Charge Notes 2020 PDF

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Lecture Notes, Charge, Land Law 2 Hi, to those who decide to rely on these notes. Please note that they were made in early 2009, so updates are required. I edited them and personalized them, but the core was still from the lecture notes, so much credit is to be given to the lecture notes. It may not...

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Lecture Notes, Charge, Land Law 2 Hi, to those who decide to rely on these notes. Please note that they were made in early 2009, so updates are required. I edited them and personalized them, but the core was still from the lecture notes, so much credit is to be given to the lecture notes. It may not be adequate, there were still some extra cases on my printed copy. p.s. this is based on Malaysian law. 4.1 Definition - Charge Definition Sec 5 NLC: A charge is a “registered charge”. Types of charge Differences between charge and mortgage. Mahadevan s/o Mahallingam v Manilal & Sons (M) Sdn Bhd [1984] 1 MLJ 266 at 270 Our land law does not recognize a mortgage if it means a mortgage in the sense of English land law whereby the legal estate, i.e. ownership of the land is transferred to the mortgagee and what is left with the mortgagor is only an equitable right to redeem, known as equity of redemption. But our land law certainly recognizes a mortgage in the sense of Torrens system, whereby the mortgagor retains the legal ownership whilst the mortgagee acquires a statutory right to enforce his security. For the purpose of avoiding confusion, our National Land Code drops the word "mortgage" and uses the word "charge" in place of Torrens mortgage. Malayan United Finance Bhd v Tan Lay Soon [1991] 1 MLJ 504 This case basically says that equity of redemption in English and equity of redemption under the law of New South Wales, Australia which is closely similar to Malaysia are no equal. Interest in land Ho Giok Chay v Nik Aishah [1961] MLJ 49 Here the land was a Malay reserve land and was charged by the Kelantan Land Enactment. However, by the Malay Reservations Enactment, the vesting of interest in a Malay reserve land cannot by transfer or transmission the interest be vested in a non Malay. The chargee was non-Malay. The order for sale by public auction was dismissed and summons dismissed. T Bariam Singh v Pegawai Pentadbir Pesaka, Malaysia [1983] 1 MLJ 232 His Lordship said that a charge does not amount to interest in land because the charge is not gven any interest as to the enjoyment of the use of land. Also, he said that it was not the intention of the enactment to create charges in favour of non-Malays in the event of default as the land can never be sold to a non-Malay.

The case of Ho Giok Chay which charge was registered under the Kelantan Land Enactment 1938 no longer applicable as it had been repealed by the NLC and now a chargee can enforce a sale on the land. Malaysia Building Society Bhd v Johore Mining And Stevedoring Company Sdn Bhd [2004] 5 CLJ 82 I: D1 PA to D2 to obtain loan and subdivide land. D2 obtain loan from P but IDT in LO for subdivision so charge not registered. Substituted PA made from D2 to P. Undertaking between made between D2 and P that charge to be made once subdivision complete. st D2 got RM 20million and defaulted on repayment. D1 revoked 1 PA and refused to execute charges. P aggrieved and applied for declaration for charge entitlement of subdivided land. H: At the time the Substituted Power of Attorney was executed, the second defendant was the first defendant’s lawful attorney. Hence, the assignment of the legal propriety interest in the parent land and the power to sell and enter possession into the 1019 parcels in the event of default was in fact granted to the plaintiff by the first defendant through its attorney, the second defendant. Consequently, the plaintiff had a proprietary interest in the 1091 IDTs. That proprietary interest is more in the nature of a right in rem taking the form of an equitable charge. (a) What can be charged: s 241 Sec 241(1): Powers of charging (a) the whole, but not a part only, of any alienated land; (b) the whole, but not a part only, of any undivided share in alienated land; and (c) any lease of alienated land, may be charged under this Act with(aa) the repayment of any debt, or the payment of any sum other than a debt; or (bb) the payment of any annuity or other periodic sum. Sec 241(2): The powers conferred by sub-section (1) shall include power to create second and subsequent charges. Sec 241(3): Restrictions The said powers shall be exercisable in any particular case subject to(a) any prohibition or limitation imposed by this Act or any other written law for the time being in force; (b) any restriction in interest to which the land in question is for the time being subject; and (c) in relation to leases, the provision thereof, express or implied. Phuman Singh v Khoo Kwang Chong Any charge created in contradiction with stipulated restrictions and requirements will be void ab ibnitio & held unenforceable. Sec 241(4): Without prejudice to paragraph (a) of sub-section (3), no charge may be granted to two or more persons or bodies otherwise than as trustees or representatives.

