Tutorial Answer 5 ( Private Caveat) PDF

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TUTORIAL QUESTION (PRIVATE CAVEAT) + PRESENTATIONLLB 30603 LAND LAW IISEMESTER II SESSION 2020 /GROUP A (9-10 FIRST SESSION) 3 MAY 2021NO. NAME MATCRIC1. LIM SIN ERN 0496222. NURSAIDATUL ATHIRAH BINTI ABDUL NAIM 0494363. SITI NURNAJIHAH BINTI MOHAMAD NIZAM 0496064. NUR KHALIDAH ‘AFIFAH BINTI HASMI 0...

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TUTORIAL QUESTION (PRIVATE CAVEAT) + PRESENTATION LLB 30603 LAND LAW II SEMESTER II SESSION 2020/2021

GROUP A (9-10 FIRST SESSION) 3 MAY 2021 NO. 1. 2. 3. 4.

NAME LIM SIN ERN NURSAIDATUL ATHIRAH BINTI ABDUL NAIM SITI NURNAJIHAH BINTI MOHAMAD NIZAM NUR KHALIDAH ‘AFIFAH BINTI HASMI

MATCRIC 049622 049436 049606 050177

Mr Salleh had deposited the original IDT of his alienated land in Kg Sungai Berani, Kuala Terengganu with Bank Bumi in consideration of a loan obtained from the bank. Due to the negligence of the Bank’s solicitor, neither charge nor a LHC was entered in respect of the land. Few years later, Mr Salleh entered into a sale and purchase agreement with Mr Hussin in respect of a two-storey bungalow house situated on the piece of land in which the IDT was previously deposited to the bank. Mr Hussin made a deposit of 10% of the whole purchase price and requested the IDT for registration of the transfer. Mr Salleh fraudulently told Mr Hussin that the document was burnt in a fire and he is now applying for a new one. Mr Hussin further made an additional payment of 30% of the whole purchase price with the condition that he would be allowed to enter possession of the land. Mr Hussin was advised by his lawyer friend to enter a Private caveat to protect his interest where no registration of transfer is made. Mr Hussin comes to see you to raise his concerns. Discuss the following issues with reference to relevant provisions and decided cases.

i.

The position of Bank Bumi in respect of the loan granted to Mr Salleh

ii.

Whether Mr Hussin is entitled to lodge a Private caveat.

iii.

Whether Mr Hussin or Bank Bumi can apply for removal of the Private caveat.

ANSWERS: I. The position of Bank Bumi in respect of the loan granted to Mr Salleh. The issue is what is the position of Bank Bumi in respect of the loan granted to Mr Salleh with the deposition of the original IDT of his alienated land in Kg Sungai Berani, Kuala Terengganu with Bank Bumi. Security dealings are dealings whereby a registered proprietor conveys his land to either a Bank, finance company or moneylenders to secure the repayment of a loan. The security transactions or dealings recognised under the NLC 1965 are charges and statutory liens. The land will be used as collateral or security to assure the Lender that the Borrower will repay the loan within the stipulated time. If the borrower fails to repay the loan within the stipulated time or breach any terms and conditions stipulated in the loan agreement, the lender can commence foreclosure proceedings to obtain an order for sale of the land by way of public auction or gain possession of the land. There are a few types of security dealings which include charge and lien.

The first sub-issue is whether Bank Bumi had entered into a charge that is statutory recognised under the NLC 1965 with Mr Salleh on his alienated land in Kg Sungai Berani, Kuala Terengganu and what is the effect thereafter. A charge is a type of security dealing or transaction, which is created when a registered proprietor or a lessee uses his land as a collateral or security in return for loan given to him by the lender. The borrower can borrow money (loan) from a bank or finance company, which is in business of lending money or even individuals (moneylender). In return he is required to pledge his land as security to guarantee the repayment of the loan with interest. In Southern Bank Bhd v Chuah Beng Hock, the court held that according to Section 243 of the NLC 1965, the charge recognised under the Torrens system must be duly registered in accordance with the requirements of the provisions of the NLC 1965. Upon registration of the charge instrument, the land becomes a security and the chargee acquires an interest in the land or the lease.

