Jual Janji PDF

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History & Definition -

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Literally: Sale with a promise. Tengku Zahara: A type of security transaction practiced commonly amongst the Malay Muslim community principally for avoiding the payment of riba or interest that prohibited under Syariah law. A dealing between the borrower, who transfers his own land to the lender, and upon full settlement of the loan, is entitled to take back his land. A Kanapathy Pillay: Jual janji can also be practiced amongst non-Muslims. Before the introduction of any statutory system to regulate land matters in the Malay State, the Malay indigenous had practice a customary security transaction in the form of jual janji. Existed after the coming of Islam to Tanah Melayu which was to avoid the practice of usury/riba (inconsistent with Islam’s teaching). Earlier, the concept of transfer in jaul janji was only in form of oral understanding between the creditor and borrower; and no actual documentation or registration of any documents taken place. W.E Maxwell: JJ is a customary transaction whereby a landowner transfers his property to a creditor for a loan on condition that, if the loan is repaid within the stipulated time, the property will be retransferred to the vendor. But if condition is not met, then JJ arrangement is transformed into jual putus (outright sale). Tengku Zahara v Che Yusuf [1951]: The purpose of of JJ is to provide a procdedure for securing a loan. Without infringing the prohibition of usury which is binding on the conscience of all good Muslims. During loan period, lender cannot sell the land to third party. However, lender will remain in possession of land as long as the borrower has not exercised his right to repurchase the land.

Position of JJ under NLC -

When NLC was introduced, registration is a mandatory in all land matters. NLC does acknowledged the existence of customary transaction as stated under Sec 4(1). However, the only dealings (to use land as a security transaction) recognized under NLC are charge and lien.\ Does, JJ is not a dealing recognize as security transaction.

However, JJ may be registered by creating 2 agreements: 1. An agreement to sell land (by executing Form 14A to transfer the land to lender) in consideration of loan granted by creditor. 2. An agreement to resell / retransfer the land back to the debtor once repayment of loan was made within stipulated time. (by executing Form 14A to retransfer the land to borrower).

If JJ is not a security transaction, how does the law view it? -

Law view JJ as a contract of sale. As in the case of Haji Abdul Rahman v Mohamad Hassan [1917]: o In this case, a creditor lent money to debtor. The debtor transfers his land to the creditor with a collateral agreement if the debtor repays the creditor within 6 months, the land will be retransferred. The borrower failed to repay the loan on time, but eventually managed to settle the outstanding balance and insisted upon the re-transfer of the land. o Trial: The transaction was similar to the common law mortgage, where “once a mortgage, will always be a mortgage”. Thus, debtor could redeem the land even after the period for repayment had lapsed. o Privy Council: Lord Dunedin referred to Sec 4 of the Registration of Titles Regulation, 1891 where it stated that “the agreement conferred upon the debtor no real right in the land, but merely a contractual right”. o The Privy Council remarked that the courts in the Malay States were too much swayed by the principle of equity and refused to invoke equity to recognize the right of purchasers who failed to comply with the (me date stipulated in the contract for sale and purchase of land. o The court held that the collateral agreement to retransfer is only effective in contract. Thus, the repayment after expiry of contractual period cannot be allowed.

Problems arise in determining whether the transaction between parties is purely a contract of sale or a security transaction. -

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If the transaction is regarded as purely a contract of sale: Time is of essence. o Borrower will not be able to redeem the land despite the intention of the parties to only use the land as security for the loan. If the transaction is regarded as a security transaction: Time is not of essence. o If the borrower has paid in full, the land would be retransferred to him. o The lender cannot refuse to transfer the land upon payment, even if payment is made after the agreed period.

