A tighter rein on land transfers

There is a general sigh of relief with the Federal Court’s decision in favour of a landowner who was cheated of his property, overruling the decision in Adorna Properties which has wreaked havoc in land transactions and increased the number of land scams in the last nine years.

THE decision by the Federal Court last Thursday in Tan Ying Hong v Tan Sian San & 2 Ors to depart from its previous decision made in Adorna Properties Sdn Bhd v Boonsom Boonyanit 2000 has finally and correctly restored the principle of deferred indefeasibility in our Torrens system of registration after a gruelling wait of more than nine years.

For the benefit of the readers, let me first explain this principle in simple terms.

Under the Torrens system , the State will guarantee an indefeasible title to anyone whose name is registered on the register of titles.

This is enshrined in section 340(1) of the National Land Code, 1965 (“NLC”) which applies to West Malaysia.

However, sub-section 340(2) provides that a title or interest can still be defeasible if it is acquired, inter alia, by fraud, misrepresentation, forgery or through an insufficient or void instrument.

Sub-section 340(3) then goes on to say that if the immediate purchaser subsequently transfers the title or interest to a subsequent purchaser, the said title or interest is still liable to be set aside unless the subsequent purchaser is a purchaser in good faith (or bona fide) and for valuable consideration.

In other words, only the subsequent bona fide purchaser/transferee and not the immediate bona fide purchaser/transferee will get an indefeasible title created out of a defeasible title.

(Under the NLC, a purchaser is defined to include a bank taking a charge over the land.) To put it in another way, for example, A is the registered proprietor of the land.

B forges A’s signature and transfers the land to himself. B later sells and transfers the land to C. C, who has no knowledge of the forgery, will obtain an indefeasible title. Or if B forges A’s signature and transfers the land from A to C and C later transfers the land to D, then, D and not C, who has no knowledge of the forgery, will obtain an indefeasible title. C and D in the first and second examples are known as subsequent purchasers under s 340(3).

However, if the principle of immediate indefeasibility espoused in Adorna Properties applies, C will still get an indefeasible title if B forges A’s signature and transfers the land immediately from A to C without first having transferred to B himself.

That was exactly what happened in Adorna Properties.

An impostor of the genuine landowner, Boonsom Boonyanit, made a false statutory declaration that she had lost the original title to two pieces of lands in Penang, and successfully managed to obtain a certified copy of the title from the land office.

With that, the impostor registered the transfer of the lands to Adorna Properties Sdn. Bhd. (“Adorna”) for a sum of RM12mil.

A three-member bench led by Chief Justice Tun Eusoffe Chin held that Adorna had obtained a good title because the proviso in sub-section 340(3) would apply to sub-section 340(2) even though Adorna was an immediate bona fide purchaser.

As a result, Boonyanit lost everything as the forger had also disappeared with the money.

Despite two attempts made by Boonyanit’s family to have the decision reviewed by a separate panel of the Federal Court in 2001 and 2004, the Federal Court dismissed both applications on the ground that no grave injustice had occasioned.

It is, therefore, not surprising to hear Chief Justice Tun Zaki Azmi last Thursday describe the error committed by the Federal Court in Adorna Properties as “obvious and blatant”.

In delivering the main judgment of the apex court, Chief Judge of Malaya, Tan Sri Arifin Zakaria ruled that the Federal Court in Adorna Properties had misconstrued s 340 and came to the erroneous conclusion that the proviso appearing in sub-section 340(3) equally applied to sub-section 340(2).

With the latest decision, the law as respects indefeasibility of titles is now settled, and all the other judges must hereafter follow it conscientiously as the decision of this strong five-member bench has effectively overruled Adorna Properties.

In fact, it cannot be gainsaid that Adorna Properties has wreaked havoc in land transactions, and incidents of land scams have also increased in the last nine years. The police had even revealed before that the computerised land registration system in several states, including Kuala Lumpur, Penang and Johor, had been compromised by syndicates using “inside people” to forge land titles resulting in several registered proprietors and purchasers losing millions of ringgit.

The former Director of Bukit Aman Commercial Crimes Investigation Department Datuk Ramli Yusoff was quoted in 2007 as saying the modus operandi of these perpetrators was to declare that they had lost their land titles and then obtained replacement titles with the assistance of “inside people” before selling the land.

In Tan Ying Hong’s case, the forger, Tan Sian San, had forged the signature of the landowner Ying Hong to create a forged power of attorney in order to charge the land to RHB Bank as security for loans totalling RM300,000 granted to a third party, Cini Timber Industries Sdn Bhd.

