeasibility. The first kind is immediate indefeasibility and the second kind is deferred indefeasibility.
Federal CourtIssue for considerations:-Before us, two question of law were posted for decision and the first is:For proof of forgery such as the one under appeal, whether the standard of proof is on balance of probabilities, or on beyond reasonable doubt?The other question put for argument and decision in this appeal is:Whether the defendant, a bona fide purchaser for valuable consideration without notice, acquired an indefeasible title to the properties (the lands) by virtue of s 340(3) of the National Land Code 1965? 3.3 High CourtParty Relationship: Plaintiff – Mrs Boonsom BoonyanitDefendant– Adorna Properties Sdn BhdA company incorporated in Malaysia which is the defendant (Adorna Properties Sdn Bhd), did present or caused to be presented, at the land office for registration, a stamped memorandum of transfer of the said properties purportedly signed by the plaintiff (Mrs Boonsom Boonyanit) as transferor to the defendant as transferee dated 7 April 1989 and the same was registered on 24 May 1989; This judgment was conducted at High Court Malaya, Penang by Tuan Vincent Ng Kim Khoay J, CIVIL SUIT NO. 22-401-89 on 25 April 1995. In High Court, the plaintiff stated that the memorandum of transfer made on date 7 April 1989 was procured by forgery and/or fraud. The plaintiff stated that she did not enter into any agreement with the defendant and did not execute the said memorandum of transfer in favour of the defendant or authorised anyone to do on behalf of her.
Therefore, the plaintiff claimed for recovery and reinstatement of all her right title and interest in the said properties. The plaintiff sought for a declaration that she is the registered owner of the said properties and said that her right title and the interest to the properties is not affected by the purported transfer to the defendant which shall be void ab initio. The plaintiff also sought for the registrar of land titles to cancel the entries or memorials in the register of land titles in favour of defendant and restore the plaintiff’s name as the registered owner of the said properties. However, the defendant in their defence denied that the fake plaintiff was the registered proprietor of the said properties, the said memorandum of transfer dated 7 April 1989 was procured by forgery or fraud as alleged in paragraph 4 of the amended statement of claim and the particulars appended, all the particulars of fraud or forgery set out in the amended statement of claim so the fake plaintiff is entitled to the remedies sought.
Then, plaintiff entered a Registrar’s Caveat against the two land, which Dzaiddin Jaffirmed in a judgment on 7 December 1989. For the judgment of High Court, the judge decided that the defendant had an indefeasible titles to the land. The judge in the High Court referred to Section 340(3) of the NLC 1965. In NLC 1965, Section 340(3) says:”Where the title or interest of any person or body is defeasible by reason of any of the circumstances specified in sub-section (2): -It shall be liable to be set aside in the hands of any person or body to whom it may subsequently be transferred; andAny interest subsequently granted thereout shall be liable to be set aside in the hands of any person or body in whom it is for the time being vested:Provided that nothing in this sub-section shall affect any title or interest acquired by any purchaser in good faith and for valuable consideration, or by any person or body claiming through or under such a purchaser.This Section gives the person who receives the land indefeasible title if he is a purchaser in good faith and for valuable consideration. The judge in the High Court took that proviso in Section 340(3) and applied it to Section 340(2) to decide that even where there is forgery, a bona fide purchaser’s title would remain indefeasible.
“I hold that even had I found that forgery had been proved beyond reasonable doubt, the defendant (Adorna) is nevertheless protected and has acquired indefeasible title over the said properties by virtue of the proviso in s. 340(3).” – Vincent Ng J, High Court (Penang) on the 29th of April 1995,Based on the judgment, Boonsom Boonyanit effectively lost her land title because of the decision of the judge means that no one’s property is ever safe.3.
4 Court of AppealParty Relationship: Appellant – Mrs Boonsom BoonyanitDefendant– Adorna Properties Sdn BhdJudgment of Court of Appeal was conducted at Kuala Lumpur, Malaysia in 17 March 1997. CIVIL APPEAL NO: P-02-268-1995. The Court of Appeal, comprising of Gopal Sri Ram, Siti Norma Yaakob and Ahmad Fairuz JJCA, aside the faulting from High Court judge, Vincent Ng Kim Khoay J for applying the wrong standard on the proof for forgery, held that section 340(3) NLC only granted Adorna Properties mere deferred indefeasibility. Indefeasibility, according to the justices of appeal, Adorna Property’s indefeasibility was postponed until the time when a subsequent purchaser acquired the title in good faith and for valuable consideration. In the Court of Appeal judgment, the words “any purchaser” appearing in the proviso to Section 340(3) refer to the subsequent and not to an immediate purchaser, hence creating a deferred indefeasibility which benefits for subsequent purchasers. The Court of Appeal reversed the judgement and orders make by the High Court, and restored the deferred indefeasibility concept in Section 340 of the National Land Code.
