Your land can land in the wrong hands

by Shaila Koshy

Crime syndicates are able to cheat people of their land through fraud and forgery because of weaknesses in the conveyancing process. It’s time to clean it up.

LANDOWNERS beware – especially those whose lands are vacant and idle, who are based overseas or are elderly.

Your title to that property can easily be stolen because any one of the key players in the conveyancing process – the Land Office, legal profession or the lending bank – may lack integrity or don’t observe the proper verification procedures.

According to police statistics on fraud and forgery cases involving land since 2005, there were 34 cases in 2005, 66 in 2006, 74 in 2007, 113 in 2008, 111 in 2009 and 37 in the first quarter of this year alone.

For almost a decade, the rise in the number of cases was blamed on the change in the legal position of whether it is the original land owner or the innocent buyer who has a better title under the National Land Code (NLC).

In 2001, the Federal Court in Adorna Properties held that the NLC supports the concept of immediate indefeasibility and not the previously accepted one of deferred indefeasibility. (See definition)

But in January this year, a different Federal Court decided in Tan Ying Hong to restore the position to deferred indefeasibility.

But are land owners and banks more secure now from fraud?

Based on fraud cases in Malaysia, the syndicates like to target vacant and idle lands, land owners based overseas and those who are elderly.

All an enterprising crook needs are loopholes in the law – unsuspecting landowners; corruptible people; commissioners for oaths, lawyers, bank officers who take a lax attitude in the verification of identities, signatures and original documents; and Land Office staff who register dealings relying on court orders without verifying their validity because they are not required to do so.

Include a land registration system that doesn’t require Land Office staff to verify information from an applicant to register a transfer of ownership, and what we have is the perfect set of circumstances for fraud and forgery to thrive.

National University of Singapore Assoc Prof Dr Tang Hang Wu does not think the Adorna decision was responsible for the rise in fraud.

“Singapore is a jurisdiction which subscribes to immediate indefeasibility (as in the Adorna case) and the instances of fraud are far fewer than in Malaysia,” he states.

While the concept of deferred indefeasibility may make it harder to commit fraud, the practical and mundane aspects of the conveyancing process are more crucial to preventing it, he adds.

Dr Tang, who was here for the 15th Malaysian Law Conference (MLC) recently, attributes the low incidence of fraud in Singapore to its “more rigorous conveyancing process.”

The higher incidence here, he says, is due to the presence of “sophisticated and organised crime syndicates” that engage in identity theft.

Malaysian lawyer Andrew Wong adds that in most of the cases here forgers assume the identity of the land owner, create fake identity cards and forge signatures.

Highlighting the modus operandi of fraudsters in Singapore, Dr Tang says that they “frequently feature conveyancing lawyers or their law clerks.”

“Another recurrent pattern of land fraud in the reported cases and news is clients who are defrauded by lawyers that they engage to act in land transactions.”

To reform the conveyancing process, Dr Tang and Wong say the following need to be addressed: the integrity and professionalism of the Land Office and the legal profession; attestation clause; identification and verification procedures; rules regarding the holding of conveyancing monies; and procedures relating to replacement of lost certificates of title.

Referring to a 2004 news report about some Selangor Lands and Mines Department staff being implicated in fraud involving land worth RM130mil, Dr Tang says the Land Office must purge itself of criminal elements as it is the principal bulwark against fraud.

He stresses the importance of training Land Office staff to detect any red flags.

In applications for replacement certificates of title, he suggests that the officer insists the applicant turn up in person for an interview and provide a thumbprint and photograph so that it would help with evidence-gathering if fraud occurs later.

“Otherwise, like in the case of Adorna, we are left none the wiser of the true identity of the rogues who perpetrated the forgeries.”

Wong, who was also at the MLC, says it is no secret that many solicitors here do not require the person executing an instrument of dealing to sign in his presence, even though this may make it “insufficient or void under Section 340(2)(b) of the NLC.”

