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JUAL JANJI DEFINITION Jual janji is a type of security transaction and classified as a type of personal law transaction practiced commonly amongst the Muslim Malay Community. Literal translation of the phrase means a sale of a promise or conditional sale. This transaction is to avoid the payment of riba or interest that is strictly prohibited by Syari’ah. The borrower would have to transfer the lender or creditor by filing Form 14A. Upon full settlement of the money he borrowed, the lender has to transfer back the land to the borrower. In the event of default of payment, the land that had been pledged as security for the loan will used to recover the loan. This is knowns as jual putus, where court will not assist the borrower to redeem back his land. Tengku Zahara v Che Yusuf Briggs J: “The whole purpose of jual janji transaction is to provide a procedure for securing a loan without infringing the prohibition of usury which is binding on the conscience of all good Muslims.” Kanapathy Pillay Jual janji can also be practiced amongst non-Muslims. However, problems arise in determining whether the transaction between parties is purely a contract of sale or a security transaction. When National Land Code 1965 was introduced, the owner must comply with the mandatory requirement for registration of land titles. Therefore, the Jual Janji transaction was affected. Dealings were regulated and Jual Janji has to conform to the procedures of transfer of land. The land will be transferred into the name of the lender and a collateral agreement will be executed whereby the lender is obliged to transfer the property to the borrower upon full repayment of the loan. ELEMENTS OF JUAL JANJI 1. LENDER Person that lend the money. 2. BORROWER Person that borrow the money or in need of money. 3. LOAN: The amount of loan taken is usually in small amount as the loan amount is fixed depending on the needs of borrower and not the value of the land. 4. LAND The land is used as security that is to secure the loan and to guarantee the repayment of the loan. This is to ensure the borrower honours his promise to repay the loan as agreed.

5. COLLATERAL AGREEMENT Agreement between lender and borrower. Under Collateral agreement, the said land will be in the name of the lender. The lender is obliged to transfer the said land back to the borrower upon full repayment within specified time.

JUDICIAL VIEWS ON NATURE OF JUAL JANJI The issue that has confronted the court as early as 1917 was whether such transaction in particular the collateral agreement for a re-transfer had effect only as a pure contract of sale or customary security transaction. The judicial attitude towards such transaction has always been that the collateral agreement for re-transfer only creates a contractual right which can be defeated by the effluxion of time or statute limitation. The courts have adopted two approaches namely strict interpretation whereby the jual janji will be regarded as a contract of sale and liberal interpretation whereby the jual janji will be regarded as equitable security transaction. Under strict approach it can be further divided into two which are the position of jual janji prior to NLC and the position in NLC.

A. STRICT APPROACH (TIME IS THE ESSENCE) The collateral agreement for a re-transfer in jual janji confers no real right in the land on the borrower. Such agreement is only good as a contract only and makes time as an essence of the contract. Failure to repay back the loan within specified time, the borrower cannot redeem the land back. Prior to the NLC Haji Abdul Rahman v Mahomed Hassan [1917] The borrower entered into a loan agreement with the lender and transfer his land to him with a collateral agreement that the land is to be re-transferred upon full settlement within 6 months. The borrower failed to repay the loan within the agreed time and only settled the debt 18 years after the expiry of the agreed date. Jual janji is not a security transaction or a form of mortgage as the only form of mortgage recognised in Malaysia is lien and charge. The collateral agreement between the parties was a contract of sale whereby time is of the essence. The borrower was no longer entitled to redeem his land. Lord Dunedin : The judges have been too swayed by the doctrine of English Equity and not paying attention to the fact that they were dealing with a totally different land law.

Wong See Leng v Saraswathy Ammal [1954] It was argued on behalf of the respondent that the transfer of the land in question was by way of security and that being the right to redeem remained irrespective of whether or not the period to repurchase had expired. H: The court has no power to extend the contractual period for the exercise of the option to repurchase contained in the collateral agreement once it expires. The option given to the respondent to repurchase the land did not confer on the respondent any interest. She only acquired a contractual right. Position under NLC Kanapathi Pillay v Joseph Chong [1981] The appellant was in need of money to prevent a foreclosure action against his land. He agreed to sell it to the respondent. There was an option for the appellant to repurchase the land at enhanced price. The option was not exercised within the time provided. The respondent charged the land to Public Bank and subsequently sold the land to the developer. The appellant lodged the caveat after the respondent had sold the land. It was contended by the appellant that the option to repurchase gave him an equitable interest in the land and thereby making him beneficial owner. Thus, he was entitled to call upon the respondent to re-transfer the land at any time he chose to do. H: the option to repurchase is only contractual and the right was not exercised at all. The caveat which he lodged was out of time, misconceived and no use at all. There is no breach of trust as the relationship between the parties was purely contractual and no trust was intended. EXCEPTION TO STRICT APPROACH However, there are 3 exceptions to this approach where time will not be regarded as an essence of contract; 1. EXTENSION OF TIME First is where there is an extension of time. This is where the lender has agreed to an extension of time, thus causing time no longer be of the essence of contract.