In the Court of Appeal, the judges decided that the Appellant is the rightful owner and the property has to be returned to her. The reasoning of the Court of Appeal is that there are actually two kinds of indefeasibility. The first kind is immediate indefeasibility and the second kind is deferred indefeasibility. In a very simplistic manner, immediate indefeasibility means that immediate purchaser gets an undisputed title and stands strong against all other claims.
The thrust of the Court of Appeal’s decision is basically that Malaysia’s land law system confers deferred indefeasibility. This means that Boonsom Boonyait is entitled to her land because Adorna Properties (even if they are bona fide), had received the property through fraud and therefore according to NLC 1965, Section 340(2), they do not have the protection of indefeasibility.In NLC 1965, Section 340(2) says: The title or interest of any such person or body shall not be indefeasible- In any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy; or Where registration was obtained by forgery, or by means of an insufficient or void instrument; or Where the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law.
Section 340(3) does protect bona fide parties but only in a subsequent transfer.”The section should be read as making defeasible the title of a proprietor who gets unto the register by means of one or more of the methods specified in the second subsection. However, if such a registered proprietor were to dispose of the land to a third party who, in good faith, pays the purchase price, then, the latter, as well as those who came on the register after him, take title free of any taint.” – Gopal Sri Ram JCA, Court of Appeal on the 17th of March 1997This division makes it clear that Parliament intended to discuss deferred and not immediate indefeasibility. The judges in the Court of Appeal saw Section 340(2) and Section 340(3) as two separate provisions and because of that, the proviso in Section 340(3) cannot be taken and used for situations of fraud that is covered in Section 340(2). The Court of Appeal held that on the evidence that Boonsom Boonyanit provided had been adduced at the trial stage, Boonsom Boonyanit had successes in proving her case on a balance of probabilities.Based on the judgment, Boonsom Boonyanit has successfully appeal and once again entitled to her land title.
3.5 Federal CourtParty Relationship: Appellant – Adorna Properties Sdn BhdDefendant– Mrs Boonsom BoonyanitDissatisfied with the decision of the Court of Appeal, Adorna Properties had obtained permission appealed to the Federal Court. In Federal Court, there is two issues bring to the court which is ‘the standard of proof to verify forgery’ and ‘whether the Adorna Properties are entitled for an indefeasible of title’.
Judgement of Federal Court conducted at Federal Court Malaysia in 13 December 2000 by Mohd Eusoff Chin Cj (Malaysia), Wan Adnan Ismail Cj (Malaysia) and Abu Mansor Ali FCJ.The Federal court agreed with the Court of Appeal that the standard of proof to prove forgery in this case is on the balance of probabilities and not beyond reasonable doubt. Although in NLC Section 340(2) (b) stated that a land title can be appeal where the registration was obtained by forgery. Federal High Court focused on the issue of whether Adorna Properties had obtained an indefeasible title to the said property under Section 340(3) of, Adorna Properties was excluded from the application of the substantive provision of the sub-Section, with the result that, aside from the instrument of transfer by which Adorna Properties came to be registered as proprietor was forged. However, the Federal Court held that despite the instrument of transfer being a forgery, the Adorna’s land title was valid due to a proviso under Section 340(3). The proviso of Section 340(3) of the National Land Code deals with only one category of registered proprietors for a temporary period as it excludes from the main provision of sub-Section(3) this category of registered proprietors so that these proprietors are not caught by the main provision of this sub-Section. The proviso says that “any purchaser” for valuable consideration and was in good faith claiming through or under him is excluded from the application of the substantive provision of sub-Section (3). Adorna Properties had entitled to an indefeasible title because it was a bona fide purchaser for value without notice.