It follows that the apex court held that the charge was invalid because as RHB Bank was an immediate purchaser under s 340(2), the proviso under s 340(3) did not apply.

Of course, had Sian San first transferred the land to himself and then charged it to RHB Bank, the latter would have been a subsequent purchaser entitled to the protection of the proviso in s 340(3) .

At this juncture, it must be stressed that the latest decision of the Federal Court does not mean that a landowner is now legally incapable of losing his land to a forger.

The decision only makes it more difficult now for these thieves and conmen to fraudulently transfer the lands.

We must, of course, not underestimate these criminals as it is not difficult from now on for a forger to transfer the property to himself or another person before transferring it to a subsequent bona fide purchaser in order to enjoy the benefit of the proviso in s 340(3).

This is all the more so if there is help from “inside people”. Take Tan Ying Hong’s case, for example.

I am just bewildered as to how the Pahang state government could have “mysteriously” alienated a nine-acre plot of land in Kuantan to Ying Hong in 1976 when he did not even know about the existence of the land until he received a demand letter from RHB Bank in 1985.

As the alienation has not been challenged, it appears that the flawed system has mysteriously enriched Ying Hong with a property which is now probably worth millions of ringgit.

It is apposite to note that in every land scam like in Adorna Properties, there are two victims involved – the genuine landowner and the bona fide purchaser.

As everyone is either a landowner or a purchaser or both, it is indeed a balancing act when deciding whose interest requires more protection and to what extent the landowner should be protected in the entire chain of dealings.

In doing so, it must be borne in mind that if protection is given solely and wholly to the landowner, then Malaysia may not be so conducive for property investments.

In this respect, countries which practise immediate indefeasibility such as Australia, New Zealand and Singapore have an assurance fund to compensate victims of land scams.

That said, as land is a State matter here, implementation of such a fund may not be so straightforward.

All in all, the latest decision now requires the purchasers, banks and their lawyers to be even more vigilant and diligent when conducting land searches and verifying the identities of the sellers before purchasing any property or providing any finance.

It is also my considered opinion that notwithstanding this landmark decision, the NLC should still be amended to bring about more stringent procedures and measures as regards how replacement titles are obtained, and dealings are presented and registered in order to be one step ahead of the criminal minds of fraud and forgery.

*Published in The Sunday Star, 24 January 2010.

Court ruling a welcomed decision

Malay Mail

by G. Prakash

KUALA LUMPUR: Law experts say the Federal Court's landmark decision on fraudulent land transfers will prevent many people from being victimised in future.

Prof Salleh Buang, a senior adviser to a company specialising in competitive intelligence, said: "Land and property owners can now sleep peacefully. I am definitely delighted with the news. I'm glad that the ruling has finally been overturned."

Salleh, who in the past had been very vocal about the decision by then Chief Justice Tun Eusoff Chin in the case of Adorna Properties Sdn Bhd vs Boonsom Boonyanit, said that innocent landowners and purchasers should always be protected.

"The previous decision had caused innocent landowners and purchasers, who bought property thinking that they were doing it legitimately, ended up being on the losing side.

"These two parties are the innocent ones, and because of a third party with fraudulent intentions, the innocent people are forced to pay for it," said Salleh, who is also active in public speaking as well as a prolific author of numerous reputable legal textbooks.

When asked if victims of previous cases could take their cases to court, Salleh said: "I'm not sure whether previous cases can now be reviewed, but I'm sure this will be a major talking point."

The professor, who writes a weekly column on land matters in a local daily, added that there were a small number of lawyers who agreed with Eusoff Chin.

However, a majority of people disagreed with the decision that had caused problems to many innocent victims.

Counsel for Bar Council, Roger Tan, who is also a former Chairman of its Conveyancing Practise Committee, described the decision as a victory for all landowners in the country.

He said the Bar Council welcomed the decision despite a "gruelling" wait of more than nine years.

"The Bar hopes that judges below will from now on follow the decision made by the Federal Court, and that no judge will deviate from this decision on the grounds that there now exists two conflicting decisions of the Federal Court because yesterday's decision is equivalent to having overruled or reversed Adorna Properties decision," said Tan.

Tan and another Bar Council representative held a watching brief for the Bar Council.

Legal victory for land owners

New Straits Times

by V. Anbalagan

PUTRAJAYA: Landowners who can prove that they lost their property through fraud or forgery now stand a chance of getting them back.

The Federal Court in a landmark ruling yesterday affirmed a provision in the National Land Code which protects the constitutional right of property owners.

The much awaited decision, a unanimous pronouncement by a five-man bench led by Chief Justice Tun Zaki Azmi, has paved the way for the apex court to depart from its controversial decision delivered on Dec 22, 2000, in the case of Adorna Properties Sdn Bhd vs Boonsom Boonyanit.

