Pro ae? INTRODUCTION joneyaw” : ae mae x” D> + 2 Lien’ can be defined as “Any proprietor or lessee for the time being may deposit with any other person or body, as security for a loan, his issue document of title or, as the case may be, duplicate lease; and that person or body”, that mentioned a person is entitled to a lien ‘over the land or lease upon the deposit of the IDT as security for a loan, and the entry ofa lien-holders caveat; and shall, upon the entry of such a caveat, become entitled to a lien over the land or lease'. Comte “Lien in its primary sense is a right in one man to retain that, which is in his possession belonging to another man until certain demands of the person in possession are satisfied”. “In its primary or legal sense ‘lien’ means a right at common law in one man to retain that which is rightfully and continuously in his possession belonging to another until the present and accrued claims of the person in possession are satisfied”. cl Lien is under Non-registrable dealing. Though subsection (1) required every dealing under the act to be registered, subsection (2) provides that the creation of liens are an to exception to that requirement’. 2 * Section 281(1). 2 Halsbury’s Laws of England, Volume 19, page 2. > Halsbury's Laws of England, Volume 28, 4th Edition, reissue, page 352. * Section 206(2Xb).Lien ... is a transaction wherein the Proprietor or co-proprietor or lessee intends to use the appropriate document as security for a loan then advanced. This definition was cited and accepted by the court in Palaniappa Chetty v Dupire Brothers®. In this case, the judge said that the meaning of lien is said to have been derived through French from Latin that is ligo, ligamen is that of binding or tying or securing something. So, lien is one and a special form of security. — According to Section 343 (3),normally in cases of co-proprietor, if theres no agreement as to who keeps the IDT, the Registrar will keep. The Registrar can make a copy ‘upon payment of a fee and endorse the date with a signature certifying it to be a copy ‘meant for the named co-proprietor. Section 343(6) stated that such a copy, if used to create a lien, recognized to be the required IDT in respect of a lien created on the undivided share of the co-proprietor. we Types of Lien 1, Equitable Lien Equitable Lien is when Lender or Creditor fails to enter Lien-Holder caveat (LHC) but still keep the title as security. This act however will not affect the right of the lien holder (C4) known as equitable lien. This type of land creates an “equitable” interest in the land or lease. ° Creditors possess a right to a lien in equity which is enforceable by way of specific performance (contract entered by the parties-good in law)*, its relates with case Mercantile Bank Bhd v The Official Assignee of t’. — > FMSLR 370. Section 206(3).. 7(1969) 2MLI 169.“In other words, although failure to lodge a caveat does not entitle the depositee with whom the issued document of title is deposited, to a lien under the Code, he still possesses a right to it in equity, he can exercise that right by registering the caveat....at any time”( Raja ‘Azlan Shah J). However, in Standard Chartered Bank Bhd v Yap Sing Yoke®. Lamin J stated: “As the IDT was at all time in the custody of the plaintiff, it had acquired a lien in equity over the land. The equitable interest is not affected by the absence of a caveat. The plaintiff had by right to lodge a caveat and may do so at any time under the provision of the National Land Code, 1965”. = 2. Statutory Lien Prerequisite elements of Statutory Lien consist of: > Deposit of OR IDT or Duplicate lease > Intention to create lien > Entry or lodgment of Lien-Holder Caveat. a §(1989)2 ML.a agcaga a gS SRS SSS ZS SxS CS ss xzs xs £B 2B a) Deposit of IDT or Duplicate lease ‘The right to create lien belongs only to Proprietor of the appropriate interest. Third Party cannot create a lien on behalf of the borrower. It was decided by the court that the right to deposit the title as security for a loan is restricted only to the proprietor for example case is Peter P’Chient v Ramasamy Chetty’. Other cases relates with this issues is Perwira Habib Bank (M) Bhd v Megat Najmuddin Megat Khas’®, Perwira Habib Bank (M) Bhd v Loo & ‘Sons Realty Sdn'', and Hong Leong Finance Bhd v Staghorn Sdn Bhd’, In case Hong Leong Finance Bhd v Staghorn Sdn Bhd! llowed lien to be created over a third party loan provided that there is an authorization by the registered proprietor for the borrower to use the proprietor’s land as security for a loan granted in favor of the ‘guototio “4 borrower by the lender. 