Test II 2020 - Sem II PDF

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Summary

a) The issue is whether Kesatuan Ladang has a right to the land after the default of payment made by F&J Resources and whether there are procedures needed to be followed by Kesatuan Ladang in order to obtain the money owed by F&J Resources. There are two courses of actions to be take...

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a) The issue is whether Kesatuan Ladang has a right to the land after the default of payment made by F&J Resources and whether there are procedures needed to be followed by Kesatuan Ladang in order to obtain the money owed by F&J Resources. There are two courses of actions to be taken by Kesatuan Ladang which are i) to claim specific performance under section 206 as an equitable charge OR ii) to enter a lien-holder’s caveat (‘LHC’) for the land and obtain an order for sale. A right to equitable lien is said to arise as long as the IDT is within the possession of the creditor even though there is no LHC endorsed in the title of document itself, as per Vallipuram Sivaguru v PCRM Palaniappa Chetty Official Administrator as Administrator of The Estate of Gan Inn, Deceased [1937] 1 MLJ 59. Mahadevan & Anor v Manilal & Sons (M) Sdn Bhd [1984] 1 MLJ 266 also acknowledged the creation of equitable liens and charges. I.

Equitable Charge

Under section 206(3), an unregistered charge is still considered equitable charge as laid out by Mahadevan s/o Mahalingam v Manilal & Sons (M) Sdn Bhd’s case. Therefore, Kesatuan Ladang has a right in equitable charge and may apply for specific performance under section 206 as a contractual obligation to repay of the money defaulted and the whole sum of the loan. II.

Lien Holder’s Caveat

However, Kesatuan Ladang may also register for LHC. Applying the principles and similar facts of Standard Chartered Bank v Yap Sin Yoke [1989] 2 MLJ 49, the nonregistration of a charge but a possession of the IDT by the charge at all times amounts the

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chargee’s right to one an equitable lien holder. Kesatuan Ladang had gained equitable title over the land. Furthermore, since the IDT was in the possession of Kesatuan Ladang, this means that it had also acquired a lien in equity over the land. Therefore, Kesatuan Ladang, may at any time, apply for LHC. The principle of an equitable lien being eligible to apply for LHC was also reinforced in the case of Mercantile Bank Ltd v The Official Assignee of the Property of How Han Teh [1969] 2 MLJ 196. Meanwhile, it is settled rule in Heap Huat Rubber Co Sdn Bhd v United Overseas Bank Ltd [1992] 3 CLJ 1589 that the caveat need not be instantly entered in concurrence with the issuance of the loan. Therefore, Kesatuan Ladang need not worry about the fact that they had only known about the non-registration of the charge. The principle laid out in United Overseas Bank (M) Sdn Bhd v UJA Sdn Bhd. 64 In Perwira Affin Bhd [2009] 6 MLJ 857 expounded on section 281 being applicable not only for registered proprietors but also applies for third party borrowers. In this case, Faisal, the owner of the land had made a lien for the benefit of F&J Resources, a third party, with Kesatuan Ladang. Kesatuan Ladang may proceed to apply for LHC and after that obtain a judgement before gaining an order of sale under section 281. Unless the application of LHC is prohibited by a Registrar’s caveat (‘RC’), A private caveat (‘PC’) or a prohibitory order (‘PO’), Kesatuan Ladang may proceed to apply for LHC under section 330(2) of the National Land Code (‘NLC’) whereby Kesatuan Ladang will need to present form 19D that has been attested under section 211 by an officer, the prescribed fee and the IDT. These documents and instruments shall be presented to the Registrar and the Registrar may examine them before registering the caveat onto the IDT. In an event that there is a lease over the land, Form 19A will be

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served to the leasee as a notification, as per section 330(3). Meanwhile, section 330(4) states that the LHC will be effective through the endorsement under the hand seal of the Registrar with statements that: a) the LHC binds the land itself (in an event that there is no lease upon the land) b) on whose application the LHC was entered which is Kesatuan Ladang’s c) the effective date of the LHC which is upon its application and lastly, d) the reference under which the application is filed. As per section 330(5), the LHC will continue to be enforced until Kesatuan Ladang chooses to remove it, F&J Resources Sdn Bhd manages to pay their debt or until the court grants order to sell the land. Section 281(2) ensures Kesatuan Ladang’s rights to recover judgement debt as it is still within the limit prescribed in the Limitation Act. Kesatuan Ladang must obtain a judgement due to them thereunder and then, they will be entitled to apply for the court for an order of sale for the land. However, I would advise Kesatuan Ladang to not delay as according to the maxim, ‘delay defeats equity.’ The rules laid out in Allagappa Chetti v Perianayagam (1908) Innes 117 enables Kesatuan Ladang to apply for an order of sale only if they a) obtain a court judgement of the actual sum due to their right to enforce the lien by way of judicial sale b) is able to show proof of F&J Resources Sdn Bhd has an obligation to repay their loan debt to Kesatuan Ladang.

