Land Law 2 Topic 9 PDF

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TOPIC 9: RESTRAINTS OF DEALINGS Types of Restraints of Dealings Under power of court: Lis pendens and injunctions o Lis pendens suit a written notice that a lawsuit is pending with regard to the land in question Granted pursuant to section 25(2) para 6 of Schedule 1, COJA 1964 Not applicable in Mala...

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TOPIC 9: RESTRAINTS OF DEALINGS Types of Restraints of Dealings 

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Under power of court: Lis pendens and injunctions o Lis pendens – “a suit pending” // a written notice that a lawsuit is pending with regard to the land in question  Granted pursuant to section 25(2) para 6 of Schedule 1, COJA 1964  Not applicable in Malaysia by virtue of section 6 of CLA 1956  Not recognised nor registrable under NLC – Section 417  T Damodaran v Choe Kuan Him: the entry of a lis pendens on the RDT does not operate as a restraint of dealings and will not prevent a transferee from obtaining an indefeasible title to the land o Injunction – granted by the court upon application of a party in a legal proceeding (usually ex parte) to preserve the status quo of the parties pending settlement of the dispute  Governed by Section 50 of the Specific Relief Act 1950  Available for caveator to preserve status quo in proceedings but cannot be registered on RDT under NLC  Heng Bak Teong v Ng Ah Seong: an injunction is a preventive relief granted at the discretion of the court. A registrar of the land cannot register an injunction as a prohibitory order on the RDT Under National Land Code 1965: Caveats and prohibitory order o Caveat: means “warning” or “caution” // “registered caveat” under Section 5  Nature of caveat system:  Caveat does not create any interest or right over the land but it only puts things in status quo. Thus the effect of caveat is to bind the land to prevent the registered owner from dealing with his land  Under s 324 caveat is issued ex parte by the Registrar acting in an administrative capacity without the intervention of the court. Registrar is not concerned with whether the claim is baseless or not – so long as the document is in correct form  Under s 329 the caveator will be liable for any damage if he obtained the caveat without reasonable cause  Caveat serves as a notice warning to any third party intending to deal with the land that there is a prior claim affecting it. As such the third party is prevented from being defrauded by the registered owner  Functions of caveat:  It restrains the registered proprietor from dealing with the land  It protects the interest of the caveator for the time being until the final disposal of his claim against the proprietor  It serves as a notice to the world at large that the caveator has an interest in the land which he is protecting by means of the caveat  It freezes the situation by maintaining the status quo of all parties concerned until the final disposition of the case  Chin Cheng Hong v Hameed: caveat exists for the protection of alleged as well as proved interest and of interest that have not yet become actual interest in land

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Butler v Fairclough: caveat operates as notice to all the world that the registered proprietor’s title is subject to equitable interest alleged in the caveat Temenggong Securities Ltd & Anor v Registrar of Titles Johor: the purpose of the caveat is to preserve the status quo pending the steps to be taken by the applicant to enforce his claim to an interest in the land by proceedings in the court Types of caveat:  Private caveats  Registrar’s caveats  Lien-holder’s caveats  Trust caveats

Trust caveats 

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Section 333(1) – a trust caveat is entered in respect of any land or interest which is expressed to be held by any persons or bodies as trustees. It may be entered by the trustees themselves or the settlor of the land or interest in question The application must be made in Form 19E and must be attested and accompanied by prescribed fee Upon receiving the application the Registrar shall endorse the word ‘caveat (trust)’ on the RDT. He must state whether the caveat is on land or its interest Section 333(5) – a trust caveat shall continue in force until it is cancelled by the Registrar upon application in that behalf by the trustees for time being and all the persons and bodies beneficially entitled under the trust Bank of Tokyo v Registrar of Titles Selangor and Anor: Plaintiff applied to remove the trust caveat entered by the defendants in respect to a land. The second defendant alleged that he was the trustees of the land but his name was not registered on the titles as trustees. He must first enter his name as trustees under Section 332(1) NLC and Section 344. As such, the second defendant did not have locus standi so the court ordered the removal of the caveat

