Land Law Caveat - Sample Question and Answer PDF

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Opening The area of the law for this case looks at two important issues with regards to Land. They are (i) Charge and (ii) Register’s Caveat. Before I advise all parties, it is important to look at the definition for charge and register’s caveat. A charge is a dealing or a transaction whereby a registered proprietor uses his land as a form of security for the repayment of a loan advanced to him by creating an interest over the land. In the case here, Gobinh is a chargor, while Sabu is the chargee. Charge in Malaysia for land is governed under Section 241 of the National Land Code 1965 (“NLC”). In the same vein, the NLC define charge in Section 5 as a registered charge. On the other hand, a Register’s caveat is caveat lodge by the Land Administrator when he deems that there is a necessity to protect the land from fraud or improper dealing, as well as to protect the interest of the state. A register’s caveat can also be entered if there is an error on the title document. A Register’s caveat in Malaysia is governed under Section 319, 320 and 321 of NLC. In the same vein, the NLC define caveat in Section 5 as a registered caveat. Notwithstanding, a registered charge is conferred with an indefeasibility of title by the abovementioned Code, while a caveat is a restrained-on dealings.

Issue In order to advise the parties, it is important to establish the sequences of events, most notable the sequence of registrations. In matters of land dealings, registration is crucial. This is given in the case T Damodaran vs. Choe Kuan Him [1979] 2 MLJ 267, where the judge put forward a New Zealand

case Fels v Knowles (1906) 26 NZLR 604 620 and argued the cardinal principle of the statute is that the registration is everything. Based on the monumental requirement on registration, the issue for this case is as follows: (a) What remedies Sabu has under the NLC for an unregistered charge? Or can Sabu find remedies in the law of equity? (b) What can Gobind do to help Sabu, especially in the matter of removing the Register’s caveat? (c) What remedies Sabu has under the NLC for a registered charge, assuming Sabu’s change was registered in July? In the case at hand, I note that the Land Office have lodge their caveat on 2 August 2018. At the same time, Sabu’s charge has not been registered, despite the fact that he has submitted the instrument of registration on 13 April 2018. A mere submission does not equate to registration. The NLC is very clear on the procedural for registration of land dealings. Every dealing under the Code shall be affected by an instrument complying with the requirement of section 207 to 212; and have been registered as given in Part Eighteen of the Code. I suspect Sabu may have failed to follow the full procedures but there is no point to deal with this matter any further. I will advise Sabu that he must be careful the next time he register any dealings with the land office. In any case, as given in Section 319 (1) (b) of the NLC, the Register’s caveat takes the effect of prohibiting the registration of title of any instrument of dealings on Gobind land. As a consolation, I can inform Sabu and Gobind that the prohibition imposed by a Register’s caveat shall apply to any such instrument even though the instrument was presented prior to the time the Registrar’s caveat takes effect. Even if Sabu have properly registered the charge in April, the prohibitions on Gobind land’s stays.

An unregister equitable charge It is important, in my opinion to emphasis to both Sabu and Gobind again the importance of registration. In the case Sime Darby Berhad v Mohn Hassan Bin Sulaiman [2000] 1 AMR 1021, the judge argues that since the charge was not registered, the lender has no remedy under the NLC. However, all is not lost. In the case Mahadevan & Anor v Manilal & Sons (M) SDN BHD [1984] 1 MLJ 266, the said Federal Court Judge states that the common intention to create a security by the way of charge amounts to an equitable charge being create. In the same vein, the good judge further states that there is specifics within the NLC prohibiting the creation of an equitable charge. For this case, it is obvious that both Sabu and Gobind share that common intention with respect to the RM150,000.00 loan. Therefore, I am pleased to advise both of them that Sabu’s unregistered instrument of charge is now an equitable charge, and that the land become a security based on the agreement to charge the land. Furthermore, I gladly point out that in the case Standard Chartered Bank V Yap Sing Yoke & Ors [1989] 2 MLJ 49, the judge held that by the virtue of the of having an unregistered charge in favour of the chargee, the chargee has acquire a title in equity over the land. Pertain the above, in my opinion, having an equitable charge also amounts to having a caveatable interest. Therefore, in order to protect Sabu interest, I advise him to enter a private caveat as soon as possible as a Registrar’s caveat do not prohibit the lodging of a private caveat. On the other hand, in the event the Registrar’s caveat is removed, in parallel, Sabu can withdraw the private caveat and registrate a new charge by following the correct procedures. At the same time, I also advise Sabu to look into remedies as provided in his contract with Gobind, if indeed there is one. He should see if his contract with Gobind provides any damages, repayment

or even a full refund. Since Gobind is a friendly party, he can also work-out a new contract with Gobind with regards to the money Gobind owe him.