He points out that attestation in New South Wales, Australia, and authentication of documents in Botswana require the person attesting a signature to “personally know the person signing”.

Wong adds that in Singapore the registrar may reject any instrument unless a Certificate of Correctness is included. This certificate, signed by a solicitor employed by a party to the instrument, implies, among others, the instrument is made in good faith and the matters set forth are substantially correct.

Former Bar Council Conveyancing Practice chairman Roger Tan, however, doubts whether introducing such a certificate here would reduce fraud.

“A certificate would impose personal liability on the lawyer but the crooks can still forge the lawyer’s signature and the certificate itself,” he says, adding that in many cases the crook had the help of a lawyer or Land Office staff.

He reckons that making it mandatory to use thumbprints on transfer forms and creation of charges is a better way to reduce fraud.

As for how to prevent lawyers from absconding with money (meant for buying a property) deposited in the client’s account, Dr Tang says there is currently a proposal in Singapore for all such monies to be held by its Academy of Law or commercial banks for safekeeping.

With regards to reducing risks to lending institutions, Wong says they should be required to take reasonable steps to confirm the identity of the borrower or the security party, and to maintain records of such steps for at least seven years.

Wong and Dr Tang also suggest that an Assurance Fund be set up to compensate victims of land scams.

However, Dr Tang admits that, unlike in Australia, defrauded land owners in Singapore face difficulties in claiming successfully because the law requires the land owner to have been deprived of his land through the “omission, mistake or misfeasance of the registrar or any member of his staff.”

Wong thinks that title insurance – a no-fault indemnity insurance which exists in several Commonwealth countries and throughout Europe – should also be introduced here.

No reform should be rushed into but they should address all the current weaknesses. It should be remembered that criminals are not encumbered by bureaucracy and that they adapt very quickly to whatever the authorities come up with.

In the mean time, all the stakeholders can work on improving their personal integrity and shoring up incorruptibility.

Definition

IMMEDIATE indefeasibility is a situation where a transferred title is valid, regardless of any element of fraud or forgery involved.

Countries such as Australia or Canada practise this, and their respective governments have in place a fund that compensates victims of such cases.

Deferred indefeasibility, on the other hand, only protects a subsequent purchaser to a title that is defeasible. Therefore, if one party obtains a title where fraud or forgery is involved, this title can be defeated.

However, if this same party sells it to another purchaser who buys it on good faith, that title is considered to be indefeasible. The indefeasibility therefore “defers” across one transfer of title (the one where fraud or forgery is involved) to the next purchaser who buys it in good faith.

(Internet source: http://www.asiaone.com/Business/My%2BMoney/Property/Story/A1Story20071227-42699.html)

Prime Targets: Based on fraud cases in Malaysia, the syndicates like to target vacant and idle lands of land owners based overseas and those who are elderly.

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A cautionary tale

By Shaila Koshy

IMAGINE looking through the “land for sale section” of the classifieds in your newspaper and finding an insert put up by someone else offering your property for sale. Then imagine seeing the same insert week after week.

This is what has happened to businessman M. A. and two others who are co-owners of five parcels of freehold land in Cheras, Kuala Lumpur.

In January, they went to the Land Office and put a caveat on the titles to warn prospective buyers that the parcels, measuring 17.35ha, were not for sale.

That, however, did not stop property agents from advertising the parcels, zoned as agricultural land, for sale.

The only effect is that many have written to M. A. saying they have prospective buyers lined up either for individual parcels or the whole lot.

Last month, the owners approached the Bar Council with their problem.

On July 12, council secretary George Varughese issued a circular to all members of the Bar informing them of the situation and to advise them to exercise caution if they were approached to handle any transaction involving the properties.

M. A., who has declined to be identified, says his discovery of the attempts to defraud him and the two other owners of the land last year happened by chance.

“A family friend who is an estate agent had seen an ‘Option for Sale’ document with my name indicating the lots were for sale and called me,” he relates.

