Indefeasibility of Title

LAND LAW II (INDEFEASIBILITY)

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Lecture Outline   



Definition Types of Indefeasibility Exceptions to Indefeasibility (Sec 340(2) NLC)  Fraud;  Misrepresentation;  Forgery; and  Insufficient/ void instrument  Title/ interest unlawfully acquired in purported exercise of power conferred by written law Bona Fide Purchaser for Value 2

Introduction 

Indefeasibility is fundamental to the Torrens system. 



“the concept of indefeasibility of title is so deeply embedded in our land law that it seems almost trite to restate it” (Raja Azlan Shah in PJTV Denson (M) Sdn Bhd v Roxy (M) Sdn Bhd [1980] 136)

Under the Torrens system, the register is conclusive evidence (Sec 89 NLC) of entries thereon so long as the instrument had complied with 3 conditions precedent:  

The transaction was one which was recognised by NLC as one capable of being registered i.e Transfer, lease, charge/ easement; The instrument used for registration was in statutory form and the IDT has been produced at the time of registration; and The transaction was not void or otherwise defective.

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Cont… 

It was observed in Mohammad Buyong v Pemungut Hasil Tanah Gombak [1982] 2 MLJ 53 that registration is perfected ‘by making of a prescribed memorial of the dealing in the register document of title under the hand and seal of the registering authority”.

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Definition 





“…the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a registered proprietor enjoys. The conception is central in the system of registration.” (Frazier v Walker (1967) “an immunity given to any person whose name got into the register document of title as having the title or interest in the land from the attack by an adversed claim” Also described as „conclusive‟, „unimpeachable‟, „state guaranteed‟, „unchallengeable‟, „unexaminable‟ and „unquestionable‟. 5

Cont… 



Section 340(1) NLC provides that upon registration, the title/interest shall be indefeasible-immune from attack by adverse claim. (General provision conferring indefeasibility).  “the

title or interest of any person or body for the time being registered as proprietor of any land, or in whose name any lease, charge or easement is for the time being registered, shall, subject to the following provisions of this section, be indefeasible” 6

Cont…  Sec

340 (2) “the title or interest of any person or body shall not be indefeasible





In any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy; or Where registration was obtained by forgery, or by means of an insufficient or void instrument; or Where the title or interest was unlawfully acquired by the person or body in the purported exercise of any power or authority conferred by any written law.”

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Cont…  Sec

340 (3) “where the title or interest of any person or body is defeasible -by reason of any of the circumstances specified in sub-section (2)  

It shall be liable to be set aside in the hands of any person or body to whom it may subsequently be transferred; and Any interest subsequently granted thereout shall be liable to be set aside in the hands of any person or body in whom it is for the time being vested;

 Provided

that nothing in this sub-section shall affect any title or interest acquired by any purchaser in good faith and for valuable consideration, or by any person or body claiming through or under such a purchaser.

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TYPES OF INDEFEASIBILITY

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1.Immediate Indefeasibility  If

a person gets a registered title, he is not having been guilty of any fraud, his title is conclusive thus has immediate indefeasibility.  Principle confirmed in Frazer v Walker „apart from fraud of the registered proprietor, his title on registration is immediately indefeasible subject only to his in personam‟ (means any relief granted could result only in an enforceable claim against the proprietor personally, but not against the land)

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Cont… 

Immediate indefeasibility means that the immediate registered title or interest of the proprietor or transferee immediately to the vitiating circumstances will be conferred statutory protection despite the existence of any vitiating circumstances.

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Example: 

When Mr. X was registered as owner of the land, he is, in fact, the owner, even if he became the registered owner fraudulently.

Cont…(IIT) 

Immediate IOT: Immediate transferee who acts in good faith and for value obtains indefeasible title notwithstanding vitiating elements 

A ------------------X

(transferor)

Forgery by X

(Immediate transferee)

Result: X gets immediate indefeasibility

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Cont… 

RP

Element under section 340(2)

BFP4V (transfree) Land

As provided under Section 340(3)

Immediate

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2. Deferred Indefeasibility •

This is where the indefeasible title is deferred to the innocent person dealing with the person who has been registered as owner due to fraud, forgery, misrepresentation etc (sec 340(2))

Another example!!!  