9 {jth to Literally, the act of the proprietor handling over the subject matter of lien to the Lender and the act of keeping the subject matter of lien by the Lender will give rise to a lien Subject matter: IDT-Registered Proprietor under Section 281(1); copy of IDT- co-proprictor under Section 343(6); and Duplicate lease-Registered lessee is under Section 281(1). —_ Can the Lender part with the IDT? Lender may part with the IDT provided he enters LHC on the land Section 281(4) briefly allowed the lien holder to part with IDT upon written request made by proprietor or lessee but it only restricted to produce the IDT or lease at any Registry or Land Office, Parting with the possession of IDT for purpose for which it is required under National Land Code or any other laws, will not cause the lien to be lost. a °(1923)3 FMSLR 220. [2003] 4 MLL 65. [1996] 4 CLI171. (2005) 5 MLJ 101 ibidIn the case of Sitambaram Chetty v Ramanathan Chetty '* it was held that the act of ‘an equitable lien holder parting with the issue document of title resulted in the lender losing the right as lien holder Then, for the ORMOMRM Manickavasagam Chetty of Teluk Anson v Thomas James Mc Gregor of Penang’ case, parting with the possession of the IDT other than debt surrounding the lien as when the title is delivered to the registered proprietor for a Purpose which itis required under the National Land Code will not cause the lien to be lost. Means if A says he wants the IDT to perhaps be shown to a government office r~ for administrative purposes (purpose other than the debt), but when taking the IDT away refuses to return it, the a be lost just because it’s not in the lenders possession. b) Intention to create lien. Intention to create lien can be inferred from the relevant circumstances of the situation or transaction. Inference can be made from the conduct of the parties as a whole. The deposit must be with the intention of creating lien. Thus, if it is a deposit for safe-keeping, no lien will be created. Section 281(1) stated that act of deposit of IDT or duplicate must be coupled or made with the intention to create the lien by only the proprietor of the alienated land (no representative) with the intention. A mere deposit of an IDT by a proprietor with any person but without the intention to borrow money from the person will not be sufficient to establish the element of deposit. Elements needed is intention, not just to borrow money, but the element of the intention to deposit the IDT and second is only the registered proprietor depositing it unless with the Power of Attomey. The element of intention is not satisfied if possession of IDT was obtained through fraud or misrepresentation and the deposit of IDT as security was never authorized by the Registered Proprietor, for example transaction does not include any loan arrangement. In this issue, case related is Master Strike Sdn Bhd v Sterling Height Sdn Bhd '°. ae (1922) 3FMSLR 8. (1933) MLJ 295, (2005) 3MLJ 585.Intention can be determined far}rwo types, first is depositing of title by borrower to ender originated from a loan transaction like case Standard Chartered Bank Bhd v Yap Sing Yoke!” . Second is the agreement executed between the parties incorporating the intention to use the title as a security like Paramoo v Zeno Ltd'* case. Intention to deposit the IDT or duplicate lease with the lender as a security for the loan and for no other purpose must be proved. They argued that since the charge was not enforceable, the lien shouldn’t be enforced cither. But the court held that the lien in this case was a statutory lien and has its existence independent from the charge. If the charge is avoided for noncompliance with the law, doesn’t mean the lien is. La ©) Entry or lodgment of Lien-Holder Caveat Lodgment of LHC in pursuant of Section 330(1) lien is created upon the entry of LHC and not before. Effect of lodgment of LHC same effect as a private caveat- it will restraint all dealings with the land. In the event of default by the borrower, the lender is entitled to invoke remedy available under Section 281 (2).Effect of lodgment of LHC can come in two types. First, same effect as a private caveat- it will restraint all dealings with the land. Second is the event of default by the borrower, the Lender is entitled to invoke remedy available under Section 281 (2) lodgment of LHC-equitable lien (LHC can be entered at any time). Failure to caveat timeously will not, for that reason alone, because the prior uncaveated lien to loose priority against later caveated interest. Remedy available under Section 281(2) right to recover debt (judgment debt) is still within limitation allowed under Limitation Act. Delay will render the action statute barred like case Cheong Kam v Loke Chow ". ae 71989) 2 ML 49. (1968) 2 MLI 230. '° (1924) 4 FMSLR 294.Sa ag Sa SS. Sa SBS SS gS xgxCS SS SS SS xO ZB Creation of lien ‘The person may create lien is registered proprietor, lessee and co-proprietor. te Furthermore, for the creation of lien, can, fer on several case like Perwira Habib Bank 1a4s6 (M) Bhd v Loo & Sons Realty Sat Wha {10-0 In this case by virtue ofthe definition of proprietor’ under Section 5, only a registered proprietor of land has the power or right to deposit the title to land to create a lien. Thus, it is not possible for a third party with whom the relevant document has been deposited to then use that document to create a lien in his name. Moreover after the registration of charge we can refer to case Peter P’Chient v Ramasamy Chetty”!, It would appear that after the registration of the charge, the lien or the right to it seizes, 522 coses offer this case,-9 uahelhar couds gollavel or nd falls Pris core ‘Then, other case relate with creator of lien is Hong Leong Finance Bhd v Staghor Sdn Bhd”, This case relates with Subsection (1) of Section 281 that mention registered proprietor depositing his issue document of title ‘as security for a loan’ but does not specify the borrower and neither does it restrict the loan to a loan to the registered proprietor. There is no reason for constructing the loan to mean only a loan to the registered proprietor. The loan may be a loan to a third party. Where the loan is to a third party, it must follow that under subsection (2) the judgment obtained is a judgment against the third-party borrower. ‘The person can be a lien holder has stated in Section 43 that mentions these are persons to whom the state authority can alienate land, usually a bank or a financial institution. Previously a non-citizen and foreign companies are prevented from transacting in land in Malaysia; however the restriction imposed by Section 433(b) ceased to apply by virtue of Section 3 Amendment (No. 2) which came into force on 12 September 1985. [1996] 3 MLJ 409. 241923) 3 FMSLR 220. ous SMO denn arst nan ® National [Code, 1965. 6 — Source 4) famelionPROCEDURE OF LIEN A lien fs only can be created by the registered proprietor or lessee, On the section 281(1), when a registered proprietor deposits document of title or duplicate the lease to a lender for purpose of securing a loan, a lien will be created’. There are must be intention to create a lien, see Paramoo v Zeno Ltd”. =e ero On the cases Paramoo v Zeno Ltd, plaintiff was lodged a lien-holder caveat over the first defendant in 1962 as security for loan of RM 75, 000. At the same time, defendant had ‘reated a charge on the land to plaintiff and registered the charge under Companies Act but not at the land office. The second defendant was a judgment creditor who had obtained a Prohibitory order against the first defendant and later obtained an order for sale of the land. Plaintiff was claimed action for lien that against both of defendant, and claiming that the lien had priority over the second defendant’s prohibitory order. High Court allowed the appeal Process. The appellant who is the second defendant claimed that the lien was voids because there was no intention to create a lien. Held, Sufian, FJ observed that the lien has priority over the prohibitory order. The lien ‘Was properly created and valid. From the cases, we can observe that the intention to create a lien can be gathered from the fact that the issue document of title was deposited with the lender only for securing the loan. ——— Hy lien + wie! Perwira Habib Bank (M) Bhd v Loo & Sons Realty Sdn Bhd & Anor., also can be refer on the issue of intention to create lien. Issue that arises from this case is whether a financier is entitled to a lien once the title is deposited. The second defendant had stood as Suarantor for loan granted to the first defendant. As a security, they had deposited document Of title of piece of land to the plaintiff. First defendant was defaulted in the loan and judgment ‘was entered against the second defendant as guarantor. Plaintiff applied for an order for sale * Section 281 (1) 2 1968] 2 M230 * [1996] 1 AMR 809of the land under section 281 (2) on the Code". The second defendant opposed that there was ‘no agreement between the parties that a lien-holder caveat be entered. Zakaria Yatim. J. was stated that as the second defendant had deposited the title as Security of loan, the plaintiff is entitled to a lien under section 281 (2) of the Code, The implication of the case, there is no necessity for express consent of the title depositor for a lien-holder’s caveat to be entered. Lien is an exception to the general principles of registration of tile, Referring to the section 206(2)(b) on the NLC, the creation of liens that have be mentioned under section 281 's an exception to the general principles of registration of title’. This is because of a Tien