“I told him that we had not authorised anyone to sell our property. They had copies of our MyKad and all our particulars were correct. How did they get them?”

How indeed, especially since he says he only got his MyKad five years ago and the only time he used it was at the Immigration Department.

“They also had certified true copies of the titles,” says the perplexed and angry M.A.

“How is that possible when the titles are with us?

“What did the Commissioner for Oaths base his certification on?”

The fraudsters were interested in the parcels – of which four are adjoined and the smallest, a short distance away – because of their development potential. Interest was especially high just before the 2010 Budget in October which re-introduced the real property gains tax.

The interest is still there as they found a man surveying the land earlier this year. Before they ejected him, they managed to get the information that a “Datuk Tan” had sent him to survey the land.

M.A. says he is getting more and more concerned, especially since he’s been told that the caveat they had put on their titles was of no use.

All it takes, he was told, was for someone to get a Commissioner for Oaths to witness a statutory declaration and the caveat could be removed!

Furthermore, the response to the council’s circular was disturbing, to say the least. Two lawyers have said they had clients who had been approached to buy the property.

According to M.A., one reported that the “vendor” had a power attorney – attested by a Commissioner of Oaths – that authorises him to sell the land.

The second lawyer reported that her client had deposited two per cent earnest money with her.

The interesting thing is that no lawyer has come forward to say he or she has acted as counsel for the purported vendor.

“Look at this!” M.A. says, pointing to the classified section of a newspaper dated Aug 4. Another agent – unauthorised by the owners – was offering their property for sale.

The owners have put a caveat on their property titles; M. A. has lodged a police report, reported the matter to the Bar Council, chased off a surveyor who entered the property without permission, and pulled down “For Sale” signs posted on the site by unknown persons. How much more diligent can an owner be?

Published in The Sunday Star on 08 August 2010.

37 land fraud cases in Q1

By Shaila Koshy

KUALA LUMPUR: If the syndicates keep their game up, they would have committed over 140 cases of fraud and forgery involving land dealings by the end of this year.

In the first quarter alone, the police recorded 37 cases.

According to Mohd Shukri Ismail, the Research and Development Section director at the Land and Mines Department (Federal), the process of administration of land dealings under the National Land Code did not appear to make it easy to commit fraud.

However, he acknowledged there were weaknesses within the land registration offices and the conveyancing system as well as problems in detecting forgery that needed to be addressed.

If not, the enterprising fraudsters will keep raking in millions of ringgit by selling or mortgaging someone else’s land.

“Between 2005 and April this year, the only state where no police report was lodged on fraud and forgery was Perlis,” said Mohd Shukri in his paper on ‘Measures undertaken to safeguard against fraud in land dealings’, presented during the recent 15th Malaysian Law Conference.

According to Commercial Crime Department statistics, the highest number of cases occurred in Sabah (86), followed by Selangor (56), Penang (47) and Kuala Lumpur (35).

While land owners, banks and conveyancing lawyers have been preoccupied with the changing interpretation of an indefeasible (secure) title under the land code in cases of forgery, syndicates focused on adapting their operations to the legal position of the day.

Mohd Shukri said based on police investigations, the majority of fraud occurred before the registration of the title.

Noting that all the cases in the table involved a dramatic increase in the use of false and forged documentation and fictitious identities, he said the rise in fraud had serious implications for conveyancers.

Listing the various measures put in place by the Natural Resources and Environment Ministry through the Lands and Mines Department, Mohd Shukri said a review of the land code was currently under way and the introduction of the several measures were being considered, among them:

● Torrens Insurance principle – compensation to innocent parties in consequence of fraudulent title;

● New provisions for electronic land dealing and electronic submission of applications;

● Establishing a “Land Court” to resolve land disputes; and

● Certificate of Correctness – a guarantee by a lawyer or real estate agent that the Registrar of Land Titles may accept an instrument at its face value.

Published in The Star on 04 August 2010.