X obtained title from Y by way of fraud. Then X registered as proprietor. X will not get indefeasibilty of title as it is deferred to the next party due to the existence of fraud Then X transfer title to Z. Z gets indefeasibilty of title against Y. So here Y cannot be restored as the proprietor but will claim for damages from X for the lost of the title.

Cont… RP

IP

SP(BFP4V)

Element under section 340(2)

Deferred

 Result:

IP gets defeasible title notwithstanding he acts in good faith and for value; SP sacquire indefeasible title (gets statutory protection under sec 340(3)

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Cont… 

DI was confirmed in Mohammad Bin Buyong v Pemungut Hasil Tanah Gombak & Ors [1982] 2MLJ 53 

“The doctrine carried in section 340 is the doctrine of indefeasibility. What that section protects is that the title or interest of any person for the time being registered as proprietor of any land shall be indefeasible. Subsection (2) of the section provides for the exceptions in that the title or interest shall not be indefeasible in any case of fraud or misrepresentation or where registration was obtained by forgery or by means of an insufficient or void instrument or where the title or interest was unlawfully acquired. This provision deals with what is called ‘deferred indefeasibility‟ about which we are not presently concerned. It would seem clear that one has to be registered as proprietor first before one’s title can be described as indefeasible. In other words, registration is a prerequisite of indefeasibility” (at p 54)

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Who is aBona Fide Purchaser for Value ? 

The meaning of purchaser also includes chargee or other interest holder. (Owe Then Kooi v Au Thiam Seng [1990] 1 MLJ 234)  

Land was transferred to the transferee by way of fraud. Subsequently it was charge to the bank. Held: the interest obtained by the chargee was indefeasible. 

“I would interpret this to mean that once it is found that the title or interest is defeasible in sub (2), namely, fraud as in this case, the title or interest may be set aside by any person or body to whom it may subsequently be transferred or in whom it is subsequently vested. „subsequently‟ must mean after the event of fraud and in our present situation, it is the D2 in whom the interest is subsequently granted”.

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Criteria of a BFP: 

Bona Fide Purchaser must have the following factors: Pays 



consideration.

Consideration must be valuable or real (money or money‟s worth). Not merely consideration for „natural love and affection‟ or nominal consideration 

Chu Choon Moi v Ngan Siew Tin [1986] 1 MLJ 34 The hus transferred his late‟s father property to the wife without any consideration. She in not considered as BFPFV

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Cont..  No

consideration- one who takes title or an interest to land without giving value or consideration treated as a volunteer.  Mohamed Moidu Mohamed v Hasan Kadir [2001] 4 MLJ 292 The defendants were volunteers by reason of the registration of the title into their names being through devolution. They were not and could not be termed as bona fide purchasers for value for the reason that they pay no consideration. In such a situation their title to the land was defeasible by the equitable interests created and subsisting by the deed of sale and as such their ownership could not fall within the rule of indefeasibility as envisaged under s 340(1) of the NLC.

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Cont… 

Acts in good faith  No

notice/knowledge whether actual or constructive 

Actual notice of the proprietor or his agent. Eg the entry of a caveat to protect the competing interest

 Adequate

value 

in keeping with the property‟s

Au Meng Nam & Anor v Ung Yak Chew & Ors [2007] 4 CLJ 526

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Cont… 

“…had the learned trial judge taken the above facts and circumstances into consideration, he cannot possibly conclude that the 1st defendant was a bona fide purchaser for valuable consideration, so as to be protected under s. 340(3) of the Code. …. “the 1st defendant knew at the time he bought the said land, the purchase price was below the market value. But he wanted to take advantage of the low price. He did a fast track to complete the purchase. In doing so he disregarded his obligations to investigate the alleged proprietors and the genuineness of the documents. My respectful view is that a purchaser in good faith does not include a purchaser who is careless or who had been negligent.”