isa dealing that gives to a non-registerable. There is no special instrument (form) to create a lien. ee However, in order to be recognized under the NLC, the lien-holder must enter a lien- holder’s caveat to restrain other dealings on the land. To create a lien, lien-holder just needs ‘o fil in Form 19D and lodge it at the Land Office®. The figure shows the flow of the creation of lien: The creation of lien can be divided into two stages which are: —— cy At this stage, what is created is an ‘equitable lien’. ——_____ “Section 281(2) 5 Section 206 (2)(b) * Section 330 (2) 10 —erred ® Lienholder's Land Office Caveat At the stage of entry of a lien-holder’s caveat, a statutory lien is created. . | There are cases that related to the lodge of a lien-holder caveat which is Merchantile Bank Ltd v Official Assignee of How Han Teh’ [1969] 2 MLJ 196. In this cases, How was- Nag | deposited his document of ttle for 2 pieces of land ee Bank in 1964 as the Bank, sac | security ofthe loan. He filed o repay the Ioan an on April 196, the judgment was entered tic against him. On June 1966, How was cofSitied an aStof-bankruptoy. Merchantile Bank lodged a lien-holder caveat over How’s land in August 1966.under section 330 of the Code, 3 month later,/Flow was adjudged a bankrupt. Merchantile Bank applied for an order of sale of the land but the Official Assignee objected on the ground that at the time Merchantile bank lodged the lien-holder’s caveat, How had already committed an act of bankruptcy and the Official Assignee had stepped into How’s shoes.* Raja Azlan Shah, J. observed that although the registration of lien holder caveat is ‘essential for a valid statutory lien, the Court can still give effect to equitable rights to a lien in contract. Thus, Merchantile bank has an equitable right to alien, - whot were the & cate cat cei Br BS Based on section 281 (2), the lien-holder also must obtain the judgment in civil procedure as proof of the debt and apply to court for an order for sale”. Any lien-holder that dogs not apply the judgment order will not able to apply for an order for sale. On the other hand, there are also cases that issue is can a lien be in respect of a loan to a third part) ae Ye one baad “7 ” [1969] 2 MLI 196 * Holland v Hodgson 1872, Malaysian Torrens System 2001, Haji Salleh. Pg 285 ° Section 281 (2) nao This j6 happened to Hong Leong Finance Berhad v Staghom Sdn Bhd and Or. Appeal'®, Abd. Aziz Mohamad FCI, held that the lien-holder’s caveat was in valid because the document of title was deposited by the third party which is the purchaser of the land not the owner of the land, the loan also was granted to a person other than registered proprietor". The registered proprietor need not deposit the title himself. He may instruct the actual depositing to be done by someone else. : lea aloes You need tv discuss a bit mae cl creghar lier —p depositer nat Whe reqs fecal Our — Seo — PHB v Lou | Sms C1de6) YL u- Stodnorn * 2005) 2 AMR 182 © Section 281(1)LIEN HOLDER’S CAVEAT Creation Of Lien Holder’s Caveat By applying section 330 subsection 1, this section related how the applications to be take place. An application must be made to Registrar to enter lien holder’s caveat. With this application, the person must submit attached documents like Form 19D, document of title or duplicate lease and prescribed fee as mentioned in section 330 subsection 2. After the application is being received by Registrar, the Registrar must take notice the date of receipt as being stated in Section 330 subsection 3. Unless he is prohibited from doing any type of caveat like Registrar, private, trust or prohibitory, he must: 1. Enter the caveat applied for on the register document of title to the land or lease of which it is to have effect 2. Serve a notification in form 19A on the proprietor of the land or lessee. In Mercantile Ba'’nk LTD. v. The Official Assignee of the Property of How Han Teh [1969], How Han Teh deposited documents of title over certain lands with the applicants for the purpose of securing a loan. He failed to repay the loan and judgment ‘was obtained against him. A bankruptcy notice was issued against him but he failed to pay the monies and thus committed an act of bankruptcy. Section 330 (1) Section 330 (2) Section 330 (3) [1969] 2 MU 196Subsequently the applicants registered caveats against the titles deposited with them as security under the provisions of section 330 of the National Land Code. A petition was subsequently filed against him and receiving and judgement orders were ‘made against him. The applicants applied to sell the lands by public auction. The application was opposed by the official assignee who claimed that the applicants were not the lien holders on the property. At the time of the act