The provision for a bona fide purchaser is set out in NLC 1965 Section 340(3).Emphasising that its duty is to determine “the real intention of Parliament” in enacting the law and to deduce that intention “from the language used” in the Code, the Federal Court said that the NLC 1965 Section 340(3) protects Adorna Properties because as a bona fide purchaser, it had obtained an immediate indefeasibility and notwithstanding the fact that the instrument used was “a forged document.”What the Federal Court said:”We therefore, agree with the High Court Judge that, on the facts of this case, even if the instrument of transfer was forged, the respondent nevertheless obtained an indefeasible title to the said lands.” – Eusoff Chin CJ, Federal Court on the 13th of December 2000.The Federal Court agreed with the High Court judgement and Adorna Properties got an indefeasible title. This means that Boonsom Boonyait lost her property and titles in final result in this court.
Before the decision of Adorna Properties, the prevailing view was that Section 340 of the NLC confers deferred indefeasibility as opposed to immediate indefeasibility. This was confirmed by the Federal Court in Mahammad bin Buyong v Pemungut Hasil Tanah Gombak & Ors 1982 2 MLJ 53.This is further reinforced by the Supreme Court’s decision in M & J Frozen Food Sdn Bhd & Anor v Siland Sdn Bhd & Anor 1994 1 MLJ 294. There the Supreme Court, comprising of Abdul Hamid Omar LP, Edage Joseph Jt and Wan Yahya SCJJ head that indefeasibility can be invalidated not only by fraud but also in cases where registration is obtained by the use of as insufficient or void instrument or where the title of interest is unlawfully acquired.3.6 DiscussionFrom the above judgement, we can see that the judgement from High Court applied immediate indefeasibility and misinterpreted as it judged by the Section 340 (3) and set aside the section 340 (2) of National Land Code. While in Court of Appeal, the judgement and orders made by High Court was set aside as they judge based on the Section 340 (2) of the National Land Code.
The Court of Appeal reversed the decision of the High Court, and reinstated the deferred indefeasibility concept in Section 340. However, the victory was not long-lived. In Federal Court, the effect to be given to sub section (3) having said that the appellant in Adorna Properties had acquired its title to the land through or under it forged instrument and it therefore came under the category of title in sub section (2) (b), the court then went on to hold that such a title is isolated from impeachment by the proviso to sub section (3).
For the above reasons, with respect, we hold that the Federal Court in Adorna Properties had misinterpreted section 340(1), (2) and (3) of the National Land Code and came to the mistaken conclusion that the proviso appearing in sub-section (3) equally applies to sub-section (2).By so doing, the Federal Court gave acknowledgment to the concept of immediate indefeasibility under the National Land Code which we think is opposing to the provision of section 340 of the National Land Code.The judgement was heavily criticised. Boonsom’s son further sued the Penang State Government for negligence and breach of statutory duty.
Even though the judge found the Penang government guilty of said charges, the application was dismissed because the legal suit was brought 36 months later than what was allowed under the law and over the time-barred. Adorna had sold the land over to Diamaward (M) Sdn Bhd, a subsidiary of Hunza Properties Berhad for RM13, 220,000 on the 7th of October 2004. After that, there is a new residential condominiums named The Infinity Beachfront Condominiums was constructed on that land. Boonsom passed away without getting the justice she deserved and lawyers found this to be a major loophole in the law that undermined the protection the Torrens System was meant to confer. This means that a poor Thai lady valiantly fought her case for 10 years only to get a judgment that not only did not serve justice on her, but also left all landowners in Malaysia quaking in fear at the thought that their land will never be truly safe…. 4.0 CASE STUDY 2: TAN YIN HONG VS TAN SIAN SAN & ORS 20104.
1 Background of the Case 4505325179070Cini Timber Industries00Cini Timber Industries2886075276225UMBC (Immediate purchaser)00UMBC (Immediate purchaser)200025223520Tan Yin Hong00Tan Yin Hong416242585090278701546355001830705287655Tan Sian San00Tan Sian San146685019494500 Charged the land as a securityTan Sian San forged the loan to UMBC (now known as signature of Tan Yin Hong RHB bank) for Cini Timberand created power of attorneyTan Yin Hong, a Pahang landowner. In 1976, the Pahang government had alienated and issued a land title of nine-acre plot land in Kuantan under his name without his knowledge. In 1985, Tan Yin Hong received a letter from the United Malayan Banking Corporation (now known as RHB bank) demanding a repayment for a sum amounting to RM309, 000 for an overdraft facility given by the bank to a Cini Timber Industries. Upon investigation, he discovered that a person named Tan Sian San had forged his signature in 1977, and created a power of attorney, a document stating that he was authorized to act on behalf of Tan Yin Hong.