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The History!!! 

1965-2001: West Malaysia applied the concept of deferred indefeasibility (Mohammad Buyong v Pemungut Hasil Tanah Gombak & MJ Frozen Food Sdn Bhd & Anor v Siland Sdn Bhd)

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2001-2010: Federal Court adopted the immediate indefeasibility approach (Adorna Properties Sdn Bhd v Boonsom Boonyanit)



Jan 2010: applied the concept of deferred indefeasibility (Tan Ying Hong v Tan Sian San & Ors)

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Exceptions to Indefeasibility  

Exceptions : A title or interest is defeasible due to any of the followings: Statutory

exceptions under Section 340(2) eg. Fraud, misrepresentation, forgery etc  Exceptions under equity such as equitable ownership, equitable charge, equitable lien etc.  Other exceptions based on custom and islamic law such as hibah/ harta sepencarian. 25

Statutory exceptions under Section 340(2) s

340(2)(a) NLC:“in any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was a party or privy; or”



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What is fraud under s 340(2)(a)? 1.

must be actual fraud. It is defined as:-

 „dishonesty- a willful and conscious disregard and violation of the rights of other persons‟ (Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd)  „something in the nature of personal dishonesty or moral turpitude‟ (Stuart v Kingston)  „fraud means if the design object if transaction is to cheat a man or by delivered dishonest act caused a person losses his existing right‟ (Loi Hieng Chong v Kon Tek Shin (1983) 1 MLJ 31

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Cont…. 

Example of actual and constructive fraud: Actual fraud (direct) Apoo v Ellamah [1974] 2 MLJ 201 Where the registered proprietor thought he was executing a charge document but instead the transferee asked him to sign a transfer form and subsequently obtained registration of a transfer  Owe Then Kooi v Au Thiam Seng [1990] 1 MLJ 234 Where a registered proprietor can only read Chinese but signed document written in English which he thought made his brother as trustee instead a document allowed the land to be transferred to the brother

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Cont… 

Datuk Jaginder Singh v Tara Rajaratnam [1983] 2 MLJ 127  Where

P transferred her land to D as security for debts with a condition that the land cannot be transferred to any 3rd party without her consent and the land would be transferred back to her within 1 year for RM 220,000. However, after 18 days, D transferred the land to developer and eventually sold to public.

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Cont…  Constructive 

fraud/ implied fraud

Tai lee Finance Co. Sdn Bhd v Official Assignee & Anor [1983] 1 MLJ 81

The registered proprietor executed 2 charges over the land in favour of App, both of which were registered. The chargor was a land developer who had contracted with 2nd7th Res to build houses on individual lots (sub-purchaser). On default, OFS was made. The purchasers opposed OFS on the basis that the chargee should have enquired to see if they had interests in the lands. Held (on appeal): when the charge was registered it was not to defraud the subpurchaser. Fraud must be an actual fraud and do not exist in this case. If ever fraud exist, it is only a constructive fraud or implied fraud, when chargee applied OFS without having regard to the right of sub purchaser in the land. Constructive notice of beneficial interest was not of itself fraud. “..’fraud’ as used in section 340…must be actual fraud and mere knowledge of the existence of an unregistered interest shall not of itself be imputed as fraud within the meaning envisaged by section 340.”(Abdul Hamid FJ)

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Cont… 2.

Fraud must be committed by the person or his agent and as a result his name was registered in RDT/IDT  If

the person is not the party or privy to the fraud then his title will be indefeasible

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Cont… 

Chu Choon Moi v Ngan Sew Tin [1986] 1 MLJ 34 

App sought a declaration that the property in Q belonged to her hus and should be transferred to his estate on his death. Res was wife of the deceased‟s son who had been responsible for transferring the property to his wife instead of including it in the estate of the deceased father. Held (SC): that the transfer to Res was fraudulent; the wife had no grounds for keeping an indefeasible title for she was a party to the fraud, she lacked bone fides and had not given value.

