Equity in Malaysian Torrens System

In Malaysia, our land administration had changes from time to time. Before the arriving of
English, our land system follows Islamic land systems and Malay customs. It has been proven from the
judgment by Maxwell C.J in Sahrip v. Mitchell & Anor case:

"It is well-known that by the old Malay law or custom of Malacca, while the Sovereign
was the owner of the soil, every man had nevertheless the right to clear and occupy all
forest and waste land subject to the payment to the Sovereign of one-tenth of the
produce of the land so taken".

From the judgment, we may see several concepts of land system which has the same basis with Islamic
land law. The concept of ownership right whereas in Islam everything belongs to Allah and in the
judgment the Sovereign is the owner of the land.

After the coming of English colonization, Islamic land law had no longer being applied. It was
replaced with two English land law systems. The Torrens system and the English deeds system had been
introduced into our system. Our focus point on this discussion is the existence or inexistence of English
deeds system or Equity in Malaysian Torrens system.

The Torrens System was originated from South Australia, drafted by Sir Robert Torrens. The
Torrens system ensures the indefeasibility of title or in other words a title which cannot be annulled or
voided. This system helps to avoid uncertainty of title. The land title will usually be two copies. One copy
being kept at the registry and another copy for the owner to keep by himself. Compare with English
Deeds Syste, English Deeds System refer to the deed itself is registered. The deed does not reflect the
ownership of the land. The owner of the land had to be traced down from the earliest owner granted by
the crown. In simple word, Torrens System is about registration while English Deed System is about the
chain of ownership or proprietorship.

Furthermore, The Torrens System consisting two main principles which made it based entirely
on registration, known as mirror principle and curtain principle. Mirror principle means that the title
reflect the exact information of the land. Meanwhile, the curtain principle means that a person does not
need to explore further than the title. They only need to rely on the title. These dual principles had from
what has been said above as the indefeasibility of title. In Malaysian law, these principles were stated in
Section 340(1) of National Land Code 1965.
 In Torrens System, the land administration works almost flawlessly as all the transactions
pertaining to the land will be recorded in the government office or registrar. The government would
know if there is any suspicious activity or confusions to the land. Compare to English Deeds System, the
system based on the principle ‘nemo dat quod non habet’ (no one gives what he does not have). To
transfer ownership they have to search the earliest owner. This may involve a very long chain of
ownerships. It could be hundreds of years and this will cause the system to be slow and ineffective.

Although we found that the Torrens System has many advantages, some critics from the
academician had been up in the air pertaining to the indefeasibility of title. In review to the case of
Adorna Properties Sdn Bhd v. Boonsom Boonyanit @ Sun Yok Eng case. The federal court in this case
had made judgment in favor of Adorna Properties Sdn Bhd. The judges upheld the indefeasibility of title
because it involves a bona fide purchaser. This had caused some worries and confusions as Section
340(2)(b) of National Land Code 1965 state the defeasibility of title because of forgery. Another major
issue related to the Torrens System is on the squatter’s right. We can see it in the Sidek & Ors. v. The
Government of Perak & Ors case. Raja Azlan Shah C.J in this case made the judgment that stated the
squatters have no right either in law or in equity. It is considered as an offence to occupy a land illegally
under Section 48 and Section 425 in National Land Code 1965 which parallel to the concept in Torrens
System. The government needs to remind themselves first that these people have right as a Malaysian
before the government had evicted them from the land.

From the above discussion, we had explained about Torrens System and English Deeds System.
We have also learned on the ups and downs of applying Torrens System. Now we were back to our main
point. The Torrens System despite its imperfection had rejected the principle of equity but accepted the
continuance of the transaction that has been established aforesaid. In the case of Barry v Heider, it
writes “the Torrens statutes.. have long.. been regarded as in the main conveyance enactments, and as
giving greater certainty to titles to registered proprietors, but not in any way destroying the
fundamental doctrines by which Court of Equity have enforced, as against… registered proprietors,
conscientious obligations entered into by them”.

Thus, under the general principle, a contract of land is valid prior to its registration. Is this
contrary to our National Land Code? In Malaysia, it has been said that some exclusion has been made
although this exclusion is limited.
 In general, Section 206 provides that a proper method of the transaction must be registered and
using the correct form as prescribed. However, Section 206(3) stated that a contract of land whether in
compliance with the Code or not is considered as valid and subject to registration. This section has to be
read together with section 206(1) and section 206(2) of the Code. Section 206(2) provides exceptions to
lien and tenancies where no registration is required. Section 206(3) further emphasizes that nothing in
section 206(1) would affect transaction for alienated land.

Everything in National Land Code is all about the matters and effects of the transactions after
registration but not prior to registration. Therefore, the essence of section 206(3) is very important. It is
because when a party had entered into a land transaction, he had certain rights and every right need to
be protected by the law. However, it is a completely different matter if the contract for the transaction
of land itself is not a valid contract. Once the contract is establish, the party had the right to sue the
other party in case of any unwanted things occurred. The right is only up to that point until registration
is made. After registration, the owner of the land can sue anything regarding to the land. Eg; trespass.

The recognition of equity in section 206(3), al so can be found with the principle of equitable
estoppel. It is where in the section stated that where a party is estopped from denying the existence of
contract or some facts to show the interest to enter into a contract. In case of a breach of contract, the
aggrieved party would entitle some remedy which is suitable in the eyes of law.

It is generally accepted that section 206(3) provide a platform for either party to sue. However,
in recent development, it shows that court is extending the application of this section. It extending it
scope to the breach of obligation.

In the case Templeton & Ors v Low Yat Holdings Sdn Bhd & Anor, Edgar Joseph Jr J writes that
section 206(3) provides a liberal application of equity. What it meant by liberal is not that it can be freely
and unqualified applying equity but it must have some basic to do equity.

Another important issue is that whether section 206(3) had defeated the concept of
indefeasibility of title as introduced in the Torrens System. According to Judith, section 206(3) does not
defeat the Torrens System because there is different right as to registered owner and unregistered
owner. It is normal in every system to have provision which does not comply with the law.

In conclusion, the principle of equity does not only exist in the Malaysian Torrens System but it
is clearly stated in the code and has been widely applied by our court in making decision.