Unregistered charge which is not registered pursuant to the provisions of the NLC 1965, can claim protection as an equitable charge with recognition pursuant to the provisions of section 206(3) of NLC 1965. Equitable charge is not registered and this will not be recognised except under equity. In Mahadevan v Manilal & Sons (M) Sdn Bhd, the court decided that there is no provision in the NLC which prohibits the creation of equitable charge. Such a charge give rise to an equitable right in favour of the lender. The court further laid down the test to determine whether or not a transaction created an equitable charge: the intention and the conduct of parties at the time when the payment was made. The court in Oriental Bank v Chup Seng Restaurant (Butterworth) Sdn Bhd held that a charge being outside the NLC provision will not be able to seek the available statutory remedies ie sale by way of public auction and taking possession. Chargee is only entitled to claim ‘in personam’. There are four situations where an equitable charge can be made. First, where a charge instrument has been executed but not presented for registration. This is illustrated in Standard Chartered Bank v Yap Sing Yoke where P accepted a charge over a piece of land held by D1 in consideration for granting a housing loan to D1. The charge was presented for registration at the Land Office and accepted. However, the charge together with the issue document of title were returned to the P's solicitors as an official receipt for quit rent was not supplied to the Land Office. The returned documents were kept by a clerk of the firm who did not bring them to the attention of the solicitors. The court held that by virtue of the unregistered charge in favour of P, P had acquired a title in equity over the land. The conduct of P as the chargee having custody of the IDT had acquired the chargee a lien in equity over the land even though the chargee was not registered. The second situation is where no title to land issued yet, so security was created over land under a loan agreement and deed of assignment. This is illustrated in Malayan Banking v Zahari b. Ahmad where the court held that the NLC does not prohibit the creation of equitable charges and based on a body of authorities, our land law recognize equitable charges. The third situation is although the IDT is available, parties do not wish to create a charge. Borrower just hands over the IDT to the lender as security. The fourth situation is IDT is available but parties wish to enter into the customary security transaction called ‘Jual Janji’ and not a charge.

In the case at hand, due to the negligence of the Bank’s solicitor, no charge was entered in respect of the land. Therefore, it could be conveyed that no registration of the land in either charge was done to be in effect in virtue of Section 243 of the NLC. In other words, Bank Bumi as the unregistered chargee of Mr Salleh’s land has no right to enforce the charge under the NLC 1965. However, according to Mahadevan v Manilal & Sons (M) Sdn Bhd, there is no provision in the NLC which prohibits the creation of equitable charge. Furthermore, the case at hand had fulfilled the test laid down in the case of Mahadevan. The conduct of Mr Salleh depositing the original IDT of the land to Bank Bumi and the custody of the original IDT thereafter been in custody of Bank Bumi all the times had reflected the intention of the parties in entering into a security dealing of either charge or lien for Mr Salleh to secure a loan and at the same time for Bank Bumi to hold the land as a security to lend the loan. The facts of the case at hand share a few similarities with the case of Standard Chartered Bank where the charge instrument has been executed but not presented for registration. Hence, Bank Bumi should thereof be in the same position of the plaintiff of the case who was entitled to a title in equity over the land. In short, Bank Bumi was an unregistered chargee and only has the right of claim ‘in personam’ instead of statutory claim over Mr Salleh’s land under the equitable charge in view that the charge instrument has been executed but not presented for registration.

The second sub-issue is whether Bank Bumi had entered into a lien that is statutory recognised under the NLC 1965 with Mr Salleh on his alienated land in Kg Sungai Berani, Kuala Terengganu and what is the effect thereafter. A lien is a security dealing that creates an ‘equitable’ interest in the land or lease which gives the holder of the right to enter a lien-holder’s caveat. In Palaniappa Chetty v Dupire Brothers & Anor, the COA held that a lien is one and a special form of security. A lien is an unregistrable interest as the NLC 1965 has not provided a Form to create lien. When IDT or duplicate lease has been deposited to the bank/lender and the lender fail to enter LHC but still keep the title as security, an

equitable lien is created. It is only after entry of the lien-holders caveat that the lien will then take effect in law as provided under Section 281(a)(b) and Section 330 of NLC 1965. In the case at hand, due to the negligence of the Bank’s solicitor, no LHC was entered in respect of the land. Therefore, it could be conveyed that no registration of the land in LHC was done to be in effect in virtue of Section 281(a)(b) and Section 330 of NLC 1965. In other words, Bank Bumi as the unregistered lien holder of Mr Salleh’s land has no right to enforce the charge or the lien under the NLC 1965. However, in view that the IDT was in possession by Bank Bumi all the times, an equitable lien was created and Bank Bumi can claim but not of statutory, only “in personam”. In short, Bank Bumi had not entered into a valid security dealing that is statutory recognised under the NLC 1965 with Mr Salleh on his alienated land in Kg Sungai Berani, Kuala Terengganu and hence, has no right to enforce the charge or the lien under the NLC 1965.