Removal of Register’s Interest The intention of Gobind to help Sabu is not only noble, but it also carries alot of weight with respect to the NLC. As mention above, a Registrar’s caveat is lodge by the Registrar himself. Therefore, it is important for Gobind to find out the real reason why a Register’s caveat have been entered. A request to obtain the entry of a Registrar’s caveat can come from several quarters, and not necessary from Federal or State Authorities. Therefore, it is very important for Gobind to get to the bottom of the matter, the surrounding circumstance and the conditions that justify its entry. Needless to say, A Registrar’s caveat continues to be in force indefinitely until it is cancelled by the Registrar either on his own motion or upon an application by the proprietor of the land, with the latter is given in Section 312 (b) of the NLC. Therefore, I will urge Gobind to apply to the Land Office to have the Registrars caveat removed as soon as possible. Failing which, Gobind and Sabu do have another remedy. Section 312 (c) of the NCL allows the Registrar’s caveat to be cancelled pursuant to a court order made on appeal under section 418 of the said Code. Section 418 allows any person, thus in this case it can be Gobind and/or Sabu to appeal to the court to have the Registrar’s caveat cancelled. Both Gobind and Sabu can rest easy and know that cases heard in Malaysia generally will probe whether the Registrar’s caveat was rightly or properly entered subjecting to the provisions as provided in Section 320 of the NLC. In the case Tan Soo Bing & Ors v Tan Kooi Fook [1996] 3 MLJ 547, the judge held that the Registrar has a duty to decide whether the caveat that have been entered is necessary and desirable. Similarly, in the case Lim Ah Hun v Pendaftar Hakmilik Tanah Pulau Pinang & Anor [1990] 3 MLJ 34, it was decided the court can remove any Registrar’s caveat if the court deem to be misleading and no longer necessary or desirable. However, Gobind and Sabu will need to worry if there were malice in their dealings which is not disclosed, or there exist an unfavourable condition such as an outstanding government claim that is not resolved. A registered charge Under the NLC, a registered charge is conferred with an indefeasibility of title. In section 340 (1) of the NLC, it is clearly stated that a charge for the time being registered, shall be indefeasible. For Sabu and Gobind, this simply means with the registration of the charge, the right in the property cannot be void or defeated by any past event, error or omission. Unlike an equitable charge abovementioned, Sabu have all the right to seek remedies as provided under the NLC.

As to the issue of the Registrant’s caveat, the sequence of event is important here. The Registrar’s caveat was lodged on 2nd August 2018; therefore, the caveat will have no effect of overriding the interested of Gobind or Sabu. In the case Development and Commercial Bank Bhd. v Land Administrator WP [1991] 2 MLJ 180, the judge argue that the indefeasibility interest of the chargee takes priority over subsequent Registrar’s caveat. Furthermore, the case of Pendaftar Hakmilik Negeri Kedah v OCBC [1991] 2 MLJ 177, a case related to debt due to Inland Revenue; the court held that before entering a Registrar’s caveat, the Registrar should had inspected the amount debt due by land owner to chargee, debt due to federation, as well as the market price of the land. If the debt due to charge is larger than market price, then the caveat should never be entered because land owner can never satisfy the liability to federation. Therefore, based on the above argument,

Sabu can be assured that his interested to enforce the charge is secured and that by enforcing the charge, he can recover the money he has loaned to Gobind.

Conclusion I will advise Gobind, along with Sabu to first seek the reason why a Register Charge was there on the title, and upon understanding the condition of the circumstance, they should resolve it accordingly. Notwithstanding, Sabu should enter a private caveat as soon as possible to protest his interest, and readily enter a register charge when the time right. Sabu also must keep in view (KIV) of Section 418 of the NCL where he can seek remedies through the court. However, settlements are typically faster, more efficient, cost less, and less stressful than a trial, hence, my advise to Sabu, as well as Gobind to resolve those issue at hand first....