ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965

[2002] 2 MLJ lxvi

Malayan Law Journal Articles

ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965

Ahmad Moosdeen

LLB (Hons) (Singapore) Advocate & Solicitor

There are two distinctive features in a Torrens system of land registration. The first is that all major dealings
concerning a land (ownership, transfer of ownership, lease, charge, easement, etc) must be registered in a central
register normally kept by the authority and the public may inspect this register. The second is that such a registered
dealing is conferred, by law, the status of indefeasibility, that is, the registered dealing cannot be challenged by
anyone.1 The intended effect of these two features is to ensure that anyone who inspects the register for the status
of the land will be able to rely on the integrity of the register - that what is recorded in the register is the correct
situation concerning the land and what is not recorded in the register cannot affect the land, legally.2

There are variations to the above basic description of the Torrens system. For instance, the law may, and normally
does, prescribe that under certain specific instances, the registered dealing will not be indefeasible, that is, it can be
successfully challenged and cancelled. The most common instance will be a registration obtained by fraud. But the
more the qualifications, the more they undermine the aim of the system which is to give certainty to the register as
correctly setting out all, and the only, legally recognized dealings concerning the land.

The National Land Code 1965 is based on the Torrens system and s 340 is the section which confers
indefeasibility on registered dealings. The section also sets out in sub-ss 2 and 3 the four instances when a
registered dealing is not indefeasible.

Section 340 reads as follows:

(1) The title or interest of any person or body for the time being registered as proprietor of any land, or in whose
name any lease, charge or easement is for the time being registered, shall, subject to the following provisions of
this section, be indefeasible.
(2) The title or interest of any such person or body shall not be indefeasible–

(a) in any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, was
a party or privy; or

(b) where registration was obtained by forgery, or by means of an insufficient or void instrument; or

(c) where the title or interest was unlawfully acquired by the person or body in the purported exercise of any
power or authority conferred by any written law.

(3) Where the title or interest of any person or body is defeasible by reason of any of the circumstances specified in
sub-section (2)–

(a) it shall be liable to be set aside in the hands of any person or body to whom it may subsequently be
transferred; and

(b) any interest subsequently granted thereout shall be liable to be set aside in the hands of any person or body in
whom it is for the time being vested:

Provided that nothing in this sub-section shall affect any title or interest acquired by any purchaser in good faith and for
valuable consideration, or by any person or body claiming through or under such a purchaser.

(4) Nothing in this section shall prejudice or prevent–

(a) the exercise in respect of any land or interest of any power of forfeiture or sale conferred by this Act or any
other written law for the time being in force, or any power of avoidance conferred by any such law; or
 Page 2 of 10
ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965 [2002] 2 MLJ lxvi

(b) the determination of any title or interest by operation of law.

In Boonsom Boonyanit v Adorna Properties Sdn Bhd,3 the Court of Appeal was required to interpret the proviso in s
340(3) and it said:

First, we are of the opinion that the proper approach is to interpret s 340 of the Code as a whole, uninfluenced by any
judicial or academic comment upon its effect. (Page 84.)

On further appeal, the Federal Court in Adorna Properties Sdn Bhd v Boonsom Boonyanit @ Sun Yok Eng4 also
said that s 340 should be interpreted as it is, without unnecessary reference to what the courts of other countries
have to say about their indefeasibility sections (which may  be differently worded) and also without unnecessary
reference to our own past sections on indefeasibility (which could also be differently worded):

We are aware that any sovereign country may adopt and apply the Torrens system, but in adopting the system, it may
modify the system to suit its own needs. Our Parliament did not slavishly follow the wordings of ss 62, 182 and 183 of the
Land Transfer Act 1952 of New Zealand, nor the wordings of s 42 of the FMS Land Code. Therefore, to follow the
arguments in earlier decisions not based on s 340 of the NLC would only lead to utter confusion. We would therefore
proceed to interpret s 340 of the NLC as it stands, and find what the real intention of Parliament was when enacting it, for
the object of interpretation is to discover the intention of Parliament, and the intention of Parliament must be deduced from
the language used.5 (Page 244.)

And so the Federal Court, using the same approach (deduce the meaning from the language used, uninfluenced
by any judicial or academic comment), came to the opposite conclusion to that of the Court of Appeal's and
reversed the Court of Appeal's decision.