With the forged power of attorney, Tan Sian San then charged the land to RHB Bank in 1984 as security for a loan to Cini Timber Industries, and subsequently disappeared. In 1987, Tan filed a suit against the bank. In 2003, High Court dismissed his application, based on the Adorna Properties decision.
The Court of Appeal upheld the ruling in 2009.On 29 Oct 2009, the Federal Court was asked to determine a question of law arising from its decision which was delivered by then-Chief Justice, Tun Eusoff Chin in his four-page Boonyanit case decision in 2000. The Federal Court had ruled that a person who acquires a land title either through legal means or by a forged or fraudulent title, has a legal claim to the property.
The Federal Court directed RHB bank to pay the amount of RM75, 000 as legal costs to Tan Yin Hong, who is still living in Kuantan. As it held that he had fought for the matter in his personal interest and did not bring the case to court as a public interest case. 4.2 Cases issueThe principal issue in this case is whether Section 340 of the National Land Code (NLC) confers upon the registered proprietor or any person having registered interest in the land an immediate or deferred indefeasibility. This was once to be considered as a settled question of law until the decision made by the Court in Adorna Properties Sdn Bhd vs Boonsom Boonyanit @ Sun Yok Eng 2001. In that case it was held, inter alia, that by the proviso to sub-section (3) of Section 340 of the NLC stated any purchaser in good faith for valuable consideration is excluded from the application of the said provision above.
It follows, therefore, that this category of proprietors enjoys immediate indefeasible title to the lands. Thus, despite the court’s finding that the instrument of transfer was forged nevertheless the appellant obtained an indefeasible title to the land. The decision of this Court in that case had a far-reaching effect on the land law and land administration in this country. 4.3 High CourtParty Relationship: Appellant – Tan Yin Hong1st Respondents – Tan Sian San2nd Respondents – Cini Timber Industries Sdn Bhd3rd Respondents – United Malayan Banking Corporation Bhd (RHB Bank)Tan Yin Hong filed a claim in the High Court seeking a declaration that the said charges are void ab initio, an order expunging from the register and the issue document of title the memorial of charges against the land. He also claims that an order directing RHB bank to deliver up to him the issue document of title to the land and a declaration that the power of attorney purportedly executed by him in favour of the Tan Sian San is void ab initio and an order cancelling or revoking the same.
Tan Yin Hong also asked for damages, costs, interest and further or other reliefs. The learned High Court Judge made the following findings, which the registration of the Tan Yin Hong in the issue document of title was obtained by fraud or forgery. Tan Yin Hong had never charged the land to the RHB bank and granted the Power of Attorney to the Tan Sian San. Tan Yin Hong also had never given authority to the Tan Sian San to charge the land to the RHB bank.The learned trial judge went on to say that: In view of the above, Section 340(2) National Land Code applies, which renders the Appellant’s title defeasible.The Appellant does not come within the category of persons entitled under the National Land Code s.
340(3)(a) and (b) to seek an order to nullify the charges.The charges are void would prejudice the Third Respondent’s rights as holders of the charges.Based on judgment of the court above, there was no dispute that the Tan Yin Hong is certainly the registered owner of the said land. There was also no dispute that the land was charged to the RHB bank as security loan for banking facilities granted to the Cini Timber Industries. In 2003, Tan Yin Hong lost his case in the High Court because it is common ground that the RHB bank, in whose favour the charges were registered, is an immediate holder of the interest on the land. The high court held that:”However, we are of the opinion that the appellant bank (which is a chargee, being the holder of subsequent interest in the Land is protected by the proviso to section 340(3) of the NLC.
“The high court dismissed his application, based on the Adorna Properties decision. By the proviso to s 340(3), any purchaser in good faith for valuable consideration enjoyed immediate indefeasible titles to the lands. This meant that despite the court’s finding that there was forgery, the third respondents obtained an indefeasible title to the land. The appellant appealed against the decision. Lastly, the appeal was allowed. 4.
