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Haji Arshad, What action can be taken against the Land Administrator for…

- - - - Mahmud bin Hassan & Anor v CIMB Bank Bhd
        (High Court)
        
        Facts: The plaintiff brought an action against defendant as the owner of a land to claim for the payment over the unsettled payment through the creation of lien-holders caveat. The land is the security for the said loan. Defendant contended that at the time the lien holder's caveat was lodged, there was a pre-existing registrar's caveat on the land thus prevents any other caveat to be lodged over the same land. The registrar's caveat was lodged to protect the interest of minor proprietors. High Court judge held that the plaintiff's lien-holder's caveat was unlawfully registered. The appellant appealed.
        
        Judgment:
        The existence of the registrar’s caveat clearly prohibits the registration of the bank’s lien holder’s caveat. Thus, the bank’s lien holder’s caveat was unlawfully registered.
        Note: The court did not interpret Section 319 (3) on the waive of the prohibition.
      - CIMB Bank Bhd. v Kamarudin bin Said
        (Court of Appeal- overturn the decision in the High Court)
        
        Judgment:
        
        The learned JC erred in law and fact in failing to appreciate that there was no evidence by the defendant to demonstrate that the Registrar had not waived the prohibition in s 319(3) of the NLC and thus wrongfully registered the plaintiff ’s lien holder’s caveat onto the second, third, and the fourth defendants land.
        
        The evidence before the court was clear that the LHC was duly registered and by virtue of showing that the LHC existed, the appellant had sufficiently satisfied its burden to prove that the LHC was validly registered. The appellant’s interest was therefore indefeasible.
        
        The creation of lien-holder's caveat is lawful as it indirectly means the Registrar had waived the prohibition of any lien-holder's caveat on the same land by allowing the entry of lien-holder's caveat
        
        Application:
        Arshad cannot set aside Menang Bank's lien-holder's caveat as it was entered lawfully. The fact that the Registrar of Manjung Land Office had proceeded to allow the entry of the lien holder's caveat is sufficient proof that the Registrar had exercised his discretion to waive the prohibition.Thus, Menang Bank has an indefeasible interest over the land.
  - - - Application:
        Hj. Arshad may apply to the Court for an order to set aside the Menang Bank's lien holder's caveat provided that he can prove that the lien holder's caveat ought not to be entered at the first place. To claim for compensation, Haji Arshad need to prove that he has suffered actual loss from the entry of lien-holder's caveat.
- - - - Issue: Whether sections 281(1) and 330 of the NLC envisage that a registered proprietor of land may deposit his issue document of title as security for a loan only to the said proprietor and never to a third party?
      - Held: Section 281(1) speaks of only the registered proprietor depositing his issue document of title 'as security for a loan' but does not specify the borrower and neither does it restrict the loan to a loan to the registered proprietor.
      - There is no reason for construing the loan to mean only a loan to the registered proprietor.
    - - In this case, the High Court rejected the application for an order for sale of the land on the ground that a lien under section 281 could be created by a registered proprietor of land when and only when he or she is also the borrower.
      - However, on appeal, the Court of Appeal held that section 281 is not limited to a lien created in favour of the registered proprietor of the land, but it may extend to third-party borrowers as well.
    - - In this case, even though the respondents were not the borrower, but this does not prevent the respondents from providing security by way of lien in favour of the third-party borrower, Ikaz.
      - The Court of Appeal quoted the case of United Overseas Bank (M) Sdn Bhd v UJA Sdn Bhd [2009] 6 MLJ 857 that section 281 was not limited to the creation of security by way of a lien on title only for the benefit of a registered proprietor. It extended to third-party borrowers as well.
  - - - Section 281(1) of NLC: Allows only the registered proprietor or lessee to deposit the original document of title or duplicate lease with the intention to make it as security for a loan.
      - Perwira Habib Bank (M) Bhd lwn Loo & Sons Realty Sdn Bhd & Satu Lagi (No 1) [1996] 3 MLJ 409 (distinguish) :
        
        Court of Appeal: Only the registered proprietor had the power or the right to deposit the title deed for the purpose of creating a lien.
        