Function of law put to the test

The three legal issues that arose last week showed how pivotal it is to ensure our laws are enacted, interpreted and enforced accurately and efficiently. If not, these laws will be transformed into an ass.

Three interesting legal issues arose in the last two weeks. First, the Kuala Lumpur High Court (Appellate And Special Powers 4) last Monday ruled that the water concession agreement entered into by the Federal Government, the Selangor state government and Syarikat Bekalan Air Sdn Bhd (Syabas) could be made public, including an audit report which was said to have been presented to the Cabinet.

Second, the proposal by the Domestic Trade, Cooperatives and Consumerism Ministry to amend the Copyright Act, 1987 (Act 332) to hold landlords liable if their tenants have infringed intellectual property and copyright rights on the premises was greeted by an outcry from real estate owners.

Third, the Law Reform Committee headed by the Deputy Minister in the Prime Minister’s Department Datuk V.K. Liew proposed to amend the Statutory Declarations Act, 1960 (Act 13) to forbid Commissioners for Oaths (COs) to attest the execution of any statutory declaration (SD) which is contentious or criminal in nature.

Disclosure of Water Concession Agreement and Audit Report

Last Monday, Judicial Commissioner Hadhariah Syed Ismail allowed the disclosure of the documents to the Malaysian Trades Union Congress (MTUC) and 13 others on two grounds:

> The applicants were adversely affected by the decision of former Energy, Water and Communications Minister Tun Dr Lim Keng Yaik not to make public the documents and thereby they had the locus standi or legal standing to sue; and

> The disclosure would not be detrimental to national security or public interest.

The judge added that the applicants had locus standi because they were paying consumers within the water concession area. As Syabas has monopoly over the distribution of treated water in that area, the applicants would have no choice but to pay for any increase in water tariff as there is no other alternative water distributor there.

She added that as water is essential to life, the applicants’ implied constitutional right to life has also been infringed.

As regards the disclosure of the two documents, the judge said she had read through them and found no information detrimental to national security or public interest. She also took note that the Selangor government and Syabas had indicated no objection to the disclosure, and some of the information relating to the water tariff increase was already known to the media and public.

She also ruled that it was nonsensical to say that any document put before the Cabinet is automatically “RAHSIA” under section 2A of the Official Secrets Act 1972 (Act 88).

This is indeed a landmark judgment for the following reasons:

> Cabinet papers are now not automatically protected by Act 88; and

> The judge had taken a liberal approach in affording legal standing to the applicants.

Based on existing legal authorities, the applicants in this action, known to lawyers as public interest litigation, ought to have first shown they had suffered damage peculiar to them or over and above the remaining water consumers in the area, and that their rights had been “substantially” affected.

If the applicants’ position is no different from the other water consumers, then they could not have been said to have been “adversely affected”. There is a ruling from the apex court which requires this to be a stringent test.

In any event, last Friday the Federal Government had obtained a stay on the disclosure of the documents. It will be interesting to see how our appellate courts deal with the issue of locus standi when the matter goes on appeal.

This decision differs from a 1994 Johor Baru High Court decision which held that the late politician-cum-lawyer Abdul Razak Ahmad was not entitled to examine the privatisation agreement between the Johor state government and the company developing the Johor Baru “floating city” project.

Justice Haidar Mohamed Nor ruled that as there was no legal duty imposed on the Government under the Government Contracts Act, 1949 to consult taxpayers like the applicant in respect of contracts made by the Government, the applicant had no legal right to examine the said agreement.

In fact, there are both good arguments for and against the relaxation on standing rules.

The Government’s most common fear is, of course, that public interest litigation can be turned into a “publicity interested litigation” or “politically interested/inspired/inclined litigation” with the purpose being to embarrass them and stall genuine government business.

But to social activists, too rigid an approach will cause injustice and immunise government decisions from curial scrutiny.

Proposal to amend Copyright Act

I believe the proposed amendment is to hold owners of commercial premises like shopping complexes liable if their tenants have used the premises to sell pirated DVDs and VCDs. If this is not the case, and it extends to private premises, then such amendment is totally unjustified.