Sec 244(1): Chargee can be entitled to the IDT (or in cases, the duplicate lease), in the event there is still liability in the charge. Types of land which can be charged: Sec 247: Postponement of priority of a charge to a subsequent charge can be made by Form 16C. Sec 245: Restriction on consolidation. Sec 246: Tacking on further advances.

(b) Ways of creating a charge Form 16A; or Form 16B Form 16A: for a charge to secure the repayment of a debt or the payment of any sum other than a debt. Form 16B: charges providing for payment of an annuity or other periodic sum (plus required stamping) Subject to Sec 241(3) & (4) What if you use the wrong form? V Letchumanan v Central Malaysian Finance Berhad [1980] 2 MLJ 96 I: The loan was to be paid in installments until request made. On default, chargee sought to sell the land, chargor objected on basis that Form 16A should have been registered. H: FC held that 16A was correct as the statutory form is flexible enough. (it was not to deviate or mislead, hence correct by virtue of the Interpretation Act) Tan Yen Yee v Equity Finance Corp Bhd [1991] 1 MLJ 237 Instrument used should be appropriate but by the Interpretation Act, any instrument shall not be invalidated by reason of any deviation that has no substantial effect and that is not calculated to mislead. (c) Creation of second charge and subsequent charges Sec 241(2): The powers conferred by sub-section (1) shall include power to create second and subsequent charges. Priorities to first registered charge Sec 244(2): A chargee having the custody of any issue document of title or duplicate lease shall, on the written request of the proprietor or lessee, and within such reasonable period as is specified in the request, produce the same at any Registry or Land Office so specified for any purpose for which it is required under any provision of this Act.

2. Effect of a Registered Charge

Sec 243: registration is ‘mandatory’ and not a choice. R & I Securities v Golden Castle Finance [1979] 1 MLJ 46 at 47. I: Request and consent from first chargee required before second charge or any further security or encumbrance could be executed over the land could be entered as in Clause 6 of the loan agreement. Applicant was requesting for an extension of caveat on the said land of the registered proprietor. The first chargee was not in agreement. H: The registered proprietors had by Clause 6 of the first charge at their own instance disabled themselves from creating further charges without consent of the first chargee. The applicants were aware of the restrictions and in the circumstances the application must be dismissed. Rights of the parties Implied Sec 249: Compliance with the sum secured for and interest and payment of any sum due to the State Authority or lessee (if relevant) and perform in compliance to the conditions the land is subject to. Sec 250: Agreement by chargor implied in absence of contrary intention: repair and keep all buildings, insure it to full value against loss or damage by fire, permit chargee’s agent to inspect upon notice, if failing, remedy may be taken. Sec 251: Implied agreement by chargee as to consent to leases, etc: implied agreement on chargee that consent to grant lease or tenancy is not be withheld without reasonable cause. Express agreement of parties. Sec 218(2): Transfer of charge by the act by Form 14B Sec 215: Form, and effect generally, of transfer of land: title to vest in the transferee. Sec 216: Additional provisions with respect to lands transferred subject to leases, charges, etc: interests on land will continue etc. Sec 244: Custody of IDT/Duplicate lease: Who keeps? 4.3 Effect of an Unregistered Charge – Equitable Charge Void Southern Bank Bhd v Chuah Beng Hock [1999] 5 MLJ 206 Charge created under Code only takes effect upon registration, no charge effective unless registered. Equitable charge Chuah Eng Khong v Malayan Banking Bhd [1998] 3 MLJ 97 Equitable mortgage (charge) still can exist in the presence of the Code. NLC did not