Lien-holder’s caveats 

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Creation and effect of liens: o Section 281 provides that any proprietor of land or any lessee for time being may deposit with any other person or body, as security for a loan, his IDT or duplicate lease, as the case may be o Upon such deposit being made the depositee may apply to the Registrar under Section 330 for the entry of a lien-holder’s caveat in respect of the land or lease. Upon entry of such caveat the depositee becomes entitled to a lien over the land or lease o The lien-holder if he had obtained a judgment for the unpaid amount due to him by the proprietor or the lessee he can apply to court to sell the land or the lease – Section 330 Creation of a lien-holder’s caveat: o An application must be made in Form 19D to the Registrar, duly attested as prescribed under Section 211 and accompanied IDT or duplicate lease and also fees o Upon application the Registrar shall note the time it was received unless he is prohibited by Registrar’s caveat, private caveat, trust caveat, or prohibitory order, he must enter the caveat as soon as possible

He must enter the caveat in RDT or lease and must notify in Form 19A to the proprietor or lessee – Section 330(3) o The Registrar must endorse the words “caveat (lien)” on the RDT together with the statements –  Whether the caveat binds the land itself or a lease  The person or body who apply the caveat  The effective time  The reference under which the application was made by subsequent lienholder’s caveats Effect of a lien-holder’s caveat: o Section 330(5) states that the lien-holder’s caveat has the prohibitive effect against subsequent registration of dealings, endorsement in respect of tenancy exempt from registration and entry of subsequent lien-holder’s caveat o If the borrower (proprietor or lessee) wants to make any dealing on the land, the lienholder’s caveat must be taken care first Merchantile Bank Ltd v The Official Assignee: the proprietor of a land had deposited his land to appellants as security for a loan. He failed to repay and on 28/4/66 judgment was obtained as against the proprietor. On 9/6/66 a bankruptcy notice was served against him. On 2/8/66 the appellants entered a lien-holder’s caveat against the land under section 330. In April 1967 the proprietor died. o The court held the Official Assignee stepped into the proprietor’s shoes as soon as the bankruptcy notice was served. But the appellant has equitable rights by way of contract. As such they can enter into and register the lien-holder’s caveat at any time. Chew Sze Mun v Muthiah Chettiar: if the lien-holder’s caveat is entered earlier, it will prohibit the entry of subsequent private caveat on the same land. Determination of a lien-holder’s caveat: o Section 331(1) – a lien-holder’s caveat may be withdrawn at any time by a notice in writing given to the Registrar by the person or body who is entitled to the benefit of the lien o The Registrar upon receiving the notice must cancel it as soon as possible o Section 331(3) – the Registrar may also cancel the caveat when there is proof that the debt is duly paid o Section 331(2) – when the land or lease is sold under court as per section 281(2) any certificate presented to register by the new purchaser shall be deemed presented by the consent of the lien-holder and upon registration the caveat will lapse o

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Registrar’s caveats 

Section 320 – Registrar’s caveat may be entered to any land by Registrar if he thinks necessary or desirable and it has the following: o To prevent fraud or improper dealings o To protect the interests of Federation or State Authority or any disabled person o To secure that land will be available to secure any debt due to the Federation or SA regardless whether debt is secure or not or judgment has been obtained or not o To correct errors in RDT or ID or any instruments relating to it

