Exceptions to Indefeasibility

Exceptions to indefeasibility Indefeasibility of title which means that the owner’s title or interest in the land become not able to be defeated or doubted by any unfavorable claim which are not stated in the register. The case of Teh Bee v K .Maruthamuthu held that if there is no any of the vitiating factors stipulated in section 340[1] of the National Land Code (NLC) 1965, once the title is registered, it is indefeasible. For example, when Hanif bought a piece of land and then went to Land Office for the purpose of registered the title under his name as to be a legal owner of the land. Once the registration process is made, then Hanif’s title of land becomes unchallengeable and indefeasible. However, Indefeasibility is not absolute. There are certain circumstances where the registered title or interest may be invalid or defeated which are stated in section 340(2)[2] under NLC and also by case law. The title of land is can be defeated where there is fraud, misrepresentation, forgery, if the title or interest was unlawfully obtained.

1. Fraud

Section 340(2)(a) stated that where the person who obtained the title of the land from another person by way of fraud or deceived, the title of such person can be defeated. The definition of the word ‘fraud’ was applied in the Malaysian cases of Tai Lee Finance Co Sdn Bhd v Official assignee & Ors [1983].   The court held that:

1. Where the title of land is registered, then the title is indefeasible but under section 340(2) NLC which is obtained the title by way of fraud, so the title can be defeasible.
2. The law is settled that while section 340 makes it very clear that the title or interest of a register owner shall be indefeasible. In the case of actual fraud under section 340(2), such title or interest shall not be indefeasible.
3. The question of existence of fraud is one of fact to be determined in the facts surrounding each particular case. When the person who is claim that they are fraud, then the duty of the person is to find evidences to proof that the fraud is truths.

For example, Pai Lang is forges Ho Lang’s signature to transfer the land to him. After Ho Lang discover that his land are being transferred to Pai Lang by the way of forgery, then the Ho Lang must find evidence to proof that Pai Lang is through the way of forgery to transfer his land without knowledge. In addition, the case of Public finance Bhd v Narayanasamy [1971] is also one of the cases that is does not enjoy the indefeasibility provided under section 340 NLC 1965.   The court held that the appellant’s insists that the third parties do not have any rights, apart from the right to damages against the respondent for break one’s promise; this is so clearly unreasonable that the learned judge is reasonable in holding that they are guilty of fraud and conspiracy. If they admit that the sub-purchasers have the right to the lands they had paid for, it will be impossible for any court to say that they want to perpetrate a fraud. For example, when the chargee is involved in the guilty of fraud and conspiracy, then the chargee’s application for order of sale of charged land would be defeated. This means that the chargee does not enjoy defeasibility of title as the chargee is obtained the title of land by the way of illegal action.

2. Misrepresentation

Lee and Detta (2009, p.730) notes that the ‘misrepresentation’ within the context of section 340(2) would mean ‘fraudulent misrepresentation’. It is kinds of fraud under the cases of Datuk Jagindar Singh & Ors v Tara Rajaratnam. The principle of this case is the interest or title which is able to be defeated by the grounds of any situations provided for in section 340 NCL 1965 remains liable to be void even in the hands of a subsequent purchaser except it can be proved that he is a purchaser in good faith and for valuable consideration. Lee and Detta (2009, p.731) acknowledge that the examples of fraudulent misrepresentation include the following:

1. the suggestion, as to a fact, of that which is not true by one who does not believe it to be true; (Lee and Detta, 2009)
2. The active concealment of a fact by one having knowledge or belief of the fact; (Lee and Detta, 2009)
3. A promise made without any intention of performing it; (Lee and Detta, 2009)
4. Any other act fitted to deceive; and (Lee and Detta, 2009)
5. Any such act or omission as the law specifically declares to be fraudulent. (Lee and Detta, 2009)