include what Selangor Registration of Title Regulations 1891, Sec 4 which voided equitable mortgages. RRM Arunasalam Chetty s/o Sithambaram Chetty v Teh Ah Poh trading under the style of Mun Seng Hin Kee & Anor [1937] MLJ 317 Expression of equitable mortgage -> Act of securing by deposit of title for a loan agreement, however you don’t get a protection on par with the NLC, but the equitable charge bring an equitable favor to the creditor. Mahadevan s/o Mahallingam v Manilal & Sons (M) Sdn Bhd [1984] 1 MLJ 266 H: an agreement to secure a debt by land – create equitable charge, give rise to equitable right though not registered under NLC, so the remedy can’t be granted as per the NLC. If failed to register, lender may be able to seek recognition Effects Tan See Hock v Development and Commercial Bank Bhd [1993] 3 MLJ 250 I: P and 4 other landowners entered into agreement with Bantar Sdn Bhd whereby P agreed to transfer land to B as trustee for development. Bantar charged the said land to st the D1 (1 Charge) to secure financial facility. Subdivision was approved and Bantar was the new registered proprietor without any encumbrances such as the first legal charge of the first defendant thereon. P and D1 lodged respective caveats on the land. The development was not carried out and B failed to repay the loan granted by D1. The registrar of titles gave notice of Form 19C, to P by D1’s request of the registrar's intention to remove the P caveats under s 326 of the NLC unless extended by an order of the court. The plaintiff applied to extend the private caveats lodged by him on the said land, contending that he had established an interest in the land and that there was a serious question to be tried with regard to the ownership of the land. The plaintiff also asserted that Form 19C, which was issued by the registrar of titles, was invalid as it was ultra vires. H: P’s application allowed. (1) Land had been freed and discharged from all titles upon re-alienation. This extinguished “interest” of D1 with the initial first legal charge. (2) Sec 340(1) NLC confers indefeasible title or interest to proprietor where at that time charge lease or easement is being registered under. It does not recognize the interest of a chargee which has not be registered. D1 was not a registered chargee, they could not avail themselves of the indefeasibility of their interest in the said land. (3) D1 was not registered chargee, hence no rights to proceed with Sec 326 of NLC. Therefore, the notice by Form 19C of the NLC was ultra vires. Any other category of persons aggrieved should seek relief by way of s 327 of the NLC. Oriental Bank v Chup Seng Restaurant (Butterworth) Sdn Bhd [1990] 3 MLJ 493 (rights not by the NLC) I: The crucial issue was whether the plaintiffs who stepped into the shoes of Citibank NA by subrogation, can obtain an order for sale under s 256 of the National Land Code 1965 despite not being the registered chargee of the said property. H: Though all the documents had been executed and ready for registration (P was now

an equitable chargee), the National Land Code 1965 clearly requires the charge to be registered in its prescribed form before a chargee can enforce his right of foreclosure under the Code though does not prohibit the creation of an equitable charge. Mahadevan s/o Mahallingam v Manilal & Sons (M) Sdn Bhd [1984] 1 MLJ 266 FC [Note: PC did not express any view on the status of the equitable charge in the Malaysian Torrens system.] (page1) ‘Equitable charge’ used in the following circumstances: a. where a charge instrument has been executed but not presented for registration

Standard Chartered Bank v Yap Sing Yoke [1989] 2 MLJ 49 I: The charge registered had not been affected as they had been returned due to inadequate documents supplied. There had been no registration as the P did not know of its return. There now was a private caveat lodged on land, so does it have priority. H: P had acquired a title in equity over the land because the IDT was in the custody of P at all times, it had created a lien in equity over the said land. The equitable interest is not affect by absence of a caveat. Oriental Bank v Chup Seng Restaurant (Butterworth) Sdn Bhd [1990] 3 MLJ 493 b. where no separate title has been issued and, instead of a charge, a loan

agreement and a deed of assignment are entered into to secure a loan Malayan Banking Bhd v Zahari bin Ahmad [1988] 2 MLJ 135 I: The D owed the P a certain amount of money. Pursuant to the loan, a loan agreement and a deed of assignment were executed, and the D defaulted on the repayment of the loan. P applied for court order that they be at liberty to issue write of possession, and for an order that they may sell and proceeds go to the repayment and interest owing to them. H: NLC did not prohibit creation of equitable charges, its recognizable, hence the loan agreement and deed of assignment created an equitable charge in form and substance. Southern Bank Bhd v Chuah Beng Hock [1999] 5 MLJ 206 nd

Failed to register 2 charge for the overdraft facility, but still disbursed $ 700,000. Order for sale applied for upon default of payment, so the court said that Sec 243 charges by NLC require registration. If above $ 1,800,000 wished to be recovered from the $ 2.5mil, then they have to obtain from other sources (I.e. judgment debt). Court did not allow application for order for sale as there was cause to contrary. Mastiara Sdn Bhd v Motorcycle Industries (M) Sdn Bhd [1998] 3 CLJ 874; [1999] 1 AMR 362 Chuah Eng Khong v MBB [1998] 3 MLJ 97; [1999] 2 CLJ 917 Phileo Allied Bank (M) Bhd v Bupinder Singh a/l Avatar Singh [1999] 3 MLJ 157 4.4 Default and Remedies Real right and personal right for chargee: • Order

for sale

• Taking

possession of land

• Appointing

receiver (if chargor is a corporation)