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Cont… 

Ismail Bin Mohamad v Ismail Bin Husin [2007] 4 MLJ 489

Facts: the solicitor in charge collaborated with D to defraud P by inducing him to sign a sale and purchase agreement but later he used P‟s title to create a charge in favour of one of the Ds. The bank had no knowledge of the fraudulent conduct but appointed the same solicitor to prepare and register the charge document. P appealled for the cancelation of the charge in favour of D (bank).  Held: the fraudulent conduct of the agent is imputed on the bank‟s interest, therefore the charge is considered as defeasible and cancelled of from the register document of title. 





 

“D2 and D3 were the agents of D4 and D2 was not just privy but a party to the fraud concerned, the charge registered in favour of D4 could not be held to be valid and indefeasible”

In establishing fraud, the onus is on the party alleging fraud. Particulars of fraud must be pleaded in the pleading. Burden of proof is on the balance of probabilities (prior to Adorna, B.o.p was beyond reasonable doubt)

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Cont….  

Misrepresentation [s 340(2)(a) NLC]:no definition in NLC. It is part of fraud. 

Datuk Jaginder Singh v Tara Rajaratnam [1983] 2 MLJ 127

P transferred her land to D as security for debts with a condition that the land cannot be transferred to any 3rd party without her consent and the land would be transferred back to her within 1 year for RM 220,000.. However, after 18 days, D transferred the land to developer and eventually sold to public. Held: the title was defeasible. They were not honest. Ds never intended to fulfill the agreement. They merely wanted P to sign the transfer form so they can get the land.

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Cont… 

Loke Yew v Port Swettenham Rubber Co Ltd (1913) 2 MLJ

D managed to get owner to sign the transfer form by way of misrepresentation that the land belonged to P will be excluded from the transfer. P bought part of the land in cash but did not register his name in the title deed.  Held: Since he was aware that if not for his statement/undertaking, he could not obtain execution of transfer, therefore by denying P‟s interest in the land will render his title defeasible. 

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Cont…  1)

s 340(2)(a) NLC:Forgery:-an act of one person to sign in the name of the registered proprietor or any person who has an interest in the land on any instrument of dealing or used of a forged document to complete the dealing.

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

Ong Lock Choo v Quek Shin (1941) MLJ 88  The registered proprietor gave his IDT to solicitor and the clerk forged his signature and charges to 3rd party.  Held: forged transfer was a nullity. Void document will render the charge defeasible.

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Cont.. 

Quah Hong Lian Neo v Seow Teong Teck (1936) MLJ 161  A person through trickery and impersonation obtained a transfer of a piece of land and later charged the property.  Held: the forger‟s title is defeasible. Since forged document is a nullity, therefore that chargee‟s interest is also defeasible.



OCBC v Pendaftar Hakmilik Negeri Johor [1999] 2 MLJ 511  “…the registration of a transfer of the title of the property to A was obtained by forgery of the instrument of transfer by the use of another person‟s thumbprint and not that of the true proprietor of the land i.e B (NH Chan JCA)”

Adorna Properties Sdn Bhd v Boonson Boonyanit @ Sun Yok Eng[2001] 2 CLJ 133  Tan Ying Hong v Tan Sian San & Ors [2010] CLJ (SE) 1 

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Cont…. 2.

Insufficient/ void instrument  Void

means instrument of dealing is defective as it contrary to rule of law or illegal.  Examples:

Void contract

Tan Hee Juan v The Boon Keat [1934] MLJ 96,  A minor signed an instrument to transfer 2 pieces of land in Mentakab to D. it was held that according to Contract Act, a contract entered by a minor is void. The instrument of transfer signed by the minor is also void.

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Cont… 

Invalid Power of AttorneyPuran Singh v Kehar Singh [1939] MLJ 71  State Tailor Sdn Bhd v Nallapan [2005] 2 MLJ 589. 



Against any existing law Appoo v Ellamah [1974] 2 MLJ 201  UMBC v Syarikat Perumahan Luas [1988] 3 MLJ 352 

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Cont.. 