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Nature and effect of Registrar’s caveat: o To prohibit the registration, endorsement or entry on the RDT of any instruments of dealing even though the instrument was presented prior to the time the Registrar’s caveat takes effect – Section 319(1) o To prohibit the entry of any claims to the benefit of a tenancy exempt from registrations and a lien-holder’s caveat – Section 319(1)(a) and (b) o Prevents any dealing but does not affect any prior registered dealing o Takes effect retrospectively o Will continue in force until withdrawn by the Registrar himself Procedure to enter Registrar’s caveat: o Where the surrounding circumstance or condition exists to justify its entry, the interested party may seek a Registrar’s caveat  AR Palaniappa Chettiar v Letchumanan Chettiar: registrar’s power is discretionary and he is performing a quasi-judicial function and as such must act in good faith o Section 321 – if Registrar decides to enter his caveat, it shall be in Form 19F endorsed in the IDT the words “Registrar Caveat Enter” and the time of entry and the Registrar must serve a notice to the proprietor of the land a notification in Form 19A o The duration shall continue in force until it is cancelled by the Registrar either through his own motion or an application by the owner of the land or a Court order made on appeal under s 418 when the Registrar had refused for cancellation Temenggong Securities Ltd & Anor v Registrar of Titles Johor: the appellants entered into an agreement to purchase a piece of land from the vendor 22/9/72 and full amount was paid so the vendor handed over the IDT and he executed the transfer to the appellants. On 14/12/72 the documents were presented to the Registrar for registration. On 19/12/72 the Govt of Malaysia obtained a judgment as against the vendor for their debts and as such obtained a prohibitory order. The Registrar entered his caveat on the RDT and informed the appellants that their transfer was rejected. The trial court also rejected the appellants’ application to remove the Registrar’s caveat o The Federal Court held that after 22/9/72 the vendor does not have any interest in that land anymore and as such the Registrar had wrongly entered his caveat so the court ordered the caveat to be removed Court can order registrar to enter caveat – Seet Soh Ngoh v Venkateswara: court can order Registrar to enter the caveat, as in this case, purchase money has not yet due but the developer demand the balance, when it was refused, developer seeks to repudiate the contract where he has no power to do so and contracted to sell the same property to another, the circumstances point to a fraud and improper dealing Registrar has discretionary power – Agrimal Project v Pendaftar Hakmilik PTG Johor : registrar’s exercise of discretion in entering a caveat cannot be examined unless it was exercised mala fide or ultra vires. Mandamus (order) can be sought to direct registrar to exercise discretion if he fails to exercise at all. In the case, registrar merely making a genuine mistake in recording the purpose of lodging caveat will not make the caveat mala fide or ultra vires, there is a police report of the allegation of fraud

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Section 321(3) – Removal of Registrar Caveat can be through Registrar’s own motion, application by proprietor of caveated land, or pursuant to court order o For aggrieved charges – can seek to remove Registrar’s caveat pursuant to Section 418 o MUI Finance v Pendaftar Hak Milik: For removal of RC under Section 321(3) only Registered proprietor can do that or Registrar on his own motion – in the case, MUI is the chargee so it cannot apply for the removal o Development & Commercial Bank v LA WP: Court held that since chargee has no right to remove under s 321, thus there will be no appeal and so s 418 is not available either. Since there is no right to apply for cancellation as well as express appeal for chargee against Registrar who refused to remove caveat a declaratory relief should be available to the chargee so the court exercised its discretion to grant declaration under s 417 o D&C Bank v Govt of Malaysia: Registrar has communicated to the chargees his decision to enter the caveat and thus s 418 is available, but chargee did not appeal and let the time lapse and want to seek declaration under s 417 so court held can no longer proceed under s 417 o Public Bank v Pengarah Tanah dan Galian Johore Bahru: appellant requested Registrar to cancel the caveat but was rejected. Court held that computation for the three-month statutory period (see s 418) starts from date of communication of the decision of R to enter into caveat in which this appeal was filed out of the period stated Section 321(4) – cancellation of Registrar’s caveat: Registrar shall give effect to any order of court by making a note under his hands and seal the date of cancellation of caveat entered (see s 417) // if Registrar acts on his motion to remove caveat he shall notify registered proprietor of affected land

Private Caveat  

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Private caveat is aimed at protecting the interest of any person who claims to have any title or any registrable interest in the land of the registered proprietor of the caveatee Section 322(2) – effect of private caveat is to prohibit for as long as it continues in force, the registration, endorsement or entry on the RDT thereto: o Any instrument of dealing executed by or on behalf of the registered proprietor o Any certificate of sale relating thereto o Any claim to the benefit of any tenancy granted by the said proprietor, and any lienholder’s caveat in respect thereof Section 323(1) of the NLC describes persons or bodies who can enter a private caveat: o Any person or body claiming title to or any registrable interest in any alienated land or any right to such title or interest o Any person or body claiming to be beneficially entitled under any trust effecting on such land or interest o The guardian or next friend of any minor claiming to be entitled as mention in paragraph above. o Kampung Sua Betong Sdn Bhd v Dataran Segar Sdn Bhd: the court decided that the relevant question which the court could asked itself to is as follows: is the appellant a person claiming title to, or registrable interest in any alienated land, or any right to such title or interest? If the answer is no then caveat must be removed. It is not that always the caveator must ultimately succeed but that he has a prima facie case