1. Order for sale

Sec 253: Remedies of Chargee: Sale (purpose and scope of the chapter) – enables the chargee to obtain the order for sale by public auction the sale of the land or lease to which his charge relates in the event if there’s a breach. Sec 254: Service of default notice, and effect thereof. One month or alternative period (as specified in charge). Notice in Form 16D specifying the required info and warning of order for sale. Sec 255: Special provision with respect to sums payable on demand: Form 16E, related to monthly repayment. Sec 256: Application to Court for Order for sale. Sec 257: Matters to be dealt with by order for sale: Form 16H: information required (please read). Sec 258: Procedure prior to sale: notice, advertisement, conditions of sale, IDT deposition etc. Sec 259: Procedure at sale (please read) Sec 260: Application to Land Administrator for order for sale. Sec 261: Land Administrator to hold enquiry. Sec 262: Provisions as to enquiry. Sec 263: Order for sale, and matters to be dealt with thereby. Sec 264: Procedure prior to sale. Sec 264A: Postponement or cancellation of an order for sale by Land Administrator. Sec 265: Procedure at sale. Sec 266: Right of chargor to tender payment at any time before sale. Sec 266A: Statement of payment due. Sec 267: Effects of sale. Sec 267A: Application of deposit upon failure to settle purchase price etc.. Sec 268: Application of purchase money. Sec 268A: Application of purchase money by chargee who is a financial institution. Sec 269: Protection of purchasers. Form 16D & 16 E: Two sets of procedures for the chargee to enforce his remedy by way of sale on the ground of the chargor’s default depending on the type of title. RT: Sec 256, Order 83 RHC – High Court.

LOT: Sec 260 Land Administrator. 4.4.2 Taking possession of land Sec 270: Limitation of powers to certain lands, and to first chargees only. Sec 271: Power of chargee to take possession on any default by chargor. Sec 272: Procedure for taking possession, Form 16J, Form 16K. Court order. Sec 273: Duration of right to possession. As long as liability continues. Sec 274: Position of chargee in possession – profits from land and rent etc. Sec 275: Power of chargee in possession to grant leases and accept surrenders. Sec 276: Provisions as to notices by chargees to receive rents. Sec 277: Application of rents and profits by chargees in possession. Sec 270(1)&(2): To registrar title, and to first chargees, only Sec 271(1)(a): Power of chargee to take possession on any default by charger Malaysia Credit Finance Bhd v Yap Hock Choon [1989] 2 MLJ 363 The learned judge said that it seemed that Sec 271 and 272 seemed to unmistakably give a right to the chargee to oust the chargors from their possession of the charged land. Right to possession The chargee has been conferred with power to take possession of land subject to lease or tenancy on default by chargor. However Sec 270(1)(aa) seems to have restricted this from subject matters that involve an undivided share in the land. Procedure for taking possession Form 16J – Serve notice on lessee or tenant and a copy on chargor where he will collecting rental from the rent to the chargor under any lease or tenancy. This will lead the rights of the chargor to be passed to the chargee. Form 16K – Serve this when chargor wishes to go into occupation. If within a chargor on whom a notice in Form 16K is served fails within the period specified in that behalf in the notice to admit or secure the admission of the chargee into occupation of the land, chargee can apply for a court order. Duration of right to possession A chargee can remain in possession until the loan remains unpaid. A chargee in possession by his rights in Sec 275 has right to lease the land or obtain the rent payable under the lease. Form 16J pursuant to Sec 272(2) or Sec 275(7) of NLC shall be in force and bind the lessee or tenant on whom it is served and any subsequent transferee of the lease or tenancy in question, until it is withdrawn by the chargee or cancelled by the chargor or by the purchaser of the land. Cancellation of notice of possession must be made by serving on the existing lessee or tenant with a notice in Form 16L or 16M. Effects of taking possession

Chargee can take all the profits accrued from the land. But chargee is liable to the chargee is liable to the chargor for any act whereby the capital value of the land is impaired or the chargor is otherwise put to other loss. Article: Challenges to Charges: Principle and Precedent, RR Sethu [1993] 3 MLJ xc 4.4.3 Appointing receiver No provision in NLC. Only happens when the chargor is a company registered under Companies Act 1965 which land is charged to the financial institutions as security for loans granted to them. Such right arises out of contract and not by virtue of the statutory powers conferred by NLC. 4.5 Order for Sale Kimlin Housing Development Sdn Bhd (appointed receiver and manager (In liquidation) v Bank Bumiputra [1997] 2 MLJ 805. Not a judgment debt. Order for sale is not a judgment or decree: Kandiah Peter v Public Bank Bhd [1994] 1 MLJ 119. 4.5.1 Notice of Demand (a) Form of notice: Form 16D or 16E There are two types on notices prescribed by the Code: Notice of default (16D) or Notice of demand (16E). Form 16D: served to defaulter to notify intention to commence proceedings for sale as in the NLC in respect of any breach of the terms of the charge (including failure to pay the money as agreed. A duration of one month (or agreed dura...