In that case the apex court led by the then chief justice, Tun Eusoff Chin, held that the person in whose name the title was registered was the rightful owner of the property, even if the transfer was due to fraud or forgery.

Yesterday the court ruled that where property was transferred illegally, the original owner is entitled to its return if he can prove that it was acquired through fraud or forgery.

Such property must be returned even if the second purchaser had bought it in good faith and for a valuable consideration.

Zaki, in his brief supplementary judgment, said any attempt to transfer properties through illegal means must be defeated.

“I hope the land authorities will be more cautious in registering land titles or any instrument in land dealings,” he said.

Tan Sri Arifin Zakaria, who delivered a written judgment, said the previous three-man bench in the case of Adorna Properties misconstrued the law and came to an erroneous conclusion.

“We have to rectify the legal position for the sake of property owners,” said Arifin, who is the chief judge of Malaya.

The judges made the remarks in allowing an appeal involving a land transfer dispute.

The history of the case can be traced to early 1970 when businessman Tan Ying Hong, in the words of the High Court, “mysteriously” became the registered proprietor of a nine-acre plot of land in Kuantan.

A conman who now cannot be located had forged a power of attorney from Tan and got the land charged to United Malayan Banking Corporation (now RHB Bank Bhd) to obtain overdraft and loan facilities amounting to RM300,000 in favour of Cini Timber Industries Sdn Bhd.

Cini Timber defaulted payment and the bank started foreclosure proceedings against Tan, the registered land owner.

Tan, represented by counsel T. Mura Raju and Bob S. Arumugam, filed an application in the High Court in 1985 to seek a declaration that the charges with the bank were of no effect as they were created by a forged power of attorney.

The High Court in 2003 dismissed Tan’s application which was affirmed by the Court of Appeal in 2008.

In May last year, Tan obtained leave to appeal and the legal question posed to the Federal Court was whether an acquirer of a registered charge, title or other interest by way of forgery obtains an immediate indefeasible interest or title.

This question of law paved the way for the apex court to review the Adorna Properties case as the issue was similar.

Head of the civil division in the Attorney-General’s Chambers See Mee Chun told reporters that the nine-year dilemma had been removed following yesterday’s ruling.

“But some amendments to the land code are in the pipeline to give better protection to property owners,” said See, who last year was invited to address the court on grounds that the case was of public interest.

Bar Council representative Roger Tan said the gruelling wait was worthy because many owners who lost their land could now “see some light”.

“We are glad that the apex court has affirmed the principle of deferred indefeasibility as provided in the land code.” Meanwhile, Mura Raju said following the court ruling, the two charges created through forgery were now null and void.

“The title to the property, currently valued at RM1 million, will be reverted to Tan (the appellant).”

The Adorna Properties case revolved around a plot of land in Tanjung Bungah, Penang.

The registered proprietor was Boonsom Boonyanit, a Thai who lived in Thailand but who visited Penang from time to time.

On June 11, 1989, Boonyanit’s son chanced upon an advertisement in a Thai newspaper calling upon any heir of Boonyanit to communicate with a firm of Penang solicitors.

Boonyanit ’s son became suspicious and got in touch with his mother’s solicitors in Penang to investigate the matter.

The probe revealed that:

• An impostor, claiming to be Sun Yok Eng @ Boonsom Boonyanit, had affirmed a statutory declaration on June 18, 1988, that she had lost the original title to the land. The impostor then managed to obtain a certified copy of the title from the Land Office.

• On April 6, 1989, the impostor affirmed a second statutory declaration declaring that the names Mrs Boonsom Boonyanit and Sun Yok Eng @ Boonsom Boonyanit on the title to the land referred to one and the same person, that is, Mrs Boonsom Boonyanit (the fraudulent) with a different Thai passport number.

• With this declaration, the impostor managed to perfect the registration of the memorandum of transfer in favour of Adorna.

The real Boonyanit then filed a suit for the return of the land. The High Court ruled in favour of Adorna.

On appeal, the Court of Appeal ruled in favour of Boonyanit.

Adorna then appealed to the Federal Court which then held that Adorna had obtained an indefeasible title notwithstanding the forgery because it was a bona fide purchaser.

Adorna Properties decision obviously and blatantly erroneous, declares the Federal Court

KUALA LUMPUR, Thurs: A five-member bench of the Federal Court today unanimously ruled that the previous Federal Court had misconstrued the provisions of section 340(3) of the National Land Code, 1965 ("NLC") in its decision of Adorna Properties Sdn Bhd v Boonsom Boonyanit 2000 ("Adorna Properties") because the principle of deferred and not immediate indefeasibility applies to the NLC.