In conclusion, Bank Bumi’s position in respect of the loan granted to Mr Salleh with the deposition of the original IDT of his alienated land in Kg Sungai Berani, Kuala Terengganu with Bank Bumi is that Bank Bumi is the unregistered chargee or lien-holder of the said land on the principle of equitable charge or lien. Therefore, Bank Bumi is only able to claim remedies in personam.

ii. Whether Mr Hussin is entitled to lodge a Private caveat.

The issue is whether Mr Hussin is entitled to lodge a private caveat in respect of the land in Kg Sungai Berani, Kuala Terengganu. First and foremost, private caveat is a personal caveat that is entered by the registrar on the application by any person seeking to protect an unregistered interest or title to land pending the finalisation of registration or settlement of a dispute in court in respect of the land sought to be protected by caveat. In the case of Eng Mee Yong v Letchuman, a private caveat does not have the effect of altering the ownership of the land or interest. It merely functions as a notice of claim and priority of claim. There is no restriction as to the number that may be entered on a title. The priority is accorded according to the order of endorsement. A person who has a caveatable interest in the land will only be entitled to lodge a private caveat. In Section 323 (1)(a) of the NLC states that the persons or bodies at whose instance a private caveat may be entered are any person or body claiming title to, or any registrable interest in, alienated land or any right to such title or interest. There are four categories of meaning and application under this section. Firstly, Section 323(1)(a)(i) of NLC for persons or bodies claiming titles to any alienated land. If both transferor and transferee already executed a transfer form (14A), but it is yet to be registered, then the transferee is said to have a claim over a title. Secondly, Section 323(1)(a)(ii) of NLC for persons or bodies claiming registrable interest to any alienated land. Thirdly, Section 323(1)(a)(iii) of NLC for persons or bodies claiming right to title to the land. Lastly, Section 323(1)(a)(iv) of NLC for persons or bodies claiming right to registrable interest title in land. In the case of Macon Engineers S/B v Goh Hooi Yin [1976], Vendors agreed to sell to respondent a property which respondent thus paid 10% of deposit. The completion date for payment was set to be on 6th November 1973. If on the date the payment is not completed the deposit money will be forfeited. On 23rd November 1973 respondent pointed that the vendor is not the registered proprietor of the property and proclaimed that he will pay the remaining sum after registration. Respondents attempt to put caveat and succeed. Appellant entered into an

agreement with the vendor on the said property but the transfer cannot be made due to the caveat. The court dismissed the appeal. Section 323 (1)(a) of NLC and maxim he who is earlier in time is stronger in law are applied. A purchaser of land under agreement has a right to the land or interest in the land and thus lodges a private caveat. Moreover, it is important to note that so long as the application for the entry of a private caveat is in the proper form duly signed, attested, verified by the statutory declaration of the applicant and is accompanied by the payment of fees, the registrar will have to enter the caveat as per requested. These procedures for entry of private caveats have been provided under Section 324 of the NLC. . In another case, Yeow & Foo Sdn Bhd v Peninsular Bank Sdn Bhd, the P had agreed to sell the land to the D. The D said that he had sent a letter to the P stating that it required confirmation of the Majlis Perbandaran Taiping that the land could be converted from the category of shop house to light industries. It also said that the 10% deposit paid should be refunded if the Majlis did not give its approval to the conversion. The D lodged a caveat after paying the deposit to the P. A formal sale and purchase agreement had not been executed by the parties. Since the D had refused to sign it when the Majlis refused to grant its approval. The court held that the D had a right to lodge a private caveat in the view of the deposit already paid to the seller. By virtue of Section 323 (1)(a), it is clear that Mr Hussin falls within this ambit of the section under the first category which is Section 323(1)(a)(i) of NLC in having the right to such title and interest which essentially refers to the interest that can be caveated. Mr Salleh and Mr Hussin

It is noteworthy that in this situation, it is

important to determine whether Mr Hussin has a caveatable interest over the land. To prove this, it is best to apply the principle of Macon Engineers S/B v Goh Hooi Yin considering the similarities of the facts. In this situation, Mr Hussin had indeed entered into a sale and purchase agreement with Mr Salleh in respect of a two-storey bungalow house situated on the piece of land in which the IDT was previously deposited to the bank. Mr Hussin also has made a deposit of 10% of the whole purchase price. Additionally, Mr Hussin further made an additional payment of 30% of the whole purchase price with the condition that he would be allowed to enter possession of the land. This proves that the consideration given by Mr Hussin to Mr