Karuppiah Chettiar v Subramaniam: the purchaser had paid the full purchase price to the vendor who had then executed a transfer in the statutory form but had not surrendered the IDT to the purchaser so the purchaser later entered a private caveat to protect his interest in the land  Federal Court held that the purchaser having private caveat has a priority over a claim of a judgment creditor who subsequently had entered a prohibitory order against the same land o Pok Kew Chai v Yeoh Thing Seng: failure to obtain the chargee’s consent for the creation of a lease will render the lease agreement void, but there is still caveatable interest under equity o Macon Engineering v Goh Hooi Yin: respondent had paid deposit to purchase a property from the vendor and agreed to pay the balance at a stipulated time. He entered private caveat. Meanwhile disputes arose and vendor regarded the agreement undetermined and forfeited the deposit. Vendor then sold the property to the appellant. Since the appellant cannot register the property he sought to remove the caveat but was dismissed  On appeal the court upheld the trial judge decision because so long as there is a valid agreement exist for the sale of land the purchaser is entitled to lodge caveat to protect is interest o Million Group Credit v Lee Shoo Khoon: the prospective purchaser was still negotiating the terms of purchase with vendor when he lodged caveat on the said land. The court held that there was no concluded contract yet, so he had not caveatable interest on it o Khoo Teng Seong v Khoo Teng Peng: a private caveat may be entered by a beneficiary under any trust on which the land or interest in the land is a trust property. The court also held in order to be entitled for a private caveat the beneficiary must show that he is a person entitled to or beneficially interested in the land held on trust for him o Mawar Biru v Lim Kai Chew: in this case the purchaser failed to fulfil certain condition agreed upon in the SPA so the court held since the failure was cause by the purchaser he could not enter into caveat o Goo Hee Sing v Will Raja Perumal: a land which is subject to restriction in interest was sold to the plaintiff without the plaintiff’s knowledge. Whether the plaintiff has caveatable interest, the court held in negative until the consent of the SA is obtained o Luggage Distributors v Tan Hor Heng: the question was whether a tenant (occupying a property under a tenancy of two years) after having exercised his option to renew for another two years had caveatable interest the court held exempted tenants have no caveatable interest in the land Procedure – Section 324 provides that any person intending to lodge a private caveat must a formal application to the Registrar or Land Administrator as the case may be in Form 19B stating expressly whether to bind the land itself or a particular interest only and support with a statutory declaration verifying the claim and enclosed with prescribed fee o Upon receiving the application the Registrar must note the time at which it was received subject to Section 329(2) as soon as may enter the caveat by endorsing in RDT by his hand and seal the words “private caveat”, whether it binds land or interest, the detail of the caveator and from which time the caveat takes effect and he must notify the registered proprietor by serving notification in Form 19A o

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Registrar is not required to inquire the validity of the claim on which it is based – registrar’s function here is purely administrative in nature o Nanyang Development v How Swee Poh: where the land authority receives the caveat application it exercises a purely administrative function as per Section 324(1) o Ong Chat Pang v Valliappa Chettiar: so long as the formalities laid down in NLC are complied with the Registrar or Collector has no power to reject a caveat o Chng Sin Poey v Quek Lian Meng: Section 324(1) does not mean that the Registrar cannot reject an application for an entry of a private caveat when it does not comply with the substance of the form, or as in the instant case, when the application does not specify whether the caveat is to bind the land or a particular interest only – Registrar must make inquire to clear doubt Can a registered proprietor caveat his own land? o Eu Finance Bhd v Siland Sdn Bhd: the court viewed that the registered owner could not do so because a registered owner must necessarily be a person already possessing title or interest and not merely a person claiming such title or interest (in this case caveat was removed) o Lee Kim Guan v Malaysian Produce Co Sdn Bhd: the defendant had charged its land to Malayan Borneo Finance but defaulted so the chargee had obtained an order for sale of the land and it was sold at a public auction to the plaintiff. A week after the sale the defendant entered a private caveat on the land as a result the land could not be transferred to the plaintiff. The court held that the defendant had no caveatable interest on the land so the caveat was removed o Hiap Yiak Trading Sdn Bhd v Hoon Soon Seng Sdn Bhd: the court held registered proprietor could caveat his own land, and the caveat in question should remain as the nature of the agreements and the comp...