Strict Interpretation -

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The transfer of land and the collateral agreement are regarded as a contract of sale. Where time is of the essence, both parties must comply with the terms of contract. Failure to make payment will result in the land not being able to be re-transferred. If the parties want the agreement to be regarded as security transaction, the must create a charge (F14A) or lien as provided under NLC. Leading case, Haji Abdul Rahman v Hassan [1917] o The borrower failed to repay the loan on time, but eventually managed to settle the outstanding balance and insisted upon the re-transfer of the land. o Under a contract of sale, time is treated as of the essence. o JJ is not recognized under the NLC, and therefore, if the parties intended to create a security transaction, it must either be a charge or lien. Another case, Wong See Leng v Saraswathy Ammal [1954]: o The defendant alleged that the lands were transferred to him as security with the option to repurchase within certain time. o It was held that the arrangement was not a security transaction but a contract to repurchase and the court has no power to extend the contractual period for the exercise of the option to repurchase once it’s expired. Ibrahim v Abdullah [1964] o The court held the transaction amounted to no more than a contract, where on one hand by the Appellant to sell the land to the Respondent, and on the other hand by the Respondent to the Appellant to resell the land to the Appellant if the Appellant was able to pay the agreed price within 3 years.

Exceptions Even though, court acknowledge that time is of the essence, but court will assist the borrower by evaluating whether the non-payment is caused by the lender himself 1. Lender grants an EXTENSION OF TIME TO BORROWER o Where the lender has agreed to an extension of time, thus causing time to no longer be of the essence of the contract. o Ismail Hj Embong v Lau Kong Han [1970] Facts: Plaintiff and defendant entered into a jual janji transaction and when the period for repayment expired, the LENDER extended the period provided BORROWER paid $40 monthly interest. Held: Although the time for exercise of the option to repurchase had expired, conduct of parties where LENDER extending period of payment, showed that period of repayment was not the essence of the contract. Means BORROWER’S contractual right repurchase can still be exercised even time has expired.

o Abdul Hamid bin Saad v Aliyasak Ismail 1. 1st JJ signed in 1966(first agreement): Plaintiff(borrower) transferred his land to defendant(lender) for a certain sum of money to be repaid within 3 years. 2. 2nd agreement in 1972: Defendant agreed to extend the time for repurchase for further 3 years in consideration of an increase sum of money. 3. When the borrower wants to exercise the option to repurchase, lender refused. The court held that the act of parties in entering into a second agreement after the expiry of the first agreement meant the time is no longer of essence and the transfer of the land to defendant was merely a conditional transfer and not an outright sale. 2. Lender REFUSE TO ACCEPT / EVADING PAYMENT o Ahmad bin Omar v Hj Salleh bin Shaikh Osman [1987] When the borrower tried to pay the sum owed within the agreed period, the lender refused to accept payment by avoiding the borrower. After the period had expired, the lender enforced the agreement. Held: The conduct of the lender in refusing to accept payment was proof that he did not regard time as of the essence, thus entitling the borrower to redeem the land. o Hatijah bte Rejab v Abdullah Saad [2004] The plaintiff borrowed money from defendant with a condition that she has to pay in full the loan within 5 years from the date of the arrangement. Few years later, defendant refused to accept the repayment of the loan and cclaimed that the transfer of title was made under a direct sale transaction and not a jual janji transaction. Held: The arrangement reflected the intention of the parties to use the land as security under a jual janji transaction not a direct sale agreement. (JJ is not considered as security transaction).

Liberal Interpretation -

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Attempts made by the court to apply EQUITABLE PRINCIPLE in JJ transaction despite having provisions in NLC and strict application in judicial precedent. Regards a jual janji transaction as an equitable security transaction similar to that of a mortgage. The right of the borrower to redeem the land under a collateral agreement remains even if the period for repayment has lapsed. The EQUITABLE PRINCIPLE in Williams v Greatrex [1957] was applied in a number of cases, where the court held that “the right of an equitable owner to perfect his title could never be statute-barred” Yaacob bin Lebai Jusoh v Hamisah bt Saad Where a borrower transferred his land to the lender to secure the loan of RM2000, the agreement executed was to resell the land at the same price within 3 years. The borrower failed to repay the loan within the agreed duration and the lender refused to retransfer the land. Held: The real intention of the parties was to create a mortgage to secure repayment of the loan, thus allowing the borrower’s right to redeem the land to remain despite the fact that the duration had expired. Nawab Din v Mohamed Sharif In this case, the lender took possession of land as creditor and not as a purchaser, thus lender was not entitled to land under JJ. It was stated that where the jual janji transaction is in the nature of a mortgage, the right to redeem was not affected by the stipulation as to time....