As I understand, the proposed amendment will also make it a crime for those who purchase even a single pirated copy of DVD or VCD. It follows that a landlord can technically be liable if the tenant of his residential property is caught having in his possession even a pirated DVD or VCD!

To my mind, the Government cannot expect landlords of private premises to police the activities of their tenants. Already, the law as it stands, is not in favour of landlords. The landlord is helpless if a defaulting tenant refuses to vacate the premises because Section 7 of the Specific Relief Act 1950 (Act 137) does not allow a landlord to recover possession of the tenanted property without first having obtained a court order.

Hence, this section has been much abused by recalcitrant and defaulting tenants. In this respect, an amendment to Act 137 is perhaps more urgent.

Proposal to amend Statutory Declarations Act

The debate between Liew and Bar Council chairman Ragunath Kesavan about amending Act 13 is, in fact, much ado about nothing. Some of the duties which Liew had wanted to impose on the COs have in fact already been provided for by law – not under Act 13, but under the Commissioner for Oaths Rules 1993, made under the Courts of Judicature Act, 1964.

Under Rule 13 of the 1993 Rules, a CO is required, among other things:

> To read over and explain the contents of the documents and the exhibits to the maker of the document;

> Not to affix his seal to any document unless the maker of the document signs or affixes his thumbprint before the CO; and

> To refuse to attest to any document if he suspects that the person before him is engaging in deception, fraud, duress, or any other illegal conduct.

If a CO is found guilty of acting in breach of Rule 13, he can be liable to a fine not exceeding RM1,000, imprisonment for a term not exceeding six months, or both.

Hence, it all boils down to enforcement. It is open knowledge that many makers of documents, particularly SDs and affidavits prepared by law firms, do not sign before the COs and these COs would affix their seals and sign the documents when they are brought to them by the clerks from various law firms.

In this regard, Liew’s concern that fraudulent land transactions can occur is not unfounded if a CO affixes his seal on a power of attorney when the makers are not before him.

In conclusion, the above issues go to show how pivotal it is the manner in which our laws are enacted, interpreted and enforced. If their enactment, interpretation and enforcement are not accurate and efficient, then these laws will be transformed into an ass.

Published in The Sunday Star on 04 July 2010.

A pact-ful of joy

Johoreans are excited about the recent breakthrough in talks between Singapore and Malaysia and are looking forward to reaping the benefits of future developments.

As a Johorean, I welcome the historic agreement reached at the meeting last Monday between Prime Minister Datuk Seri Najib Razak and his Singaporean counterpart Lee Hsien Loong.

Finally, we can see some light at the end of the tunnel after being gridlocked for two decades over the interpretation on the Points of Agreement signed between former Malaysian Finance Minister Tun Daim Zainuddin and Lee Kuan Yew on Nov 27, 1990 – the day he stepped down as prime minister of Singapore.

Even though the agreement may have already thrown some politicians into conniptions, it is nevertheless reassuring to see both prime ministers, who are also sons of the founding fathers of our two nations, determined to improve and enhance ties by increasing connectivity between our two peoples geographically and economically.

In fact, Johor Baru residents are particularly excited over the announcement. Taxi drivers and commuters are overjoyed that authorised cabs will soon be able to pick up and drop off passengers from any location in Singapore or Johor Baru instead of at just two places – Bugis in Singapore and Kota Raya terminal in Johor Baru.

In addition, bus services between Johor Baru and Singapore will be doubled with the introduction of four new routes on each side.

It is also hoped that the reduction of toll rates at the Second Link will help ease the traffic congestion at the Causeway.

However, what local residents most want is the creation of a rapid transit system link between Johor Baru and Singapore as close to 100,000 Malaysians commute daily between both destinations to work and study.

To them, a new bridge is not the priority; instead, they want an effective mass rapid train system capable of moving thousands of workers and students to and from Singapore daily.