of bankruptcy, there was no caveat entered under the National Land Code. The applicants submitted that at the time when the act of bankruptcy was committed, the applicants had equitable rights to a lien in contract. . ‘The court held that at the time when the act of bankruptcy was committed the applicants had an equitable right to a lien. They had a prior interest and were entitled to an order of sale. The court observed that the applicants had not parted with the documents of title which was in their possession all the time and it was open to them to register the caveat at any time. ‘The conclusion is the applicant was entitled to an order for sale. It is because by applying section 134, the lien holder's caveat is valid even though it was applied during the commencement of bankruptcy. '3The difference of charge and lien is charge in which a third-party charge has always been considered valid while lien not. Under case Hong Leong Finance Berhad v. Staghorn Sdn. Bhd, the Court of Appeal held that the lien-holder caveat was invalid because of title as deposited by the purchaser of land and not the owner. In addition, the loan was granted to a person other than the registered proprietor. This proven that the third part is invalid in creation of lien holder’s caveat. Section 134 Section 330 (1) [2005} 2 AMR 182 14Effect of Lien Holder’s Caveat The word “Caveat (Lien)” gave big implication for entry of lien holder’s caveat on register document of title by referring to section 330 subsections 4. Together with this endorsement, some statement must be included like: Whether the caveat binds the land itself or a lease thereof only ‘The person or body on whose application it was entered The time from which it is effective The reference under which the application is filed Determination Of Lien Holder’s Caveat Determination of lien holder’s caveat can be done under some circumstances: 1. If lien holder’s caveat want withdraw and Registrar must cancel immediately as he received the notice. 2. When proof has up to the satisfaction like the lien have been fully paid Ina situation, where the judgement order has been procured under section 281(2) and the certification of sale has been presented, upon the registration of the certificate, the lien holder caveat must be expired and entry of caveat to be cancelled. “ Section 281 (2) ‘Section 330 (4)9 Wows asa lan > ISSUES ARISING * 8) Does the respondent take any action to obtain judgement order for the appellant to pay the debt as stated in National Land Code (NLC) Section 281 (1) ? b) What is the effect to the respondent if he did not comply with National Land Code Section 281? ©) Can the appellant use the limitation of time to terminate the caveat? Issue (a) Does the respondent take any action to obtain judgement order for the appellant to pay the debt as stated in National Land Code (NLC) Section 281 (1) ? In the case of Wong Kok Leong v. RHB,' the respondent had applied a lien holder's caviet in 1991. 13 years later in 2004, the respondent had applied to foreclose the properties under the lien holder's caveat. However, the court decides to cance! the action because the respondent did not obtain Judgement Order from the court at the first place as per National Land Code (NCL) 281 (1). The Order is to make the borrower to pay the debt. If the borrower fails to do so, then only the respondent can go to the court to apply the sale of land or foreclose the properties. Section 281(1) of NLC reads as follows: “281. Creation and effect, of liens. (1) Any proprietor or lessee for the time being may deposit with any other person or body, as security for a loan, his issue document of title or, as the case may be, duplicate lease; and that person or body- (a) may thereupon apply under Chapter 1 of Part Nineteen for the entry of a lien holder's caveat; and (6) shall, upon the entry of such a caveat, become entitled to a lien over the land or lease. (2) Where the holder of any lien has obtained judgment for the amount due 10 him thereunder, he shall be entitled to apply 10 the Court for, and obtain forthwith, an order for the sale of the land or lease.” * In this case, the respondent did not take any action to get the Judgement Order from the court. He directly apply to foreclose the property. Therefore, this action was cancelled by the court referring to the NCL section 281. * (2015) 2MLI 385 ? Section 281 (1) keg) ch) : u i You could have ex plaivrecl what opr ened i We BG & issues tn CAIssue (b) What is the effect to the respondent if he did not comply with National Land Code Section 281? ‘The important thing needs to be noted in the case Wong Kok Leong v. RHB? is that the respondent shall comply with National Land Code section 281 by filing a suit and obtain courts’ Judgement Order first, only then can proceed with foreclosing proceeding. If he failed to do so, appellant can apply the limitation of time as set in, section 331 where the li appellant can apply n of Seefipn 331 where the lien holder’s caveat can be terminated / removed. The private caveat shall lapse at expiry of 6 years from the time it was lodge. * This case is applicable as Sayang Plantation Bhd v Koh ‘Siak Poo.’ The Court of Appeal stated that: “Since a lien-holders caveat has the like effect to that of private caveat, the effect of a private caveat would also apply with equal force to a lien-holders caveat.” Doo tis include. “durahon" d ro LC> 5. 32BNLC ‘The determination and/or removal of the lien holders’ caveat is stated in section 331 of NLC. It reads as follows: “331. Determination of lien-holders' caveats. (1) A lien-holder's caveat may be withdrawn at any time by a notice in writing given to the Registrar by the person or body for the time being entitled 10 the benefit of the lien, and the Registrar shall cancel the entry of the caveat as soon as may be after the notice is received. (2) Where any land or lease subject to a lien-holder's caveat is sold pursuant to an order of the Court made by virtue of sub-section (2) of section 281- (a) any certificate of sale presented for registration by the purchaser thereof shall be deemed for the purposes of this Chapter to have been presented with the consent of the lien-holder; and (®) upon the registration of the certificate, the caveat shall lapse, and the entry thereof be cancelled accordingly by the Registrar. (3) The Registrar may cancel any lien-holder's caveat upon proof to his satisfaction that all ‘sums due under the lien have been duly paid. > [2015] 2 MLI 385, * Section 328 (1) + [2006] 1 CLI 1163(4) Where the Court is satisfied that any lien-holder's caveat ought not to have been entered, or ought to have been withdrawn, it may order — (a) the cancellation thereof by the Kegistrar, and () if the entry or failure to withdraw has caused damage or loss to any person or body, the payment of compensation by the person or body at whose instance the entry was made or, as the case may be, by whom the withdrawal ought to have been effected. (0) Un cancelling the entry of any caveat pursuant to this section, the Kegistrar shal note on the register document of title the reason. for the cancellation and the date thereof; and where any such entry is cancelled by reason of the withdrawal of the caveat, the Registrar shall give notice of the withdrawal to the person or body for the time being entitled to the land or lease formerly affected. (6) Every cancellation under sub-section (5) shall be signed and sealed.”* Assue (¢) Can the appellant use the imitation ot time to terminate the caveat’ Section 32 National Land Code (NT.C) allows the determination of lien-holder’s caveat by: the time limit. It stated that “The private caveat shall lapse at expiry of 6 years from the time lodge”? “Tike appeiianis compa ina tve respondcus ind vet om its rigints ani the respondents cause of action if any relating to the lien holder's caveat in law has not been productively crystallized by the respondent within the permissible time trame as stated by the Limitation Act and the NLC and in consequence of laches the appellants say they are entitled to the relief claimed." The issue is does this section and Limitation Act can apply to the Wong Kok Leong case? {ne yuagement point out that the “limitation” 1ssue cannot stand as a cause of action and only can be taken as a defence.” The part of judgement reads as follows: © Section 331 7 Section 328 (1) ‘Appellate Jurisdiction , A-02-461-02/2012 (The Court of Appeal of Malaysia September 4, 2014) a8“Pihak Dejendan menentang permohonan imi dan berkwah berdasarkan nas dalam kes Mahkamah Rayuan Sakkap Commodities (M) Sdn. Bhd v Cecil Abraham (executor of the estate of Loo Cheng Ghee) [1998] 4 MLJO31. C2 Dari nas kes tersebut, Mahkamah ini memahami prinsip undang-undang yang tidak membenarkan plaintif menjadikan sekatan had masa sebagai kausa tindakan, ‘Sebaliknya sekatan had masa hanya boleh digunakan untuk membela tindakan. (It is merely a defence to an action).”"° Aneretore, the appellant only can use the Limitation Act and section 528 to detend to an action taken by the respondent. He cannot use this act to determinate the lien-holder’s caveat because the act only applied to “cause ot action’ by the respondent. Conelusi an * Sawer fads 4) cose” a ride ON oom tok tery 2 se CLOT Heyes ° Tare omy 0 are er ene "eg awl pe coke yudaunet Oreten 1984 ~ Bat ee Le RHR ~ Locyed Loe in (ttl P13 tan Up Applied +h sell lawl tr 4 200% ° Appellate Jurisdiction , A-02-461-02/2012 (The Court of Appeal of Malaysia September 4, 2014) . a | | (|