4 Court of AppealParty Relationship: Appellant – Tan Yin Hong1st Respondents – Tan Sian San2nd Respondents – Cini Timber Industries Sdn Bhd3rd Respondents – United Malayan Banking Corporation Bhd (RHB Bank)At the beginning, the counsel for the Third Respondents proposed that should the Appellant withdraw his appeal, the Third Respondent will not proceed with any shortfall upon the sale of the land, and that each party bear their own costs. The counsel for the Appellant takes time to get instructions from her client and the matter was stopped for ten minutes. When the court resumed its sitting, counsel informed the court that Appellant wished to proceed on the appeal, both parties were heard that.The Court of Appeal upheld the ruling in 2009. The purpose of the Appellant is to revoke the charges, pursuant to the Respondent’s demand for the repayments of the overdraft and loan facilities.
The Court of Appeal discovered that the title of the Third Respondent is indefeasible in the charge, and was an innocent party. Thus, its interest as a charge is indefeasible unless there is evidence proves that there is fraud or misrepresentation or where the registration of the charge was obtained by forgery or where the title or interest was unlawfully acquired by the Third Respondent’s knowledge. Tan Yin Hong also failed at the Court of Appeal when a three-judge panel dismissed his appeal after ruling that the Third Respondent had obtained immediate indefeasibility of its interest. After that, the Court of Appeal agrees that the issue of ownership of the land is a contentious issue, in view of Adorna Properties, said that regard must be had to the evidence before the High Court. The Court of Appeal concluded:”The position seems to be this, the appellant though registered as land owner did not actually own the land.
On the facts, this position can be distinguished from those in Adorna Properties. However the interest of the said land was subsequently granted to the 3rd respondent as chargee who is bona fide and who acquired the interest in good faith with consideration.” 4.5 Federal CourtParty Relationship: Appellant – Tan Yin Hong1st Respondents – Tan Sian San2nd Respondents – Cini Timber Industries Sdn Bhd3rd Respondents – United Malayan Banking Corporation Bhd (RHB Bank)The Federal Court decision, which affirmed by the Court of Appeal decision in 2009, marks the end of Appellant’s long legal battle. The Appellant appealed against the judgment.
The principal issue for the court in this case was whether S.340 of the NLC conferred immediate or deferred indefeasibility upon the registered proprietor or any person having a registered interest in the land, that is whether the Adorna Properties’ case was correctly decided, and the proper construction to be accorded to S. 340(1), (2) and (3) of the NLC. In this case, a single question was posed to the Federal Court was like that:”Whether an acquirer of a registered charge or other interest or title under the National Land Code 1965 by means of a forged instrument acquires an immediate interest or title.
“The Federal Court was asked to review the decision made in the case of Adorna Properties Sdn Bhd v Boonsom Boonyanit 2001. The decision was that a purchaser who in good faith for valuable consideration could acquire good title to a property even though the instrument of transfer was a forged instrument. The Federal Court, comprising of a panel of 5 judges, first considered the question whether Adorna Properties was correctly decided. The Court, in a consistent decision, concluded that the judges in the Federal Court in Adorna Properties had misconstrued Section 340(1), (2) and (3) of the NLC by coming to the erroneous conclusion that the proviso to sub-section (3) applied equally to sub-Section (2). By doing so, the Federal Court in Adorna Properties gave recognition to the concept of immediate indefeasibility under the NLC contrary to the provisions of Section 340. The Federal Court then applied the re-stated principles of indefeasibility to the facts of Tan Yin Hong and held that the registered charges were liable to be set aside under Section 340(2)(b) NLC 1965 as it was not disputed that they were void instruments as the relevant Form 16A were not executed by the Tan Yin Hong, which were executed by the Tan Sian San pursuant to a forged power of attorney. Thus, the charge instruments (Form 16A) used in the present case was indisputably void instruments.
The Court further held that the RHB bank could not avail itself of the proviso to Section 340(3) as it was the immediate holder of those charges.Accordingly, the Federal Court granted the orders sought by the appellant including:A declaration that the charges were void ab initio; An order that the memorial of those charges be expunged from the register and issue documents of title to the land; and An order that the 3rd Respondent deliver-up to the Appellant, the issue document of title to the landThe Federal Court said: “We are of the view that the proviso is directed towards the provision of subsection (3) alone and not to the earlier subsection. This in our view is supported by the use of the words “in this subsection” in the proviso. Therefore, its application could not be projected into the sphere or ambit of any other provisions of s.340.”The decision of Federal Court in Tan Yin Hong’s case is that the Appellant had admitted himself didn’t apply for the land and was not aware of the land had been already registered under his name until he had received the letter of demanding a repayment from the Third Respondent.
