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CHARGES IN MALAYSIAN LAND LAW, Comparison - Coggle Diagram
CHARGES IN MALAYSIAN LAND LAW
Registration
Steps
Chargor & chargee execute F. 16A (secure debt) or F. 16B (secure payment of annuity or other periodic sum) (S242)
Use of the wrong form will not invalidate the charge as long as it has no substantial effect or be calculated to mislead (
Tan Yen Yee & Anor. v. Equity Finance Corp. Bhd)
Attestation of Chargor & Chargee’s signature by advocates or land administrator (s211)
Stamping of F.16A at LHDN
Present Form 16A for Registration at Land Office/Registry and enclosed document.
Registration by registrar s304(2)
Effect
Registered Charge
S243 Land becomes liable as security
S340 Indefeasible Interest
Entitled to statutory remedies
Unregistered Charge
Equitable Charge S206 (3):
Mahadevan v Manilal
Where charge instrument has been executed but not presented for registration
(Standard Chartered Bank v Yap Sing Yoke)
No title to land issued yet, so security created over land under a loan agreement and deed of assignment.
(Malayan Banking v Zahari b. Ahmad)
Although the IDT is available, parties do not wish to create a charge. Borrower just hands over the IDT to the lender as security.
IDT available but parties wish to enter into the customary security transaction called ‘Jual Janji’ and not a charge.
(Haji Abdul Rahman v Hassan)
Remedies in personam
Charge =
Registered Charge ( S.5)
What is a charge?
When a registered proprietor or a lessee who in need of cash uses his land as security to guarantee the repayment of the loan given by the Lender
Mortgage v Charge
Meaning of mortgage
A mortgage is a pledge of the land by the land owner to a lender that conveys to the lender the title to the land in consideration for the loan.
Upon repayment of the loan, the mortgagee is to re-transfer the land back to the mortgagor.
Right of the mortgagor to redeem the land is called ‘equity of redemption’.
Charge ≠ Mortgage
Gan Khor v Soan b. Pelita (1935)
Paramoo v Zeno [1968]
BBMB v Doric Dvpmt S/B [1988]
Comparison
Creation
contract v statute
Legal title of land
transferred v remains
Right
equity of redemption v registered interest
Default
foreclose v statutory remedy
Powers of Charging S241
Who?
A registered proprietor [S 43 and 241(4)]
What?
Whole land and a lease. (s.241(1)
Kalau tanah tu shared by husband & wife, and wife nak charge, kena charge whole land.
For what?
To secure repayment of money S.241(aa) and (bb)
Subsequent Charge S241 (2)
Must get the consent of the 1st charge
(R&I Securities S/B v Golden Castle Finance Corp. (M) Bhd.)
Nature of Interest
Case Law
Charge = Interest in land
(Ho Giok Chay v Nik Aishah)
Charge ≠ Interest in land
(T. Bariam Singh’s Case)
NLC
Section 243: Legal Interest
Action against the land (in rem)
(Tengku Azman b. Tg. Adnan & Anor. v Hong Leong Bank)
Priority of Charges S268 can be altered
Consolidation of Charges S245
Fuse two charges in one charge by the same chargor and chargee
To discharge Land A, the chargor must also discharge Land B.
NLC restricts unless there is an express agreement
Consolidate the 2 accounts before and not after applying for an order for sale
(Public Finance v Hock Seng Housing Dvpt & Ors)
Tacking S246
Condition
Where the advance/s are made with consent of the 2nd Chargee
Continuing account
Expressly authorised by the prior charge
Definition
Chargee tack the charge with the future loan
Postponement S247
Form 16C
Ling Tee Huah Credit & Leasing S/B v Lii Tat Credit Mortgage S/B
Distribution of money after sale of land in public auction: S268
Statutory Remedy
Order for Sale S253
Sale by Private Treaty S266 (1)
Rights to the chargor, not chargee
(Kimlin Housing Dvp S/B v. BBMB)
Conditions
Purchase price is not lower than the amount owing to the Chargee.
Chung Khiaw Bank Ltd v Lau Ah Yen & Anor.
Consent of the Chargee is obtained.
MUI Bank v Cheam Kim Yu
Concluded before conclusion of sale by public auction.
After order for sale is granted:
UMBC Bhd v Chong Bun Sun & Anor.