I propose to use the same approach (deduce the meaning from the language used, uninfluenced by any judicial or
academic comment) to interpret s 340 and then, with deference, compare my conclusions with the Federal Court's.
For my interpretation, I shall paraphrase s 340 into an example and confine the example to the dealing of
title/ownership only.6

According to s 340(1), if A is the registered owner of a land, his registered title (subject to the provisions of the
section) is indefeasible. If A transfers his title to B, B's registered ownership (subject to the provisions of the section)
would also be indefeasible. Section 340(1) is the provision which confers indefeasibility on registered dealings.

Section 340(2) sets out the three instances when a registered title would not be indefeasible. If A's title is
transferred to B under any of the three instances in s 340(2), B's registered title would be defeasible, that is, it can
be set aside.

Section 340(2)(a) states that if A's title is transferred to B by fraud or misrepresentation to which B is ‘a party or
privy', then B's registered title would be defeasible. This should mean that if B is not a party or privy to the fraud or
misrepresentation, B's registered title would not be affected by para (a) and it would be indefeasible by virtue of s
340(1). Therefore, if B is a purchaser in good faith and for valuable consideration (‘purchaser in good faith') which
should mean a purchaser who does not know of the fraud or misrepresentation,7 B's registered title would be
indefeasible even if it is transferred to B by fraud or misrepresentation. An example would be if A's lawyer
fraudulently induces A to transfer his land to B, a purchaser in good faith who does not know of the fraud and who
pays the purchase price to the lawyer who then absconds with the money, B would still have an indefeasible title
against A and the whole world because para (a) would not apply to him and sub-s 1 would confer indefeasibility on
his registered title.

Section 340(2)(b) states that if the registration of B's title is obtained by forgery or by means of an insufficient or
void instrument, then B's title is defeasible. It should be noted that para (b) does not say that B must be a party or
privy to (for example) the forgery, unlike para (a). This should then mean that even if B does not know of the
forgery, his title is still defeasible. Therefore, even if B is a purchaser in good faith (that is, B does not know of the
 Page 3 of 10
ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965 [2002] 2 MLJ lxvi

forgery), B's registered title would still be defeasible. An example would be if A's lawyer by forgery transfers A's title
to B, a purchaser in good faith who does not know of the forgery and who pays the purchase price to A's lawyer
who then absconds with the money, B's title would be defeasible because para (b) would apply whether B knows of
the forgery or not.

Section 340(2)(c) states that if B's title is unlawfully acquired by B in the purported exercise of any power or
authority conferred by any written law, then B's registered title is defeasible. This para (c) also does not state that B
must be a party or privy to the unlawful act. Paragraph (c) then has the same effect as para (b) and is different from
para (a), that is, even if B is a purchaser in good faith who does not know of the unlawful act, his title would still be
defeasible.

For the purpose of this article, if A transfers his title to B (whether under the instances in sub-s 2 or otherwise) and
if B transfers the title to C in a regular manner (that is, C does not acquire his title under any of the three instances
in sub-s 2), B shall be called the ‘immediate transferee' and C, the ‘subsequent transferee'.8

Sub-section 3 states, in effect, that if B (the immediate transferee) acquires his title under one of the three
instances in sub-s 2 (therefore, B has a defeasible title) and transfers his defeasible title to C (the subsequent
transferee) in a regular manner (that is, not under any of the three instances in sub-s 2), C's registered title is also
defeasible.

For the purpose of the continuing discussion, it is important to note that sub-s 2 applies to immediate transferees
only and not to subsequent transferees while sub-s 3 applies to subsequent transferees only and not to immediate
transferees, and this may be demonstrated thus.

Sub-section 1 says the ‘title … of any person [example, B] … for the time being registered as proprietor of any land
… shall, subject to the following provisions of this section, be indefeasible.'

Sub-section 2 says the ‘title of any such person [that is, B] … shall not be indefeasible … where the registration
was obtained by forgery...'. This would be registered proprietor B, an immediate transferee, with a defeasible title.
Therefore, sub-s 2 concerns only an immediate transferee; there is no mention at all in this sub-section of any
subsequent transferee.

Sub-section 3 says ‘[w]here the title of any person … is defeasible by reason of any of the circumstances specified
in sub-s (2) [that is, B's defeasible title] - it shall be liable to be set aside in the hands of any person … to whom it
may subsequently be transferred …'. Sub-section 3 obviously refers to a third party other than B (‘to whom it may
subsequently be transferred'), whose title is also defeasible (‘shall be liable to be set aside in the hands of any
person… to whom it may subsequently be transferred') by virtue of this sub-s 3 (not sub-s 2). And this third party
whom we call C, is a subsequent transferee as opposed to B, the immediate transferee in sub-s 2.