These facts were raised by the Third Respondent in the support of its contention that the Appellant should not be entitled to the relief sought. The Federal Court had rejected the contention on the basis that none of the parties including the Third Respondent, had challenged that the Appellant was the original registered holder of the land title. In other words, the result of the Federal Court’s decision in Tan Yin Hong is that the Appellant may have been unfairly enriched as he ended-up being the registered proprietor of a piece of land which he did not apply for or purchase of.In conclusion, the Federal Court unanimously decided that any person acquiring a title or interest on a property via a forged instrument of dealing cannot be allowed an immediate indefeasible interest or title. The Federal Court also directed RHB bank to pay RM75, 000 in legal costs to Tan Yin Hong, who is still living in Kuantan, as it held that he had fought for the matter in his personal interest and did not bring the case to court as a public interest case.4.
6 DiscussionThe both High Court and Court of Appeal were applying the principle in Adorna Properties case that was immediate indefeasibility, the Third Respondent acquired immediate indefeasibility of the land interests. Then, the Third Respondent didn’t acquire its interests under an instrument that was void. In fact, the Third Respondent had acquired its interests to all intents and purposes, as an interest subsequently granted from the Appellant which was being registered in good faith and for valuable consideration.Lastly, the Federal Court applied deferred indefeasibility for Tan Yin Hong case and did not follow with the decision of Federal Court in Adorna Properties which had misconstrued with the Section 340(1), (2) and (3) of the National Land Code and thus come to the erroneous conclusion that the proviso to Section 340(3) applied equally to Section 340(2), to interest of all registered proprietors, this error needed to be rectified forthwith.Nonetheless, Tan Yin Hong is a decision which should be welcomed by the landowners because it provides them an additional protective layer to prevent the loss of their lands by fraudulent means or forged instruments. Tan Yin Hong is a landmark decision as it restored the principle of deferred indefeasibility with the immediate indefeasibility to Section 340 of the NLC. In the words of the learned Chief Justice of Malaysia, Tan Sri Zaki bin Tun Azmi, the “obvious and blatant error” committed in Adorna Properties was an error and rectified in Tan Yin Hong case.
5.0 DISCUSSIONBOONSOOM BOONYANIT V ADORNA PROPERTIES SDN. BHD.In the case of Boonsom Boonyanit v Adorna Properties, it involves many judgments with many different outcomes which showed poor consistency. First and foremost, the land office not checking the identification and go through the process of proper credential obtaining when giving the copy of the land title to the impostor. After that, the High Court make their judgments adapted to the standard proof beyond reasonable doubt, which need to prove with the standard evidence. In that situation, Boonsom Boonyanit did not have any prove that her signature was forged by others.
Hence, the Court apply the Section 340(3) of NLC which reads: “Provided that nothing in this subsection shall affect any title or interest acquired by any purchased in good faith and for valuable consideration, or by any person or body claiming through or under such a purchaser”, which stated that the purchaser with bone fide and valuable consideration have the rights to obtained the indefeasible title, but the problem in sub-section 3 is only applicable to the subsequent purchaser. The words ‘any purchaser’ is refers to anyone included the first purchaser/transferee. In this case, Adorna Properties Sdn Bhd is not subsequent purchaser, he is direct purchaser.
The Federal Court have agree with the High Court Judge that, on fact of this case, even if the instrument of transfer was forged, the respondent nevertheless obtained an indefeasible of titles to the said lands so that Boonsom Bonyanit lost the cases in High Court.Then, Boonsom Boonyanit made appeal in the Court of Appeal. In the Court Of Appeal, it favour to Boonsom Boonyanit at this time, this is due to the judge held that the word ‘ any purchaser’ refers in the NLC Section 340 (3) is refers to a subsequent buyer but not to the immediate buyer to protect the subsequent buyer only, which lead the title become deferred indefeasibility. So, in Section 340 (2) stated that forgery or fraud case will lead to defeasible of title, so that Boonsom Boonyanit won the case. Next, Adorna Properties made an appeal to the Federal Court. In 2001, the Federal Court now turned back to the favour of Adorna Properties again which they applied immediate indefeasibility.