Land Office Title S260-265
Procedure
Issuance of Form 16D (Notice of Default) upon default by virtue of section 254
If the chargor failed to remedy the breach within one month (period stated in 16D), the chargee can apply to the LA for an order for sale by filling in Form 16G as prescribed by s260(2) of NLC.
Upon receiving the application, the LA by virtue of s261 will appoint the time and place to hold an enquiry. The LA will notify the chargee and summon the chargor requiring him to appear at the enquiry.
An enquiry will be held as per section 262 of NLC. Only the chargor, chargee or their representatives (lawyer) can attend the enquiry.
If chargor fails to show any cause to the contrary, LA will grant the order for sale of the land in Form 16H by virtue of section 263.
Cause to the contrary =
1.Whether the charge is a registered charge or not. 2. Whether there was an existence of default 3. Breach is not caused by the chargor (e.g. chargee had refused to accept the monthly instalments by the chargor.)
After making the order, the LA shall give a copy of Form 16H to the chargor and the chargee as well as make a public notice of the sale pursuant to section 264(1). The chargee will then have to deposit the IDT and the duplicate charge as prescribed by section 264(2).
A public auction will be held in accordance with section 265. If there is a successful purchaser at the auction, the LA must give the certificate of sale in Form 16I and the IDT.
Issues
Nature of Land Administrator's power
The Land Administrator is to enquire whether the chargor has defaulted in the charge, rather than examining the merits of the charge or its validity
( Gurpal Singh v Kananayer)
Govt. of Malaysia v Omar bn Hj. Ahmad
- LA cannot make order for chargor to pay the arrears due to chargee by instalments
Land Administrator is functus officio after the order for sale is granted unless to postpone
(Lim Yoke Foo v Eu Finance Bhd)
Who is the vendor of the land during public auction?
The chargee is regarded as the vendor
(Malayan United Finance Bhd., JB v Liew Yet Lan)
When is a sale concluded?
At the fall of the auctioneer’s hammer. But ownership of the land does not pass to the purchaser until registration.
How many times can postpone?
S265 (2) and (3): 2 times. After 2 times, boleh postpone lagi or refer the matter to the court
Registry Title S256-259
Procedure
After the period to remedy the breach or to pay the sum has lapsed, the chargee applies to the High Court through Originating Summons supported by an affidavit for an order for sale of the land S256 (2)
Court will grant order for sale through s.256(3) NLC
Content : Section 247 (1)
S256 (3) "Cause to the contrary"
(Low Lee Lian v Ban Hin Lee Bank)
Where a chargor was able to bring his case under any of the exceptions to the indefeasibility doctrine under s. 340(2) NLC; (fraud, misrepresentation, forgery, void or insufficient instrument)
An order for sale would not be granted if the chargee has been fraudulent or where the chargee and the chargor have acted in collusion to defraud third parties.
Tai Lee Finance Co. v Official Assignee
The charge was void under s. 340(2)(b) as it was procured through an unlawful power of attorney (void instrument)
Tan Ying Hong v Tan Sian Sang
When a chargor could demonstrate that the chargee had failed to meet the conditions precedent for applying for an order for sale under the NLC
Where the statutory notice of demand in Form 16D and notice to attend the enquiry was not sent to the chargor, there is ‘cause to the contrary’
(Standard Chartered Bank Msia Bhd v Mohd Nazro b. Zulkipeli)
Where Form 16D was not sent to the new registered address of the chargor that is a company.
(Kekatong)
When the chargor could demonstrate that the making of the order for sale would be contrary to any rule of law or equity.
Where the chargee is a non-Malay but it is a Malay reservation land
(Jamaludin Jaafar v Affin Bank Bhd.)
Time-Barred: From when do we calculate the limitation period?
1 more item...
The Court Registrar serves a copy of the order for sale on the chargor. (s.258(1)(a)) and advertises the sale to be done by public auction. (newspapers and posters).
Chargee prepares the conditions of sale according to court order and deposits the IDT/duplicate lease to the court a week before auction date.
Under section 259, sale will be carried out by an officer of the court or a licensed auctioneer. (see s.259(2) as to duties of the auctioneer).
Successful bidder (‘purchaser’) in the public auction, upon paying the full purchase price, will receive from the auctioneer 2 things (during public auction pay 10%)
Form 16F - Certificate of Sale by Court
The IDT/duplicate lease.