Ismail Haji Embong v Lau Kong Han [1970] The plaintiff had transferred a land together with a house erected on it to Lau Chee Hoi. The plaintiff suggested for the land and house to be charged to him but Lau did not agree. An

agreement giving an option to repurchase the land and house was entered into at the time when the transfer was executed. The eight months period mentioned in the agreement has been expired. The lender then extended the time provided that he would pay $40 monthly, as the borrower failed to pay back on time. Another memorandum of transfer was executed in favour of his son, the defendant on the ground that he was in poor health and wanted to avoid payment of estate duty after he die. H: There were technically two loan transactions between the plaintiff and the defendant’s father that is one in respect of the land and the other one is in respect of the house. The law applicable to them are different. A memorandum of transfer cannot be considered as anything else but an absolute sale of the land. Thus, the option to repurchase only confers a contractual right. This is a clear case of jual janji as far as the land is concerned . Even if the time was originally the essence of the contract, it had been allowed to pass since the conduct of the parties clearly showed that it was no longer so. The plaintiff is therefore entitled to repurchase the land on payment of the sum of money lawfully due to the defendant. Aliyasak Ismail [1998] The court held the conduct of the parties in entering into a second agreement after the expiry of the first agreement meant that the time is no longer of essence. 2. EVADING OF PAYMENT Second is where there is evading of payment. The lender could not just refuse the payment made by borrower during specified time. He could not also impose new conditions on which was not discussed earlier in the agreement in order to accept payment. The lender’s conduct would amount to a breach of contract, thus entitling the borrower to redeem the land. Thus, if the lender acts like above mentioned, it shows the intention that time is not regarded as essence of contract. Aliyasak Ismail [1998] The creditor’s act in refusing to accept the repayment and asking for the payment to be raised was proven to have been done in hopes that the borrower will not able to pay in order for the creditor to own the land. The creditor then argued that his title and ownership to the land is indefeasible. It was held that the borrower was entitled to redeem the land upon full payment of the loan. Hatijah Rejab v Abdullah Saad The borrower was having a financial difficulties and borrowed RM20k from the defendant with a condition that she has to pay in full the loan amount within 5 years. The defendant refused to accept the repayment of the loan and refused to retransfer the land to the plaintiff even though the repayment is made within the stipulated time in their agreement. It was held that the

defendant was instructed to retransfer the land to the plaintiff since the plaintiff has paid the loan to the defendant as in their agreement. 3. FRAUD Where a jual janji agreement is still in subsistence, the borrower may in any cases of fraud, recover the land from the party to the fraud who is last registered proprietor of the land. Mohamed Isa v Haji Ibrahim [ 1968] The respondent was the owner of a piece of land. He transferred the land to Mohamed Zain (1 ST appellant) in jual janji agreement under which the land was transferred to Mohamed Zain subject to a right of repurchase by the respondent. Whilst this agreement was in force, Mohamed Zain transferred the land to the appellant. They also executed a jual janji agreement giving the right to the Moahmed Zain to repurchase the land within the period of 3 years from the date of agreement. This signing was witnessed by Hassan bin Zain, the 1 st appellant’s son. He did mentioned to the appellant with regards to the jual janji agreement between his dad and the respondent. The respondent brought an action for an order that the transfer of the land to the appellant be declared void and that the land to be transferred to him on payment by him of the sum due under the jual janji agreement H: Mohamed Zain had fraudulently transferred the land to the appellant and that the appellant was aware of the jual janji agreement between Mohamed Zain and the respondent. The transfer therefore void. Furthermore, the appellant is not a bona fide purchaser since he knew that the Mohamed Zain was defrauding the respondnetand therefore had no better title than the transferor. B. LIBERAL APPROACH (AS EQUITABLE SECURITY TRANSACTION) Based on liberal interpretation, it is to be regarded as to mortgage. This is because the collateral agreement for a re-transfer is to be regarded as equitable transaction whereby the right to redeem remains irrespective of whether or not the period within which it is specified the loan shall be repaid has expired. Hence time is not the essence nor it is the contract. Yacoob Bin Lebai Jusoh v Hanisah bte Saad [1950] The appellant sold the land in question to the respondent who by a separate written agreement undertook to resell the land to the appellant at the same price. The appellant was to repurchase the land within a period of 3 years after which if he failed to do so the agreement would become null and void. According to the appellant the agreement to sell was to mortgage the land to secure the repayment of the sum of $2000 and to give the appellant the right to redeem.

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The appellant remained in possession of the land and thus proved that the transfer of the land was only a transfer as security The respondent after 3 months purchased the land gives the appellant right to repurchase it for the same amount after a period of 3 years.

H: Their intention was just for mortgage and treated as a security transaction to secure the repayment of $2000. Jobling J held on Haji Abdul Rahman’s case which held that where an agreement in the nature of mortgage, the right to redeem remains irrespective of whether or not the period within which it specified the loan shall be repaid has expired. The stipulation that the land shall be repurchased within 3 years does not therefore affect the appellant’s right to redeem.

Nawab Din v Mohamed Shariff & Ors [1953] The original payment of $7000 by the plaintiff to the defendant was a loan and the plaintiff gives the defendant right to repurchase it for the same amount proved their intention was just for mortgage made to secure the original loan of $7000. H: the defendants are entitled to redeem what was given as security and that the right is not affected by the stipulation that the land can only re-purchased within two months after the lapse of a period of 3 years.

Halijah v Morad & Ors [1972] The agreement was that the respondents agreed to hand over the possession of their land to the appellant in consideration of a sum of money they had received from the appellant. The appellant agreed that she would hand the land back to the respondent if they paid the same amount of money. If such payment was not made within 3 years, the respondents would execute a transfer of the land at a sale price equal to the amount of the agreed payment. It was contended by the appellant that since the period of 3 years has been lapsed, she has became the purchaser and equitable owner of the land. H: in the light of the case of Williams v Greatex, the right of an equitable owner to perfect his title could never be statute barred. Jual janji agreement is a valid agreement as contract and a sale by the lender. The breach of the agreement would constitute a fraud and enabling the borrower to apply for the sale to be void....