Unfortunately, Boonsom Boonyanit lost back the cases in Federal Court because the Federal Court held that by virtue of the provision to sub-S(3) of S340 of the NLC 1965, any purchaser in good faith and for valuable consideration are excluded from the application of the substantive provision of sub-S(3). The proviso to sub-S (3) of S 340 of the NLC 1965 deals with only one class or category of registered proprietors for the time being. It excluded from the main provision of sub-S (3) this category of registered proprietors so that these proprietors are not caught by the main provision of this subsection. Who are these proprietors? The proviso says that any purchaser in good faith and for valuable consideration or any person or body claiming through or under him are exclude from the application of the substantive provision of sub-s(3). For this category of registered proprietors, they obtained immediate indefeasibility notwithstanding that they acquired their titles under a forged document.
They obtained immediate indefeasible title to the land. In this case, even if the instrument of transfer was forged, the respondent nevertheless obtained an indefeasible title to the land. This decision drew much criticism from academics as being clearly wrong. It also caused grave concern amongst land owners who become vulnerable to losing their land even though the use of forged instruments of transfer.
Many courts reluctantly followed this case as it was a judgment of the highest court in Malaysia so called as the nightmare of other land owner.In my opinion, the decision of the high court was in poor taste, stating that no property is ever safe. Boonsom Boonyanit already has the title to the land also being impersonated and stripped from all her riches. Boonsom Boonyanit was at the wrong place at the wrong time. If an owner is unable to defend her own title of the land, it defeats the whole purpose of law, which was made to protect the people. This explains the loophole in the law, which undermines protection of Torrens System.
The court of equity should step in to protect individuals facing fraud problems. Both the High Court and Federal Court also wrongly uses the Section 340(3) which is for deferred indefeasibility, but they use it as immediate indefeasibility against Boonsom Boonyanit. This is wrong because Adorna Properties is not the subsequent buyer. Making Adorna Properties triumph against Boonsom Boonyanit over good faith and other reasons. This case is being largely criticized. The federal court is also being criticized for and though it may seem bad, but this sets as an example of the flaws in our country’s land law and justice system. Thus, they are taking action to change it and making Boonsom’s effort and sacrifice not be in vain.
TAN YIN HONG V TAN SIAN SANIn the case of Tan Yin Hong v Tan Sian San, the court was not in favour of Tan Yin Hong first because High Court was made the judgment according the decision of the Federal Court in Boonsom Boonyanit vs Adorna Properties case. In that case, according to the provision of Section 340(3), any subsequent purchaser in good faith for valuable consideration will enjoy indefeasible title to the lands. This reflected result on Adorna Properties still obtained an indefeasible title to the land although there was forgery. This totally an error made by Federal Court.
It is a wrong judgment because there was no valuable consideration between each parties. According to the findings, it found that there were a fraud or forgery. Besides, RHB bank is also not a party stated in Section 340(3) in NLC 1965. Hence, RHB bank also not a subsequent purchaser or owner of the land, so that was a wrong judgment. That’s why Tan Yin Hong lose the case in High Court.Tan Yin Hong also failed at the Court of Appeal when a three-judge panel dismissed his appeal after ruling that the RHB bank had obtained immediate indefeasibility of its interest.Finally, the Federal Court did not follow the unfair judgment of Adorna Properties Case, that the decision of Adorna Properties had misconstrued about Section 340 by erroneous conclusion that the proviso appearing in Section 340 (3) equally to Section 340 (2).
They also acknowledged their past error of reading and decided that any one acquiring a land via a forged title cannot be allowed an immediate indefeasibility of title. The Federal Court then applied the re-stated principles of indefeasibility to the facts of Tan Yin Hong and held that the registered charges were liable to be set aside under Section 340(2)(b) NLC 1965 as it was not disputed that they were void instruments as the relevant Form 16A were not executed by the Tan Yin Hong, which were executed by the Tan Sian San pursuant to a forged power of attorney. This cases will become a landmark decision as it restored the principle of deferred indefeasibility with the immediate indefeasibility to Section 340 of the NLC. In this case, the law has successfully protected the interest of Tan Yin Hong.Similarity and difference between 2 casesSimilarity Differencefraud/forgery justicewrong section’s judgment of court immediate/deferred indefeasibility of titles6.0 CONCLUSIONIn conclusion, two famous cases that related to the indefeasibility of title under the Section 340 of the National Land Code 1965 have been studied which is the Adorna Properties Sdn Bhd vs Boonsom Boonyanit @ Sun Yoke Eng 1995 and the Tan Yin Hong vs Tan Sian San & 2 Ors. 2010 cases. The first one relied heavily on the immediate indefeasibility while the second one relied on the deferred indefeasibility.