3. Forgery

Under section 340(2)(b) NLC 1965 states that upon the registration was acquired by the way of forgery, the title of the land for such person is defeasible. The event where such person is not a party to forgery, his title is still defeasibe. For instance, under the cases of Booson Boonyanit v Adorna Properties Sdn Bhd when the forgery by itself would makes the registered title become defeasible regardless of the lack of knowledge on the part of the owner. In other hands, even if he is an innocent purchaser for value but it would also affect the immediate owner. However, in the case of Booson Boonyanit indicate that the subsequent purchasers are protected by section 340 (3)[3] NLC 1965. For example, Lee Gak was looking for the land to build factory and ask for help from his friend, Yong Tae Mu. At that time, Yong Tae Mu already had a land, which was he tricked his grandmother to transfer the land to him. So, Yong Tae Mu sold the land to his friend, Lee Gak. However, Lee Gak did not know that the land was getting by fraud. When Yong Tae Mu’s grandmother wanted to get back the land, she just realized that the land was sold. In section340 NCL 1965 stated that the title or interest of land is indefeasibility upon registration, so Yong Tae Mu’s grandmother can have her land back. Yong Tae Mu had cheated his grandmother to get the land, so his land title is defeasibility which stated in Section 340 (2) National Land Code. However, Yong Tae Mu had already sold the land to his friend, Lee Gak. Lee Gak still can remain the ownership of land because he was the innocent party and the subsequent purchaser is protected by Section 340 (3). In conclusion, Lee Gak had the land and Yong Tae Mu’s grandmother is unable to claim back her land. Basically, the subsequent purchase has the benefit of protection whereas the immediate proprietor does not have are stipulated in Section 340(3). For example, Alexandar is the registered owner of the land. Benjamin forges Alexandar’s signature and transfers a piece of land to himself. Then, Benjamin sells the land and transfer the land to Catherine. But Catherine, who has no being aware of the forgery, she will obtain the indefeasible title. Or if Benjamin forges Alexandar’s signature and transfers the land from Alexandar to Catherine and Catherine later transfers the land to Damien, then, Damien and not Catherine, who has no knowledge of the forgery, will obtain an indefeasible title. Catherine and Damien in the first and second examples are known as sub-purchasers under section 340(3). Besides than that, chargee may still can succeed in obtaining an order for sale when the land is transferred by the fraud of the transferee and a charge is effected in favour of an innocent 3rd party as illustrated inOwe Then Kooi v Au ThiamSeng & Anor Development & Commercial Bank Bhd v Au Thin Chai & Ors. For example, Park Ha and Joo Se Na are sisters and having closing relationship to each other. But, Park Ha is richer than Joo Se Na and owns some property. Joo Se Na felt jealous to her sister Park Ha and wanted to get her sister’s property, so, Joo Se Na tricked her sister to transfer her property to Joo Se Na. Her sisters had believed Joo Se Na and agree to transfer her property to Joo Se Na on the spot. Joo Se Na charged the property to Bank Mimi to borrow money after she got the title of land from her sister. Her sister realized that she had been cheated by Joo Se Na while Joo Se Na had already run away with the money which had borrowed from Bank Mimi. Her sister wanted to get back her title of land since she had been cheated. However, she unable to take back her title of land due to there was included the innocent party, which was Bank Mimi. The amount of money lend to Joo Se Na is not able to be recovered, so Bank Mimi had to sell the property to get back their money which is lend to Joo Se Na. Joo Se Na’s sister, Park Ha still can get the money if there was remaining money after sold the property, vice versa. Lee and Detta, (2009, p.731) acknowledge that this may be compared with the position in Sarawak where section 132[4] of the Sarawak Land Code (cap.81) provides that a purchaser in good faith and for value, provided that he is innocence and commit of any fraud, will obtained an indefeasible title or interest when registration even if the registration has been obtained by the way of forgery or void instrument. (Lee and Detta, 2009)

4. Insufficient or void Instruments

Insufficient or void instruments is laid down under section 340(2)(b) NLC 1965. For example, an instrument of dealing may be considered to be adequate if the instrument has failed to comply with certain procedures or formalities as stipulated by the NCL. Thus the procedures or formalities as stipulated by sections 207 to 211 NLC 1965 must be followed or else the instrument of dealing may be considered to be inadequate. Based on the case of Puran Singh v Kchar Singh & Anor, another example of an ‘inadequate ‘instrument is an instrument of dealing signed by an lawyer according to an invalid or insufficient power of attorney . On the other hand, Lee and Detta (2009, p.732) notes that void instrument would include one which is forged or violation to any restriction in interest to which the land is subject to any prohibition imposed by the Code or any written law. Examples of instruments which are because of prohibition prescribed by law include the following:

1. Transactions made in violation of the Moneylenders Ordinance 1951. (Lee and Detta, 2009)
2. Transactions made in violation of Malay Reservation Enactments. (Lee and Detta, 2009)

5. Position of Subsequent Purchaser Taking Defeasible Title/Interest

Lee and Detta (2009, p.732) acknowledge that section 340(3) provided that nothing in this subsection 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. The result of section 340(3) is that where a registered title is presented defeasible by the grounds of the circumstances provided under section 340(2) NCL 1965, it is liable to be void not only in the hands of the immediate registered owner but also any subsequent purchaser.

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[1] Refer to Appendix 14 [2] Refer to Appendix 15 [3] Refer to Appendix 16 [4] Refer to Appendix 17  

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