Then there is the proviso in sub-s 3 (‘proviso') which is the cause of the problem on the interpretation of s 340 and
the reason for this article. To repeat, the proviso reads:

Provided that nothing in this sub-section shall affect any title or interest acquired by any purchaser in good faith and for
valuable consideration, or by any person or body claiming through or under such a purchaser.

Case law and the textbooks on land law have given this proviso two possible interpretations – the immediate
indefeasibility interpretation and the deferred indefeasibility interpretation.9 In the first interpretation, the proviso is
interpreted to apply to sub-ss 2 and 3 - if an immediate transferee is a purchaser in good faith, his title is
immediately indefeasible even if his title is acquired under sub-s 2(b) or 2(c) which would make his title defeasible
even if he is a purchaser in good faith, if not for the proviso. This is called the immediate indefeasibility principle
since an immediate transferee who is a purchaser in good faith acquires immediate indefeasibility even if his title is
obtained by, for example, forgery.10

In the second interpretation, the proviso applies only to sub-s 3 and does not apply to sub-s 2. If B, the immediate
 Page 4 of 10
ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965 [2002] 2 MLJ lxvi

transferee, obtains his title under any of the instances in sub-s 2(b) or 2(c), his title is defeasible even if he is a
purchaser in good faith. But if B transfers the defeasible title to C in a regular manner and C is a purchaser in good
faith, then C acquires an indefeasible title by virtue of the proviso. This is called the deferred indefeasibility principle
as the immediate transferee is not given indefeasibility but this is deferred to the subsequent transferee.

The issue then is whether the proviso applies to an immediate transferee who acquires his title under sub-s 2(b) or
2(c) and is a purchaser in good faith (first interpretation) or only to a subsequent transferee in sub-s 3 who is a
purchaser in good faith (second interpretation).11

I would, without referring to the case law and textbooks but looking at the wording of the proviso only, interpret this
proviso as follows:

(a) ‘this sub-section' refers only to sub-s 3 (the proviso forms part of sub-s 3)12 and does not refer to sub-s 2 or
any other sub-section;
(b) the ‘purchaser in good faith and for valuable consideration' refers only to a subsequent transferee such as
C, in sub-s 3; and
(c) the ‘purchaser in good faith and for valuable consideration' does not refer to an immediate transferee such
as B, in sub-s 2.

I would, therefore, paraphrase the proviso to state that nothing in sub-s 3 is to affect the title of a subsequent
transferee who is a purchaser in good faith, or the title of any other subsequent transferee claiming through such a
subsequent transferee.

I would not apply the proviso to an immediate transferee in sub-s 2 even if he is a purchaser in good faith, for four
reasons.

The first reason is this. The proviso says nothing in sub-s 3 (‘ this sub-section') shall affect the title acquired by a
purchaser in good faith. But the proviso does not also say that nothing in any other sub-section shall affect the title
acquired by a purchaser in good faith. The proviso prohibits only sub-s 3 from affecting the title of a purchaser in
good faith. It does not prohibit any other sub-section from affecting the title of a purchaser in good faith. Therefore, if
another sub-section prohibits a purchaser in good faith from acquiring indefeasibility, it will not be contradicted by
nor conflict with the proviso.

Sub-sections 2(b) and 2(c) say that even the title of a purchaser in good faith who acquires it by forgery, an
insufficient or void instrument or by an unlawful act, is defeasible. The proviso does not prohibit sub-ss 2(b) and 2(c)
from doing this – denying indefeasibility to such a purchaser in good faith who is an immediate transferee. This
should mean that the proviso does not apply to sub-ss 2(b) and 2(c).

Secondly, the proviso says that nothing in sub-s 3 (‘ this sub-section') shall affect the title acquired by a purchaser
in good faith. Sub-section 3 affects only subsequent transferees. It does not affect immediate transferees who are
governed by sub-s 2, instead. If sub-s 3 affects a purchaser in good faith, it must affect only a purchaser in good
faith who is a subsequent transferee. This should mean that the proviso prohibits sub-s 3 from affecting the title of a
purchaser in good faith who is a subsequent transferee and not a purchaser in good faith who is an immediate
transferee since sub-s 3 in the first place does not affect an immediate transferee, including one who is a purchaser
in good faith.