Section 340(2)(c) NLC:- Title or interest was unlawfully acquired in purported exercise of power conferred by written law  M&J

Frozen Food Sdn Bhd & Anor v Siland Sdn Bhd [1994] 1 MLJ 294 MJ Frozen (higher bidder)

RP Transfer the title to MJ Frozen using Certificate of sale (COS) which was issued by Senior Ass Registrar (SAR)-years later after MJ Frozen forwarded balance sum.

-paid 25% of purchase price as deposit and balance to be settled within 30 days (was not complied-b.o.ct)

RP claimed for a rescission of the contract and forfeiture of the deposit paid by MJ Frozen.

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Cont..  Trial

Court: declared the deposit forfeited, annulled the certificate of sale issues by SAR and cancelled the registration of transfer in respect of the property  The judge also made orders for the return of the IDT and ordered the property to be resold.

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Cont.. (appeal)-dismissed.  (Wan Yahya SCJ): the certificate issued by the SAR was ultra vires the statutory provision of the NLC and the title was unlawfully acquired by the purchaser. This is when registration is obtained through void instrument. The title is ineffective and defeasible if it violates any written law or is against the law. 43

Cont..  “In

the case where the vendor’s title is good but the instrument which was used by a purchaser for registration is void or voidable, the effect on such registration will only confer on the person in whose name the land is registered, what is usually referred to as deferred indefeasibility. Under this principle, the registration of the insufficient or void instrument can be set aside.” 44

Cont.. 



It was held that failure to comply with the statutory requirements of para (a) and (b) of s 258 and para (c) of s. 261(1) of the NLC was not just a mere irregularity, but was an illegality which struck at the root of the (first respondent) R1‟s right to be heard. Therefore, the certificate issued by the Senior Assisstant Registrar was ultra vires the statutory provisions of the NLC and the title was unlawfully acquired by first appellant (A1). The title of the A1 was defeasible under s 340(2)(c) of the NLC and the learned judge had arrived at a correct decision when he made the order for the cancellation of the registration of the transfer.

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Effect of title under Sec 340(2) 



Title or interest obtained under the circumstances in section 340(2)(a), (b) & (c) NLC will be defeasible. The title and interest can be set aside in the hand of person or body to whom it is subsequently transferred or vested.

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Laches  

 

Laches is a defense to a proceeding in which a plaintiff seeks equitable relief. Cases in Equity are distinguished from cases at law by the type of remedy, or judicial relief, sought by the plaintiff. Generally, law cases involve a problem that can be solved by the payment of monetary damages. Equity cases involve remedies directed by the court against a party.

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Cont…  



Laches is based on the legal maxim "Equity aids the vigilant, not those who slumber on their rights." Laches recognizes that a party to an action can lose evidence, witnesses, and a fair chance to defend himself or herself after the passage of time from the date the wrong was committed. If the defendant can show disadvantages because for a long time he or she relied on the fact that no lawsuit would be started, then the case should be dismissed in the interests of justice. 48

Cont… 



The law encourages a speedy resolution for every dispute. Cases in law are governed by STATUTES OF LIMITATIONS, i.e the Limitation Act, which are laws that determine how long a person has to file a lawsuit before the right to sue expires. Laches is the equitable equivalent of statutes of limitations. Unlike statutes of limitations, laches leaves it up to the court to determine, based on the unique facts of the case, whether a plaintiff has waited too long to seek relief. 49

Example where defence of laches is applicable: 

If the neighbor observes the construction of the garage on her property and does not file suit until the garage is completed, the defendant may plead laches, arguing that the neighbor had ample time to protect her property rights before the construction was completed, and the court may find it unfair to order that the garage be torn down.

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s.341 Adverse posession: to acquire title to real property by occupying it for a period of time (not by the RP)  S. 341 does not put a limitation to RP or those who have registered interest in the land to bring action for the recovery of the land vs adverse posessor. 

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Cont… 

S. 341 is a mean to put aside the defence of laches under equity for recovery of land by the RP

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