Megat Najmuddin bin Megat khas & ors v Perwira

Habib Bank Malaysia Berhad [2003] 4 MLJ 65

Facts:-

This is an appeal case regarding the lien’s holder caveat between Megat Najmuddin Leong & Co. and
Perwira Habib Bank Malaysia Berhad. This case is started when the bank had engaged the services of
the solicitors to arrange for the execution, by Messrs Loo & Sons Realty Sdn Bhd which was the
registered owner of a piece of land or in other words (‘the landowner’). This landowner was a third party
first legal charge over the land, as a security for an overdraft facility which has been granted by the bank
to the borrower which kwon as a MAA Holdings Sdn Bhd. In the same time the landowner also entered
into sell and purchased agreement with Land Holding Sdn Bhd (purchase) where the original title deed to
the land was handed over to the purchaser. However the land was subject to a restriction-in-interest term
which prohibits any transfer, creation of a lease or any security without the approval of the State
Authority. The borrower was in need of urgent cash. Since it would take some time to obtain the consent
from the State Authority, the borrower proposed to the respondent the creation of a lien-holder’s caveat
(‘LHC’) on the land. The proposal triggered the appellants to issue four different letters to the respondent,
on which the respondent based its claim for negligent advice. Under the SPA, the balance of the purchase
price shall be paid by the purchaser not later than four months from the date of the agreement (16
December 1983) subject to the consent of the State Authority having been obtained for the transfer and to
create a charge over the land. In the event, the consent not having been obtained within the stipulated
period, then the time for payment of the balance of the purchase price shall be extended by a further two
months (from 15 April1984 to 15 June 1984). If the consent is still not obtained, the agreement shall
determine and all payments made shall be refunded by the vendor to the purchaser and thereafter neither
party shall have any claim against the other except for antecedent breaches. The consent of the State
Authority for the transfer of the land was obtained only on 25 January1988, by which time the agreement
had been determined. The title shows that the transfer, which was effected on 22 July 1988, had been
cancelled subsequently. The High Court and the Court of Appeal held that the LHC was invalid for not
having complied with the requirements for its creation under the provisions of s 281(1) of the National
Land Code (‘the NLC’).

Issues:-

The first issue arise at this court is whether purchaser could consent to creation of a lien over the land?
The second issue is whether such a lien holders’ caveat valid under section 281 of National Land Code
and lastly whether solicitors ought to be held liable for loss?

Judgments:-

The Court of Appeal was dismissing the appeal with costs. The fact that the bank never asked for specific
advice in writing from the solicitors did not absolve the solicitors from liability for the negligent advice.
On the borrower’s request for a LHC, the solicitor had failed to check with the landowner, of whom the
solicitors were aware, for confirmation that the landowner had, indeed, deposited the title and that it had
no objections to the LHC being created. Nature of solicitor profession, the solicitors ought not to have
presumed that the landowner had given its consent for the creation of the LHC on the land. Based on the
authority of Brisol & West Building Society v Mothew (1966) 4 All ER 698 , the learned judge found that
the appellants had been guilty of failing to give the respondent proper advice in respect of the LHC.