Delivering the main judgment of the apex court, Chief Judge of Malaya, Tan Sri Arifin Zakaria said the Court has to depart from Tun Eusoff Chin's four-page judgement in Adorna Properties as it is erroneous. Tan Sri Arifin also held that the decision of Court of Appeal Judge Datuk NH Chan in OCBC Bank (M) Bhd v Pendaftar Hakmilik, Negeri Johor Darul Takzim 1999 in so far as holding the OCBC Bank's charge as invalid is wrong as the learned judge has misapplied the principle of deferred indefeasibility in the case.

In delivering his supporting judgment, Chief Justice Tun Zaki Azmi described the error committed in Adorna Properties as "obvious and blatant". He added that it is a well known fact that some unscrupulous people have taken advantage of this error by falsely transferring titles to themselves.

In an immediate response, counsel for Bar Council, Roger Tan, who is also a former Chairman of its Conveyancing Practice Committee, described the decision as a victory for all landowners in this country. He said the Bar welcomes the decision despite a gruelling wait of more than nine years.

"The Bar hopes that judges below will from now on follow today's decision made by this powerful panel of Federal Court, and that no judge would deviate from this decision on the ground that there now exists two conflicting decisions of the Federal Court because today's decision is equivalent to having overruled or reversed Adorna Properties", said Tan.

The Federal Court is finally able to revisit Adorna Properties today after more than nine years when the Court granted leave in May last year to the appellant landowner Tan Ying Hong to appeal on this question: "whether an acquirer of a registered charge or other interest or title under the National Land Code, 1965 by means of a forged instrument acquires an immediate indefeasible interest or title."

The case before the Federal Court can be traced back to 1976 when without the knowledge of Ying Hong, the Pahang State Government had "mysteriously" alienated and issued the document of title of a nine-acre plot of land in Kuantan in favour of him. Ying Hong only came to know about the existence of the land in 1985 when he received a letter from the United Malayan Banking Corporation Bhd (now RHB Bank Bhd) demanding repayment of the sum of about RM300,000 being the outstanding loan sum granted by the RHB Bank to Cini Timber Industries Sdn. Bhd.

Upon enquiry, Ying Hong discovered that the conman, Tan Sian San, who is now missing and not related to Ying Hong, had forged Ying Hong's signature by creating a power of attorney in favour Sian San himself in 1977. With the forged power of attorney, Sian San had charged the land to RHB Bank in 1984 as security for the loan facilities granted to Cini Timber Industries Sdn. Bhd.

The High Court dismissed Ying Hong's application in 2003 and this was affirmed by the Court of Appeal last year. The appeal was heard on October 29 last year before Tun Azmi, Court of Appeal President Tan Sri Alauddin Mohd Sheriff, Tan Sri Arifin and Federal Court judges Datuk Zulkefli Ahmad Makinudin and Datuk James Foong Cheng Yuen.

On the facts of the case, the Federal Court held that as RHB Bank is an immediate purchaser/chargee within the meaning of s 340(2), the proviso that protects a subsequent purchaser/chargee who is a bona fide purchaser for value in s340(3) will not assist the respondent bank. The Court added that it is immaterial that there is evidence to show that the land was alienated to the appellant without his knowledge as the validity of the alienation was not even challenged by the respondent bank. The Court then awarded a sum of RM75,000 as costs to the appellant, and the ownership of the land which now should be worth a few millions of ringgit reverts to the appellant.

Appearing before the Court today were T. Mura Raju who acted for Ying Hong, and Datuk Bastian Pius Vendargon and Ong Siew Wan acted for RHB Bank.

Head of the Civil Division in the A-G’s Chambers, See Mee Chun appeared for the Attorney General as amicus curiae whilst Roger Tan and Tony Woon appeared as amici curiae who held a watching brief for the Bar Council.

BERNAMA REPORT

PUTRAJAYA, Jan 21 (Bernama) -- Landowners can heave a sigh relief as the Federal Court here on Thursday pronounced a landmark decision protecting original landowners from losing their lands to forgers.

A Federal Court five-member bench led by Chief Justice Tun Zaki Azmi ruled that the controversial 2001 ruling in the case of Adorna Properties vs Boonsoom Boonyanit @ Sun Yok Eng, permitting fraudulent land transfer, was erroneous.

"I am legally obligated to restate the law since the error committed in Adorna Properties is so obvious and blatant.