        In the absence of any evidence to show that the first respondent had authorized the second respondent to deposit the title deed, the court held that there was no valid lien and thus, the lien-holder’s caveat was a nullity.
      - Hongkong & Shanghai Banking Corp, The v Hj Salam bin Hj Daud (Mohd Azni bin Sudin, Auction Purchaser; Rhb Bank Bhd, Intervenor) [2002] 3 MLJ 483 (distinguish)
        
        Held: The lien holder’s caveat was invalid in law because the right to grant a lien holder’s caveat belongs only to the registered proprietor of the property, i.e., the auction purchaser.
      - Hong Leong Bank Bhd (formerly known as Hong Leong Finance Bhd) v Staghorn Sdn Bhd and other appeals [2008] 2 MLJ 622 (apply)
        
        Issue: Whether section 281(1) of NLC requires that the registered proprietor personally deposit his issue document of title to create a valid lien or whether the element of deposit can be satisfied by evidence that the issue document of title is deposited by a third party with the authorization, consent or on instruction of the registered proprietor?
        
        Held: By virtue of section 281(1), it enables or empowers the registered proprietor to deposit his issue document of title with any person or body as security for a loan. However, the provision does not mention any specific manner in which the depositing should be done.
        
        Thus, it ought not to be construed as requiring that the registered proprietor himself must do the act of depositing. The registered proprietor may instruct, authorize or give consent to a third party to deposit the registered proprietor’s document of title as a security for a loan.
      - CIMB Bank Bhd (previously known as Cempaka Finance Bhd) v Kamaruddin bin Said (as the administrator of the estate of Said bin Ali, deceased) & Ors and another appeal [2019] 5 MLJ 512 (apply)
        
        Issue: Whether the consent by the defendants’ duly appointed solicitor constitute a valid consent for the purpose of creating the lien holder’s caveats?
        
        Held: The solicitor had the ostensible authority to surrender the original title deeds to the plaintiff to enable the lands belonging to the defendants to be used as collateral by the borrower whereby lien holder caveats were duly registered by the plaintiff.
      - Application; Haider, had deposited your land titles to Menang Bank for a loan of RM5 million in favour of Suasa. Even though you were not the borrower of the loan from Menang Bank, but a lien can still be created over your lands to secure the loan made to the third party i.e., Suasa.
    - - Export-Import Bank of Malaysia Berhad lwn Life Paradise Sdn Bhd [2020] MLJU 177
        
        Referred to Perwira Habib Bank Malaysia Bhd v Tin Siang Sdn Bhd & Ors [1992] 4 CLJ 1875: A mere deposit of a document of title without the intention to borrow money was insufficient to establish the element of deposit.
        
        Referred to Paramoo v Zeno Ltd [1968] 2 MLJ 230: No express consent is needed to establish the element of intention as it can be reflected by the act of the proprietor in depositing his document of title as a security for a loan.
      - Hongkong & Shanghai Banking Corp, The v Hj Salam bin Hj Daud (Mohd Azni bin Sudin, Auction Purchaser; RHB Bank Bhd, Intervenor) [2002] 3 MLJ 483
        
        The deposit of the document of title must be solely for the purpose of making it as a security for a loan. Mere possession of an issue document of title was not proof of intention to deposit the title as security for the loan.
      - Application: Arshad appointed Haider to act on his behalf for the completion of the sale and purchase agreement and Arshad surrendered your document of title to Haider as the titles were necessary for the sale. Here, it is evident that Arshad's intention was only to complete the sale and purchase agreement and not for securing any loan. The element of deposit and intention for the creation of a lien are not satisfied.
- - - - Issue: If a registered proprietor of land deposits his issue document of title as security for a loan to a third party, whether the judgment that is required to be obtained under s 281(2) of the NLC is a judgment to be obtained against the borrower of the loan or against the registered proprietor of the said land?
        
