Malaysia Federal Court’s decision (21.1.2010), in the case of Tan Ying Hong vs Tan Sian San reinforced defer indefeasibility back into West Malaysia under the NLC after overturning Adorna Properties Sdn Bhd vs Boonsom Boonyanit. The effect of Tan Ying Hong is that only a subsequent purchaser will gain title (for a bona fide and without notice) transaction. In Adorna, the original owner lost her titles to Adorna after a culprit forged her signature on the titles (copies issued by Land Office after the culprit declared them stolen) and transfer them to Adorna. The law as it stands now is that Adorna will not gain the titles but anyone buying from Adorna (‘subsequent’) will get good titles – this is the principle of deferred indefeasibility which means it is not immediate as in Adorna – ie upon registration anyone will get good title – the principle of Torrens. Immediate indefeasibility is clearly stated in countries like Australia and to mitigate fraud and forgery (as in Adorna’s case), a fund was setup and available to help the victims. In this way the original principle of Torrens (from South Australia) is maintained and continued in its spirit.

Now in Sabah, we do not have NLC and instead we have Sabah Land Ordinance (SLO). The most well known case here is Borneo Housing Mortgage Finance Bhd v Time Engineering Berhad [1996] 2 CLJ 561 (Borneo Finance Case). However this does not deal with the issue of fraud as in Adorna but merely confirmed Section 88 of SLO as paramount.

88. No title or claim to land valid unless registered.

No new title and no dealing with, claim to or interest in any land except land still held under native customary tenure without documentary title shall be valid until it has been registered in accordance with the provisions of this Part.

As can be seen in Sabah, we used “validility” as the test and not indefeasibility as in the NLC (see Section 340 where the word “indefeasibility” is clearly expressed). Obviously the fact that a dealing can be valid does not mean it is also indefeasible (say in fraud or forgery).

So the position in Sabah is unique and in a way modified the Torrens System much the same way as “deferred indefeasibility” do in practise. In the past, Courts’ decisions have been a mixed bag with some Judges calling to align with West Malaysia (ie with Adorna – even though as can be seen now was wrongly decided ) by endorsing the principle of immediate indefeasibility. Some enlightened would consider the validity to be paramount but be defeated by fraud or forgery. See Wee Yee Ying v Emin Bin Sadi (Civil Suit K 22-153-1995) unreported in open court 2005 in KK by Datuk Ian Chin J (now retired).

The problem with land dealings in Sabah is well known to all and want of transparency. Currently, there are still many without titles to their land as the master title is still undivided to individual titles despite over 30-40 years wait. There are provisional leases (unsurveyed) that date back to 70s. A first step is to computerise the entire registry and make it available online instantly with security such as using MyCard (Microchip Identification Card) for transfer etc. It currently takes more than 1 day to check a title (if you are located in KK).

One also notice in the majority of cases this will involve Native Titles – and the Native Court or Syariah Court endorsing the transfer ( the con-man, shamster, fraudster claiming to be the son or executor of the land – in many cases the owner is still alive). The buyers will argue that they are subsequent bona fide buyers without notice (ie the first transfer was to the fraudster who later sold to them).

I have even encountered a case where the Title was printed and issued under a wrong section but the Judge rebutted this and you can read the judgement here http://tinyurl.com/nu448p. This case was an eviction case and it went to the Court of Appeal.

But other than the technical and administrative problems, the SLO should not be amended given the reason that we already subscribed to “deferred indefeasibility”. Furthermore, this reversal in West Malaysia will also see a number of law firms being sued now by disgruntled bona fide owners without notice (like Adorna – first buyer from fraudster in owner’s name) and will make conveyancers to be more vigilant. Also consider if there is any limitation to action in fraud. www.mylawyer.com.my/pdf/Limitation_Act.pdf

Where there has been a fraud or concealment however, the Limitation Act 1953 provides for an exception. Section 29 of the Act states that where an action is based upon the fraud of the defendant or his agent or where any fact relevant to the plaintiff’s cause of action was delibrately concealed or where such an action is based on mistake, the time of six years does not run until the discovery of the fraud, concealment or mistake by the plaintiff. The effect of this section is plainly seen in the case of Lim Yoke Kong v Sivapiran s/o Sabapathy [1992] 2 MLJ 571 where the defendant’s insurers took great pains to conceal themselves from the knowledge of the plaintiff and thus the latter’s claim was not held statute barred as a result. Limitation periods also do not run where a plaintiff is under disability until the expiry of such a disability under section 24 of the Act.

Cheers