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To conclude, I submit that the course of action that I would advise Kesatuan Ladang to take is to make an order judgement to obtain an order of sale through the LHC route. This is due to the fact that there are two options available for Kesatuan Ladang wherein F&J Resources may choose to repay their debts to Kesatuan Ladang and in the event that they cannot, Kesatuan Ladang may make an order judgement to obtain an order for sale. The money from the auction will go to Kesatuan Ladang. This approach is much wider and provide several options for Kesatuan Ladang. Meanwhile, the specific performance through the equitable charge route is much narrower and rigid and may cause a frustration of contract if F&J Resources are not able to repay the debt.

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b) The issues are whether the PC in favor of JGH Holdings Bhd and RC in favor of Inland Revenue Board’s RC have an effect on Kesatuan Ladang’s equitable rights. My advice would change based on the new circumstances presented before me.

I.

JGH Holdings Bhd’s private caveat

On the issue of whether the PC in favor of JGH Holdings Bhd would effect Kesatuan Ladang’s equitable rights, the case of Standard Chartered Bank is reapplied wherein the facts of the case are similar to the present one pertaining the existence of a PC where there is a lack of registration of an ongoing charge which later was about to be registered. Based on the facts of the present case, Kesatuan Ladang’s possession of the IDT would make them equitable holders of lien. The non-registration of the LHC does not affect the equitable rights of Kesatuan Ladang as per Vallipuram Sivaguru’s case. Meanwhile, it is settled rule in Heap Huat Rubber Co Sdn Bhd that the caveat need not be instantly entered in concurrence with the issuance of the loan, but it is already equitably effective. Furthermore, JGH Holdings Bhd does not have any claims on the land either a) in the title of the land b) nor any registrable interest of the land c) nor right to such title or interest. Applying the principles of Score Options Sdn Bhd v Mexaland Development Sdn Bhd [2012] 6 MLJ 475, JGH Holdings Bhd’s rights to developed parts of the land are simply monetary interest, also known as right in personam and therefore not registrable under the NLC. As for the sale and purchase agreement made between Farid and JGH

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Holdings, only a total RM5 million was deposited as payment. It is not enough to render JGH Holdings Bhd as a purchaser and therefore, they do not have a registrable interest. Therefore, Kesatuan Ladang may apply for the removal of JGH Holdings Bhd’s PC to the court as an aggrieved person under section 327. Kesatuan Ladang is considered an aggrieved person because the existence of the PC affects Kesatuan Ladang’s registrable interest as a lien holder as well as an equitable charge as per Wu Shu Chen (sole executrix of the Estate of Goh Keng How, deceased) & Anor v Raja Zainal Abidin bin Raja Hussin [1997] 2 MLJ 487. Kesatuan Ladang may apply for compensations for wrongful entry of caveat under section 329 for allowing the wrongful registry of JGH Holdings Bhd’s PC. JGH Holdings Bhd will have to pay compensation to Kesatuan Ladang. To sum it up, my advice would only differ from (a) in a sense where Kesatuan Ladang may use the LHC approach by firstly, applying for the removal of PC for JGH Holdings Bhd through the court and then registering the LHC.

II.

Inland Revenue Board’s Registrar’s Caveat

On the issue of whether Inland Revenue Board’s Registrar’s caveat affects Kesatuan Ladang’s equitable rights, section 319(1)(b) states that a registrar’s caveat prohibits the registration, endorsement or entry on the document of i) any instrument of dealing and iii) any LHC. Meanwhile, section 319(2) states that the prohibitions in the prior sub-section, applies regardless in the charge instrument was presented for registration even before the RC was entered. This is to say, the presentation of the

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missing instrument on 4th June 2020 does not affect the prohibition of registration even though the caveat is effective on 5th Jun 2020. Therefore, Kesatuan Ladang’s rights are affected as they cannot register the charge nor the LHC. If the charge was initially registered, Kesatuan Ladang would have been able to claim that they were not made aware of the RC entry as per Development v Commercial Bank & LA WP [1991] 2 MLJ 180 and pray for removal under section 418 to the court. However, seeing as Kesatuan Ladang only has an equitable charge only over the land, this means that they only have an equitable remedy and not statutory remedy. With that said, Kesatuan Ladang cannot pray for removal under section 418. The Mahadevan s/o Mahalingam v Manilal & Sons (M) Sdn Bhd case had established the operation of equitable charge through its contractual obligation under section 206. Therefore, Kesatuan Ladang may sue F&J Resources for breach of contract and apply for specific performance. In a nutshell, my advice would differ from (a) whereby Kesatuan Holding will have to apply for specific performance in order to get F&J Resources to repay their debt....