        Judgment: Where the loan is acquired in favour of a third party, then by virtue of subsection (2), the judgment obtained is a judgment against the third-party borrower.
      - Issue: Whether Section 281(1) and 330 of the NLC specify that a registered proprietor of land may deposit his issue document of title as security for a loan only to the said proprietor not to a third party?
        
        Judgment: Subsection (1) of s 281 provides that the registered proprietor may deposit his issue document of title 'as security for a loan' but does not specify the borrower and does not restrict the loan to a loan to the registered proprietor. Therefore, the loan may be a loan to a third party.
    - - Facts: The appellant lodged a lien-holder’s caveat to secure a loan to a third party (Ikaz). Due to the default in the repayment of the loan by the third party, the appellant sought to enter judgment against the respondents who comprised landowners, administrators of deceased landowners and a trustee.
        
        Judgment: The appellant was required to secure a judgment against the borrower, Ikaz, and not against the respondents/landowners to enable it to enforce its right under s 281(2) of the NLC due to the fact that the respondents were not the borrowers of the appellant or parties to the loan agreement and had no privity of contract with the appellant
        
        Application: Menang Bank should have applied to the Court to obtain judgment against Suasa (third party borrower), not Arshad.
        
        Conclusion: Arshad can apply to set aside the judgment against him.
    - - Facts: Respondent has obtained judgment against the 1st Appellant for the amount due, t on 14.10.2004 in the sum of RM15,000,000.00.
        
        Judgment: The aforesaid provision does not require judgment to be obtained against the 2nd Appellant. The 2nd Appellant is not a borrower of the Respondent. However that does not preclude her from providing security by way of a lien for the benefit of a third party debtor, that is, the 1st Appellant in this case.
- - - - Application:
        Action: Application to remove the caveat, declaration of the lien's holder caveat to be null and apply for the title to be released by Menang Bank on the ground that those land were obtained through fraud.
        Remedies:
        Return of those original land titles that being obtained through improper means, fraud in this case to Arshad.
  - - - Privy to fraud:
        
        Assets Co Ltd v Mere Roihi [1905] AC 176
        “ The fraud must be brought home to the person whose registered title is impeached or to his agents.”
        
        Menang Bank did not request consent from the legal owner of the title which is you when the titles have been deposited to them.
      - Intention to cheat:
        Goh Hooi Yin v Lim Teong Ghee [1990] 3 MLJ 23
        “It is not enough to show that the transfer had the effect of depriving the plaintiff of a known existing right. It must be demonstrated that the transfer was executed with the intention of cheating the plaintiff of such a right”.
        
        The dishonest act of Haider, the fraudster who intentionally does the above act to deprive your right without your consent to deposit the title to gain advantage on his part
      - Actual fraud:
        The Ayer Molek Rubber Company Berhad v Bintang-bintang Sdn Bhd & Ors [2012] MLJU 1002
        Actual fraud is where one person causes pecuniary injury to another by intentionally misrepresenting or concealing a material fact which from their mutual position he was bound to explain or disclose
        
        The act of Haider intentionally misrepresenting that the deposit of title was for the purpose of sale and purchase agreement but actually using it to secure Suasa’s loan where he bound to explain to Arshad and causing Arshad to lose his title to Menang Bank.
        Menang Banks also has indeed deprived you of your right when they did not ask your consent when the title was deposited by Haider as security for Suasa’s loan.
- - - - Conclusion: You can take action against the Land Administrator for wrongful lodge of lien-holder's caveat against the Land Administrator.
- - - - Application: Haji Arshad's land is under the definition of Malay Holding under section 2 of FMS MRE and Menang Bank was proven not within the 2nd Schedule of the Enactment nor within the exception for creation of lien under Malay reserved land.
        
        Conclusion: Menang Bank cannot create a lien-holder caveat under Haji Arshad's land.