"It is quite a well-known fact that some unscrupulous people have been taking advantage of this error by falsely transferring titles to themselves. I hope that with this decision, the land authorities will be extra cautious when registering transfers," Zaki said.

The other judges who presided with Zaki were Court of Appeal President Tan Sri Alauddin Mohd Sheriff, Chief Judge of Malaya Tan Sri Arifin Zakaria and Federal Court judges Datuk Zulkefli Ahmad Makinudin and Datuk James Foong Cheng Yuen.

Today's decision was welcomed by the Attorney-General's Chambers and the Bar Council.

The 2001 ruling had been strongly critised by landowners, the legal fraternity and academicians because it opened an avenue for fraudsters to fraudently acquire lands by forging documents, causing the principal registered landowners to lose their land through scam.

The interpretation applied to the proviso in the National Land Code by the previous Federal Court panel led by former chief justice Tun Eusoff Chin in the 2001 ruling protected subsequent innocent buyers of properties, where the titles were forged, leaving the original owners with little recourse.

The effect of the Adorna Properties principle conferred immediate indefeasibility of land title to a registered proprietor even if the instrument of transfer was forged.

In a unanimous decision departing from the Adorna Properties principle, Arifin said the previous Federal Court panel, in deciding on the Adorna Properties case nine years ago, had misconstrued Section 340 (1), (2) and (3) of the National Land Code, thereby making an erroneous conclusion.

He said the interpretation applied by the previous Federal Court panel had gone against the clear intention of Parliament and that error needed to be remedied in the interest of all registered proprietors.

The court was requested to revisit the Adorna Properties principle by counsel representing parties in a land matter dispute involving a businessman, Tan Ying Hong, and Cini Timber Industries Sdn Bhd and United Malayan Banking Corporation Bhd.

In that case, Tan was the registered proprietor of a nine-acre plot of land in Kuantan, Pahang.

However, a fraudster, who cannot be located now, forged a power of attorney from Tan and got the land charged to United Malayan Banking (now RHB Bank Bhd) to obtain loan facilities amounting to RM300,000 in favour of Cini Timber Industries.

Cini Timber defaulted payment and the bank commenced foreclosure proceedings on Tan, the registered land owner.

Tan then commenced legal proceedings to seek a declaration that the charges with the bank were of no effect as they were created by a forged power of attorney but his claim was dismissed by the High Court in 2003.

He brought the matter to the Federal Court after the Court of Appeal affirmed the High Court's decision. Today, the Federal Court set aside the High Court decision and allowed Tan's appeal.

It also ordered that Tan be paid RM75,000 in litigation costs for court proceedings in the lower court and federal courts.

Meanwhile, outside the court, Head of the Civil Division in the Attorney-General Chambers (AGC) See Mee Chun said today's decision had addressed the contentious issue.

She said the AG's Chambers was also looking at other aspects including amendments to the National Land Code to further protect registered owners.

Counsel Roger Tan, who held a watching brief for the Bar Council, said that after nine years of waiting, many landowners could finally see some light that their properties would be safer.

He hoped the lower courts would apply this new principle when adjudicating similar court cases on land disputes.

Federal Court to deliver major decision on property sales by forgers this Thursday

KUALA LUMPUR, Mon: All eyes will be on the Federal Court this Thursday as it delivers a major decision whether to end nine years of gross injustice caused by the 2000 decision of the Federal Court in Adorna Properties Sdn Bhd v Boonsom Boonyanit ("Adorna Properties") or to follow and further entrench Adorna Properties in the laws relating to property sales by forgers in this country. It is one case which will be closely watched by property owners and conveyancers both within and without this country.

On October 29 last year, a strong five-member Federal Court, presided by Chief Justice Tun Zaki Azmi, was asked to determine the question "whether an acquirer of a registered charge or other interest or title under the National Land Code, 1965 by means of a forged instrument acquires an immediate indefeasible interest or title." The other judges were Court of Appeal President Tan Sri Alauddin Mohd Sheriff, Chief Judge of Malaya Tan Sri Arifin Zakaria and Federal Court judges Datuk Zulkefli Ahmad Makinudin and Datuk James Foong Cheng Yuen.

In the 2000 decision of Adorna Properties, delivered by the then Chief Justice Tun Eusoff Chin in a four-page judgment, the Federal Court ruled that such an acquirer could acquire an immediate indefeasible title and interest from a forger under section 340 of the National Land Code, 1965.

S 340 reads as follows:

"(1) 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.

(2) The title or interest of any such person or body shall not be indefeasible -

(a) 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

(b) where registration was obtained by forgery, or by means of an insufficient or void instrument; or

(c) 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.