Where breach of charge agreement has continued for more than a month, the chargee will serve on the chargor a Notice in FORM 16D.
Contains 3 things:
a) specifies the breach in question.
b) requires it to be remedied within 1 month.
c) warns the chargor that if the notice is not complied with, the chargee will take proceedings to get an order for sale.
However, if the principal sum secured is payable ON DEMAND (must ascertain this from the Charge Annexure), the chargee will issue Form 16E
Case (Issue on Notice of Demand)
Wrong Notice
Jacob v Overseas Chinese Banking Corp:
Where there has been a breach of any obligation Form 16D may be used, regardless of the nature of the obligation, including the payment of the principal sum on demand
Where the principal sum is payable on demand then either notice in Form 16D or Form 16E may be served.
S.255: If Form 16E has been served, and there is non-compliance by the chargor, there is no need to follow up with Form 16D.
(Bank Bumiputra Malaysia Bhd. v. Mahmud)
Failure to Specify Exact Breach
If the details of the breach had been specified in detail in an earlier letter of demand, failure to specify the details of the breach in Form 16D will not effect its validity
(RHB Bank Bhd. lwn Syarikat Sungei Nal Timber Industries Sdn. Bhd)
Changing duration of notice
S.254(1)(b) :The period to pay the amount demanded in the notice of demand (Form 16D) to be ‘within 1 month… or such alternative period as may be specified in the charge.’
Chargee stipulate lesser than a month? S.254 (1)(b) permits. Chargor & chargee may agree.
(Citibank Bhd. v Mohd. Khalid b. Farzalur Rahman & Ors)
Irregular Service of Notice
S 431 (1) - Method of service
Previous registered office?
(Kekatong)
: VOID
Ownership of land is a fundamental right under Art. 13 FC. Any deprivation must be in strict compliance of both, substantial and procedural law.
Effect of order for sale and the subsequent public auction, etc. are designed to permanently deprive a registered proprietor of his land.
Payment of Balance Purchase Price
Shall be settled not later than 120 days from the date of the sale and ‘there shall be no extension’ of such period
(M&J Frozen Food S/B & Anor. V Siland S/B & Anor)
However, if the ‘Conditions of Sale’ expressly allow the extension of time, an order of court to approve such extension of time is valid
(Chi Liung Holdings S/B v L&T Realty S/B )
Taking Possession S271
Nature & Limitation S270
Does not apply to Land Office title (only register title)
Does not apply to charge of undivided share of land.
Does not apply to town or village land held under Registry Title that is occupied by the chargor.
Available to first chargee only.
Method
By receiving the rent S272
If no tenant or lessee, by going into occupation
Both remedies can be applied for simultaneously. (s.253(2))
Holding IDT
S. 244(1) – ‘first chargee’
Chargor can request for IDT by written request to the chargee,if needed and chargee will produce at the Land office. (s.244(2))
Powers of Chargor & Chargee
Chargor
Create subsequent charge
Create lease or tenancy (S251 & S226) but with consent (
Leisure Complex S/B v Malaysian Credit Finance Bhd
)
Discharge the Charge S278 through Form 16N
Chargee
First chargee holds the IDT
Upon default, may enforce
Transfer the charge (S216)
Postpone the charge S247
Express and Implied Condition
Express
Can be found in the charge annexure
Conditions imposed by the parties that are not mentioned in the NLC provisions.
Right to consolidate charges
Restriction against other charges
Implied
S249 - Fixed obligations of chargor
1) To pay all sums secured. i.e. repay the loan.
2) Pay rent (land revenue) to the State Authority.
3) Observe and perform all conditions to which the land is subject.
Void Charges
A charge that fails to comply with fixed requirements
1) Where the charge is to secure an unenforceable loan
(Phuman Singh’s case and Associated)
money-lenders' license
Where title of the chargor is defeasible (s240) due to fraud in the transfer, the charge is also null and void
(Owe Then Kooi’s case)
Consideration for the charge over the land is past consideration
(Lau Ngiik Ping)
Comparison
Judicial Sale (Registry Title)
Apply to High Court
Other party can apply
Full judicial powers
No limit to postpone
Land Office Sale
Apply to Land Administrator
Only chargor and chargee can be heard
LA's power : Evaluate whether:
May postpone twice