Salleh can be deemed as sufficient to place Mr Hussin as someone who has the interest to become the caveator of the land. Mr Hussin can also validly enter the private caveat as long as it complies with Section 324 of NLC in the terms of the procedures. The decision in Yeow & Foo Sdn Bhd v Peninsular Bank Sdn Bhd also supports that Mr Hussin has a right to lodge a private caveat in the view of the deposit was already paid to the seller, Mr Salleh. In conclusion, Mr Hussin is entitled to lodge a private caveat in respect of the land in Kg Sungai Berani, Kuala Terengganu.

iii. Whether Mr Hussin or Bank Bumi can apply for removal of the Private caveat.

The issue is whether it is Mr Hussin or Bank Bumi that has the right to apply for the removal of private caveat lodged against the land in Kg Sungai Berani, Kuala Terengganu. Generally, according to Section 328(1) of the National Land Code, the duration of a private caveat is 6 years and after such period, the private caveat will cease to exist. However, a Private caveat may also be withdrawn or removed before the expiry period by applying to the Registrar of Titles or the Land Administrator, or by applying to Court, according to the procedures laid down in the NLC. Firstly, an application for the withdrawal of a private caveat may be executed by the caveator, at any time, via notice in form 19G as provided under Section 325 (1) of the NLC. Section 325(2) of the NLC further stated that the Registrar shall cancel the caveat in the register document of title, issue a notice regarding the cancellation to the proprietor and ensure that the cancellation has been signed and sealed upon receiving the notice of cancellation from the caveator. Next, a caveatee may also apply for the removal of a private caveat to the Registrar under Section 326(1) of the NLC. The rights provided under this Section may be exercised by the registered proprietor of the caveated land or any person who has a registered interest over the land due to the creation of charge. This can be identified from the register document of title. In Macon Engineers Sdn Bhd v Goh Hooi Yin, in which Ali FJ held that the cancellation of a private caveat under section 326 of the NLC may only be applied by the registered owner of the land. In Pok Kew Chai v Teoh Thian Seng & Anor [1975] 1 MLJ 220 it was held that a registered chargee has locus standi to apply for removal of a Private Caveat under section 326. The application must be made in form 19H and by paying certain prescribed fees. According to Section 326(1A) of the NLC, if the court has not granted any extension on the private caveat, the Registrar has to issue a notice in Form 19C upon the removal application. Then, if two months have lapsed from the date the notice had been served and the caveator has not obtained the extension of the caveat from the court under Section 326(2) of the NLC, the Registrar shall

resume cancelling the entry of the caveat in the IDT. Once the removal of a private caveat has been completed, the caveat may not be revived. Moreover, a caveatee and any aggrieved party may apply for the removal of a private caveat to the Court under Section 327 of the NLC. An aggrieved party refers to a person/ body who is claiming an interest in the land but is unable to register his interest due to the private caveat. In Transsummit Sdn Bhd v Chuan Nyook Lin [1994] 3 AMR 49, Mohd Noor Ahmed J held that if the removal of a private caveat under Section 327 is applied by a person other than the caveatee, the applicant must prove that there are sufficient grounds in law and fact that he would be aggrieved by the existence of the caveat. Referring to the case of Wong Sze Soon v Pegawai Pemegang Harta Malaysia & Anor (1995) 3 MLJ 57, it was held that the applicant making an application to remove the private caveat section 327 must establish that that applicant is aggrieved within the ambits of the Section and once established, the caveator only has to show he has a caveatable interest. The term aggrieved is not defined under the NLC. In Wu Shu Chen @ Anor v Raja Zainal Abidin Bin Raja Hussin[1997] 2 MLJ 487, Lordship Mokhtar Sidin JCA defined the term ‘aggrieved person’ in its ordinary meaning, which means someone dissatisfied with or adversely affected by a wrongful act of another. He stated that an aggrieved person is therefore a person whose legal right or interest is adversely affected by the wrongful act or conduct of another person or body. The courts have taken the view that whether a person is aggrieved by the existence of a caveat will depend on whether he will suffer loss if the caveat is not removed. In Pasupathi A/L Sithamparam V Adam Bin Abdullah [2019] 2 MLJ 254 the owner (borrower) and the respondent (lender) entered into a loan agreement in which the owner granted the respondent option to purchase his land in the event loan not repaid. Then, the owner entered into a sale and purchase agreement with the applicant for the sale of land. The respondent later lodged a...