(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) -

(a) it shall be liable to be set aside in the hands of any person or body to whom it may subsequently be transferred; and

(b) 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.

(4) Nothing in this section shall prejudice or prevent -

(a) the exercise in respect of any land or interest of any power of forfeiture or sale conferred by this Act or any other written law for the time being in force, or any power of avoidance conferred by any such law; or

(b) the determination of any title or interest by operation of law."

The main thrust of Eusoff Chin's decision was that the proviso in s 340(3) would also apply to sub-section 340(2). Hence, Adorna Properties Sdn. Bhd. ("Adorna") which was a body falling within the meaning of sub-section 340(2) had obtained a good title by virtue of the proviso of sub-section (3) even though the properties were transferred to Adorna by way of a forged instrument of transfer.

Briefly, in Adorna Properties, a Thai, Boonsom Boonyanit, who resided in Thailand was the registered proprietor of two lots land in Tanjung Bungah, Pulau Pinang ("the said lands"). An impostor, one Mrs Boonsoom Boonyanit, claiming to be "Sun Yok Eng @ Boonsom Boonyanit" had affirmed a statutory declaration on June 18, 1988 that she had lost the original title to the said lands. The impostor then managed to obtain a certified copy of the title from the land office.

On April 6, 1989, the impostor affirmed a second statutory declaration declaring that the names Mrs Boonsoom Boonyanit and Sun Yok Eng @ Boonsom Boonyanit in the title to the said lands were one and the same person, that is Mrs Boonsoom Boonyanit (impostor) with a different Thai passport number. With this declaration, the impostor managed to register the transfer in favour of Adorna for a sum of RM12Million.

Boonyanit then sued for the return of the said lands. The High Court Judge of Penang, Justice Vincent Ng Kim Khoay, ruled in favour of Adorna (judgment dated April 25, 1995). On appeal, the Court of Appeal, comprising Gopal Sri Ram, Siti Norma Yaakob and Ahmad Fairuz, allowed the appeal in its judgment dated March 17, 1997. Adorna then appealed, and the Federal Court comprising Eusoff Chin, Wan Adnan Ismail and Abu Mansor Ali allowed Adorna’s appeal in its judgment dated Dec 13, 2000 and pronounced in open court on Dec 22, 2000 ("main judgment"), but by then Boonyanit had passed away in May that year.

In fact, Eusoff Chin's decision in Adorna Properties did not follow the 1994 Supreme Court decision in M & J Frozen Food Sdn Bhd & Anor v Siland Sdn Bhd & Anor which held that the issue of indefeasibility involving forgery under s 340 was based on the principle of deferred indefeasibility and not immediate indefeasibility.

In simple terms, the principle of deferred indefeasibility operates in this way: For example, A is the registered owner of the land. B forges A's signature and transfers the land to himself. B later sells and transfers the land to C. C has no knowledge of the forgery, and C obtains an indefeasible title. Or if B forges A's signature and transfers the land from A to C and C later transfers the land to D. Then, D and not C, who has no knowledge of the forgery, will obtain an indefeasible title. C and D in the first and second examples are known as subsequent purchasers under s 340(3). However, after Adorna Properties which embraces the principle of immediate indefeasibility, C will still get an indefeasible title if B forges A's signature and transfers the land immediately to C without first having transferred to B himself.

Hence, had the Federal Court in Adorna Properties applied the principle of deferred indefeasibility, Adorna would not have had obtained an indefeasible title because the land had not first been transferred to the impostor before it was transferred to Adorna and as such Adorna was not a "subsequent purchaser" within the meaning of sub-section 340(3).

Two unsuccessful attempts had also been subsequently made by Boonyanit’s family asking the Federal Court to review the main judgment. In the first attempt, the main ground advanced was that when the main judgment was delivered, Eusoff Chin had retired on Dec 19, 2000. Steve Shim, Haidar Mohd Noor and Mokhtar Abdullah dismissed the application in a judgment dated Feb 26, 2001. In the second attempt, the Federal Court comprising P.S. Gill, Rahmah Hussein and Richard Malanjun ruled in its judgment dated Aug 27, 2004 that they were not convinced that the interpretation given in the main judgment was patently wrong and had resulted in grave injustice.

There is, no doubt, that Adorna Properties has wreaked havoc in land transactions for the past nine years. Many landowners had also lost their properties due to forgery when their lands were immediately transferred to bona fide purchasers by forgers using forged instruments. As Adorna Properties is the decision of the apex court, it remains good law until it is legislatively reversed by an Act of Parliament or by another decision of the Federal Court. Unfortunately, when the opportunity arose in 2007, the Federal Court decided not to grant leave to appeal in the case Au Meng Nam & Anor v Ung Yak Chew & Ors 2007.