Both the cases have same scenario as the Boonsom Boonyanit which the original land holders were forged by the third party to sell the land and disappear with the money acquired, but the results are different, which Tan Yin Hong won the case and Boonsom Boonyanit lost the case. In a common sense, this is definitely unfair to Boonsom Boonyanit when the moments Boonsom Boonyanit lost a land without any authorized permission and gained nothing in return. It was clear that the Federal Court had misconstrued the Section 340 (1), (2) and (3) which came to an erroneous conclusion. The error needed to be remedied in the interest of all registered properties, this error is normally known as a loophole which can easily destroy a legal party’s interest. The judge has to be clear with the definition word by word in every section to prevent cases happening to ensure the adjudication is fair to both of party. Based from High Court, Court of appeal to the Federal Court, the judge had ruled the different statement which has been proven of legal uncertainty as the court are changing the application of immediate and deferred indefeasibility of titles.Immediate indefeasible will grant the buyer the indefeasible title notwithstanding any fraud or forgery by the seller, this is definitely unsafe as if there is any possible platform for the third party to have the copy of registration title for the third party to sell, and moreover the third party might be an anonymous.
As in Boonsom Boonyanit case, imposter of Boonsom Boonyanit had successfully sold the land by obtained the title by using the applicant of immediate indefeasible of title. Due to this, many cases happen of land lost due to forgery and fraud as long as seller is a bona fide purchaser (Christiana Tan Lee Ling). Till today there are still many courts reluctantly followed this case’s decision in Malaysia. Even in 2010, Bench of Federal Court also ruled that the case of Boonsom Boonyanit v Adorna Properties “was erroneous”. However, if deferred indefeasibility of titles have been applied, it will be totally different. Imposter of Boonsom Boonyanit transferred the land to Adorna Properties, at this particular moment Adorna Properties is a defeasible title if the title was tainted by one or more of the vitiating elements set out in Section 340 (2) which involve the element of fraud, forgery or the title land was unlawfully acquired. Meanwhile if Adorna Properties has sold the land to another subsequent buyer, it will probably fall into two outcomes. Due to section 340 (3), the title can be set aside if the title has contain the element in Section 340 (2) which is fraud or forgery, the title will become defeasible and the title will be deferred which the original land owner can be claim.
However, if the purchaser is in good faith with valuable consideration, the title and interest will be indefeasible. From our opinion, we think that court should have applied for the deferred indefeasibility title. This can ensure the original land holder can avoid the loss of land by anyway, moreover this can also ensure that the new vendor can enjoy the indefeasible of title which lead to a win-win situation.Lastly, the type of indefeasibility of title using in Malaysia based on the National Land Code 1965 is now become deferred indefeasibility of title. This means that the indefeasibility of title of any person or party who subsequently acquire the title or interest is postponed.
With using deferred indefeasibility, it can protect the owner to certain extent as it does not protect the owner if there is bona fide subsequent purchaser. If any person or party acquires the title by fraud, forgery or unlawfully method, the title will become defeasible under Section 340(2) and the person or party will not grant the immediate indefeasibility of title upon the registration. This protect the innocent original registered owners to avoid loss their land easily. In brief, the land owner must be take care of their own land and be alerted when the land is having transaction or dealing. In other word, land owner should always keep an eye on their own land at all time.7.0 References:Slideshare.
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2018.Slideshare.net. (2018). Cases for Indefeasibility of Title. online Available at: https://www.
slideshare.net/azrinhafiz/list-of-cases-for-indefeasibility Accessed 29 Jun. 2018.Perumal, P., Perumal, P.
and Perumal, P. (2018). Immediate Proprietor/Interest Holder vs Subsequent Proprietor/Interest Holder. online LoyarBurok. Available at: http://www.loyarburok.com/2013/12/27/proprietorinterest-holder-subsequent-proprietorinterest-holder-section-3403-national-land-code-1965/ Accessed 29 Jun. 2018.
Doctrine-res-ipsa-loquitur.blogspot.com. (2018). TAN YING HONG v TAN SIAN SANG – Overruled? Adorna Properties Sdn Bhd v Boonsom Boonyanit @. online Available at: http://doctrine-res-ipsa-loquitur.
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