As this is projected to be ready only by 2018, Keretapi Tanah Melayu Berhad must immediately get down to prepare for a huge increase of Johor Baru residents opting to travel to Singapore by KTM trains during this transition period when its station is relocated from Tanjong Pagar to the Woodlands Train Checkpoint in July next year. Hence, KTM must improve on its services and the comfort of its train coaches.

There is no doubt that the integrated rapid transit system link will bring long-term benefits to Singapore as well as Johor, particularly to the two integrated casino resorts in Singa­pore and the Iskandar Development Region in Johor.

Similarly, the image of Johor Baru city will be transformed as, too often, the experience of travelling to Johor Baru from Singa­pore has been likened by many tourists to travelling to Tijuana, Mexico, from San Diego, USA.

In this respect, it is a wise decision to give up the KTM station in Tanjong Pagar. Surely, the old and unimpressive KTM station should not be the gateway to those who intend to visit Malaysia through this route. It makes no sense to hold on to these pieces of leased properties, the use of which is strictly restricted to railway operations by the 1918 Railway Ordinance. It is also not legally possible for Malaysia to turn the Tanjong Pagar station, for example, into a Kuala Lumpur Sentral type development.

For Singapore, this will substantially lighten the burden on their enforcement agencies in checking the KTM trains from Johor Baru to the Tanjong Pagar station for illegal immigrants and drug smuggling.

However, as soon as KTM vacates the Tanjong Pagar station, Singapore will own 40% of the six pieces of land to be jointly developed through the 40% stake held by Singapore’s Temasek Holdings Limited in M-S Pte Ltd (JVC) as the properties will be vested and transferred to the JVC. Malaysia’s 60% in the JVC will be held by Khazanah Nasional Berhad.

The six pieces of land can also be swopped for pieces of land in Marina South and/or Ophir-Rochor with equivalent value.

This is understandable since the value of these lands has been enhanced after conversion of land use. It follows for this joint development to succeed and for both countries to maximise the benefits of the venture, the JVC should be professionally managed and free from political interference.

Though Malaysia has majority control over the JVC, Singapore can still exercise control over it as it is still subject to Singapore property development laws and authorities.

Hence, judging from past experience, one has to concede that the success of this new venture is still very much dependent on the prevailing level of relationship between the two countries.

That said, Khazanah must never at any time for reason of making quick gains sell any part or the whole of its 60% stake to Temasek as this gigantic development is also a great opportunity for Malaysian workers to acquire skills and improve themselves. Preference should be given to workers and professionals from Johor, albeit this is sadly not enthusiastically pursued by Khazanah in the Iskandar Development.

With regard to water, Malaysians must now acknowledge that it is no longer our bargaining chip with Singapore. The fact that Singapore is prepared to allow the 1961 Agree­ment to expire next year without re-negotiation shows that Singapore is water self-sufficient.

Singapore has obviously over the years increased its water resources from two original taps – local catchment from their 14 reservoirs and imported water from Johor under the 1961 and 1962 Agreements – to five, which include treating waste water, desalinating sea water and importing water from Indonesia. The 1962 Agreement which allows Singapore to draw water from the Johor River will only expire in 2061.

But interestingly, after the Gunung Pulai, Skudai and Tebrau waterworks are handed back to us when the 1961 Agreement expires next year, Johoreans will find it more expensive to operate these facilities compared with buying treated water from Singapore. Since 1961, the price has been 50 sen for every 1,000 gallons. Singapore spends about RM2.50 to treat it.

All these go to show that Johoreans will be most affected whenever there is a deterioration or improvement in our relations.

Sadly, we are more influenced by rivalry and pride whenever we deal with one another, always forgetting that serious ramifications will follow as our peoples are closely related in family ties.

For now, though, Johoreans can only hail this latest breakthrough as it will bring long-term improvement to many ordinary lives on this side of the Causeway.

*Published in The Sunday Star, 30 May 2010.