On Thursday, the Federal Court will have an opportunity to revisit Adorna Properties to decide whether to overrule it or follow this much criticised decision.

The case before the Federal Court on Thursday can be traced back to 1976 when without the knowledge of the appellant (plaintiff), Tan Yin Hong, the Pahang State Government had alienated and issued the document of title of a piece of land in Kuantan in favour of him. The appellant only came to know about the existence of the said Land in 1985 when he received a letter from the Third Respondent, United Malayan Banking Corporation Bhd (now RHB Bank Bhd) demanding repayment of the sums of RM111,825.95 and RM197,244.01 being the respective sums owing under an overdraft facility and term loan facility granted by the Third Respondent to the Second Respondent, Cini Timber Industries Sdn. Bhd. Upon enquiry, the appellant discovered that the First Respondent, Tan Sian San, who is now missing and not related to the appellant, had forged the appellant's signature by creating a power of attorney in favour of the First Respondent on February 7, 1977. With the forged power of attorney, the First Respondent had charged the said Land to the Third Respondent in 1984 as security for the loan facilities granted to the Second Respondent.

The appellant then sued the respondents in 1987 asking for various declaratory reliefs including an order that the charge and power of attorney be declared void ab initio. At the High Court at Kuantan, Justice Datuk Abu Samah Bin Nordin dismissed the appellant's claim on July 4, 2003. Upon appeal to the Court of Appeal, Justices Suriyadi Halim Omar, Zainun Ali and Ahmad Haji Maarop dismissed the appellant's appeal on February 19, 2009, holding that the Third Respondent had obtained immediate indefeasibility of its interest by applying the principle in Adorna Properties.

On October 29 last year, counsel T. Mura Raju who acted for the appellant and counsel Datuk Bastian Pius Vendargon and Ong Siew Wan who acted for the Third Respondent submitted that the question posed to the Federal Court should be answered in the negative, in that, the Adorna Properties had been wrongly decided and ought to be overruled. Both counsel emphasised that Eusoff Chin had erred as it was very clear in s 340(3) that the proviso only applied to "this sub-section (3)". Vendargon, however, submitted that the declaratory reliefs sought by the appellant ought to be dismissed on procedural grounds.

Head of the Civil Division in the A-G’s Chambers, See Mee Chun and its Deputy Head of Civil Division I, Azizah binti Nawawi who appeared for the Attorney General as amicus curiae agreed with the submissions by the counsel for the appellant and the Third Respondent in that Adorna Properties should be overruled. See also revealed that the Attorney General's Chambers were looking at the possibility of amending s 340(3).

When invited to submit by Tun Zaki, counsel Roger Tan who held a watching brief for the Bar Council together with Tony Woon, informed the court that the Bar agreed with the submissions by all the counsel in that the principle of deferred indefeasibility should apply to s 340 and Adorna Properties was wrongly decided.

However, Tan said he disagreed with the submissions by the counsel for the appellant and Third Respondent with regard to using the decision of the Court of Appeal in OCBC Bank (M) Bhd v Pendaftar Hakmilik, Negeri Johor Darul Takzim 1999 (OCBC Bank) as an authority on the application of deferred indefeasibility. Tan submitted that the decision in OCBC Bank was wrong as the learned Court of Appeal judge, Datuk NH Chan had misapplied the principle of deferred indefeasibility by overstretching it. Tan, who is the former Chairman of Conveyancing Practice Committee of the Bar Council, added that had the principle been properly applied, the charge in favour of the appellant bank would have been valid as the land had already been transferred to the forger before the charge was created and the bank was therefore a "subsequent purchaser" entitled to protection under the proviso of s 340(3).

In OCBC Bank, the appellant bank was the chargee of a plot of land in Batu Pahat, Johor ('the said land'). The charge in favour of the appellant had been granted by one Ng See Chow who was the registered proprietor of the said land. When the said Ng See Chow failed to pay for the overdraft facility, the appellant applied for, and the court granted, an order for sale of the land. However, one Ng Kim Hwa lodged a police report claiming that the land belonged to him and he claimed that he had not executed any transfer form in favour of Ng See Chow in respect of the land. The Court of Appeal, comprising Justices NH Chan, Abdul Malek and Mokhtar Sidin dismissed the appellant bank's appeal. Justice NH Chan ruled that the charge was invalid as any interest granted by an immediate proprietor or holder was also liable to be set aside.

Tan then referred to the paper entitled "Basics of Indefeasibility under the National Land Code" presented by Professor Teo Keang Sood at the 14th Malaysian Law Conference in October 2007 where the learned professor of law from the National University of Singapore said:

"...It is also crucial to note that section 340(2) does not provide that any interest subsequently granted by an immediate registered proprietor with a defeasible title (such as the defeasible title held by Ng See Chow) is also liable to be set aside thereunder, contrary to what was stated by NH Chan JCA in that part of his judgment reproduced above which is italicised. Being an interest subsequently created out of a title rendered defeasible under section 340(2), it comes within section 340(3)(b) which is enacted to deal with the position of a subsequent registered proprietor or holder of such an interest.

"If NH Chan JCA’s interpretation of section 340(2) is correct, it would mean that no subsequent interest created out of a defeasible title can ever come within section 340(3) and the proviso therein notwithstanding that the acquirer has acted in good faith and given valuable consideration. This is stretching the concept of deferred indefeasibility a little too far. All that section 340 intended is that the immediate registered proprietor should not have the benefit of the quality of indefeasibility conferred on him where the vitiating factors apply. No where in section 340 is it suggested that a subsequent registered proprietor or holder of an interest should suffer the same fate, especially where he has acted in good faith and given valuable consideration. It is unwarranted to restrict the scope of section 340(3) and the proviso thereto in such a manner. In fact, section 340(3) and the proviso thereto embrace and give effect to the well-known Torrens concept of a defeasible title operating as the root of a good title or interest in favour of a subsequent purchaser so long as the latter acts in good faith and gives valuable consideration."

The Federal Court will now deliver its decision on Thursday, January 21 at 9.30am.

Make up your mind, Kedah

New Straits Times

by Salleh Buang

MY friends in Kedah are wondering whether they should continue to believe anything coming out from the menteri besar's office.

In October 2008, Kedah Menteri Besar Datuk Seri Azizan Abdul Razak announced his administration would increase the Bumiputera housing quota from the 30 per cent level to 50 per cent effective Sept 1, 2009.

To my mind then, he had good reasons for making the move - Malays comprise 1.5 million of the state's total popula-tion of 1.9 million.

That announcement came under heavy fire from several quarters including housing developers, nongovernmental or-ganisations and politicians.

In a response on Nov 13, 2008, Real Estate and Housing Developers' Association (Rehda) president Datuk Ng Seing Liong told reporters it would seek a judicial review of Bumiputera housing quotas "if state governments continue to impose new rulings on developers".

He said such a course of action would be "the last resort" if the issue could not be resolved with the respective state governments.

Senior lawyer and columnist Roger Tan said the Kedah government "should have ruled by law and not by administra-tive policies" when it announced the 50 per cent Bumiputera quota for every housing development in the state.

While acknowledging that such a policy "is not new" as other state governments (including Selangor and Malacca) had that in the past, Tan reiterated "these policies have been implemented haphazardly throughout the country".

Tan also opined that such a policy contravened Article 8 of the Federal Constitution.

Rehda past president Datuk Jeffrey Ng Tiong Lip shared the view that such a policy is unconstitutional. At the Malay-sian Law Conference on Oct 29, 2007, he said the positive discrimination envisaged by Article 153 of the Federal Con-stitution covers only "specific areas" and housing is not included in that list.

In its wishlist for Budget 2009, Rehda hoped the Bumiputera quota policy (which ranges between 30 and 70 per cent in several states) would be revised to not exceed 30 per cent in order to boost the housing sector.

Rehda also hoped the Bumiputera discount would be capped at five per cent and made applicable only for houses priced RM250,000 and below, while the low- and medium-cost units should be excluded from the discount.

Rehda also wanted the Bumiputera quota "release mechanism" to be standardised, structured and transparent.

For reasons which many quarters will continue to speculate, the state government has now deferred the implementation of the 50 per cent Bumiputera quota for new housing projects in the state.

Explaining the sudden about-turn, Housing and Local Government Committee chairman Datuk Phahrolrazi Zawawi said the state does not want to go ahead with the policy because it does not want "the people to be unhappy with any of its policies".

I wonder who are the "unhappy people" he has in mind. The Bumiputera housebuying public, with limited means, would certainly be unhappy with this unexpected abandonment of the new policy. It was targeted to come into effect on Sept 1, 2009.

"We do not want people to claim that a policy is unfair and only favours one group. We will find a more amicable solution," he told reporters at Wisma Darul Aman on Jan 7 this year.

The only "happy people" I could think of are the housing developers and those with their own agendas who shot down Azizan's policy right from the start.

I told my pessimistic friends not to give up hope, reminding them that (as indicated by Phahrolrazi) the state govern-ment is still working on "a more amicable solution" to the problem.