The third reason is a continuation of the second reason. Sub-section 2 affects an immediate transferee only (and
not a subsequent transferee) and sub-s 3 affects a subsequent transferee only (and not an immediate transferee).
Therefore, even without the proviso, sub-s 3 does not affect an immediate transferee at all, including one who is a
purchaser in good faith.

To interpret the proviso to mean that nothing in sub-s 3 is to affect a purchaser in good faith who is an immediate
transferee (sub-s 2) adds nothing new to the legal position without the proviso because, even without the proviso,
 Page 5 of 10
ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965 [2002] 2 MLJ lxvi

sub-s 3 does not affect a purchaser in good faith who is an immediate transferee. This interpretation of the proviso
makes the proviso redundant or superfluous as it tells us nothing which we do not already know without the proviso.

However, if the proviso is interpreted to affect a subsequent transferee only, it becomes meaningful (not redundant)
and with a new and important consequence. Without the proviso, sub-s 3 says the titles of all subsequent
transferees, including the title of a subsequent transferee who is purchaser in good faith, are defeasible. But with
the proviso, the law is changed. With the proviso, the titles of all subsequent transferees, except that of a
subsequent transferee who is a purchaser in good faith, are defeasible. With the proviso, the title of a subsequent
transferee who is a purchaser in good faith becomes indefeasible.

Therefore, this second interpretation should be preferred because while  this second interpretation tells us
something new about the law, the first interpretation tells us nothing new about the law but makes the proviso
redundant; like adding the adjective ‘young' to ‘boy' (‘young boy') which is supposed to be bad English since a boy
is, by definition, already young.13

The fourth reason is a detailed application of the third reason. Even without the proviso, the wording of sub-s 2(a)
(‘party or privy') shows the immediate transferee must be a party or privy to the fraud or misrepresentation for sub-s
2(a) to apply. If the immediate transferee (whether he is a purchaser in good faith or not) does not know of the fraud
or misrepresentation, s 2(a) does not apply to him and his title is indefeasible by virtue of sub-s 1. Therefore, even
without the proviso, a purchaser in good faith who acquires his title by fraud or misrepresentation would not be
affected by sub-s 2(a).

So, if the proviso is interpreted to apply to sub-s 2(a) to mean that if B acquires his title by fraud or
misrepresentation but is a purchaser in good faith, his title is indefeasible, it adds nothing new to sub-s 2(a) which
already says this without the proviso. The proviso is again redundant. Whereas, if the proviso is interpreted to apply
to a subsequent transferee in sub-s 3 only, it is not redundant but meaningful for the reasons stated above.

In summary, my interpretation of s 340 is as follows:

(a) Sub-section 1 confers indefeasibility on a registered title unless the other provisions in the section say
otherwise.
(b) Sub-section 2 sets out the three instances when the registered title would not be indefeasible.
(c) Sub-section 2(a) states that if a registered owner acquires his title by fraud or misrepresentation and he
participated in or knew of the fraud or misrepresentation, his title is not indefeasible. It must follow then that
if he did not participate in or did not know of the fraud or misrepresentation (this would include a purchaser
in good faith), his title would be indefeasible because sub-s 2(a) would not apply to him while sub-s 1
would, not because of the proviso.
(d) If the registered owner acquires his title under any of the instances in sub-ss 2(b) and 2(c), his title would
be defeasible even if he does not know of the forgery, etc, and this would include a purchaser in good faith.
(e) If any of the registered owners in (c) and (d) above, whose titles are defeasible (immediate transferees),
transfers his title to a third party (subsequent transferee) in a regular manner (that is, not under any of the
three instances in sub-s 2), sub-s 3 states the subsequent transferee's title is also defeasible.
(f) But if the subsequent transferee is a purchaser in good faith, the proviso in sub-s 3 states this particular
subsequent transferee's title would be indefeasible.
(g) The proviso in sub-s 3 only applies to a purchaser in good faith who is a subsequent transferee, that is, to
sub-s 3. It does not apply to a purchaser in good faith who is an immediate transferee, that is, to sub-s 2.

If my above interpretation is correct, this means, in relation to a purchaser in good faith, that:

(a) If an immediate transferee who is a purchaser in good faith obtains his title by fraud or misrepresentation
(which he, as a purchaser in good faith, would not know of), his registered title is still indefeasible as sub-s
2(a) would not apply to him. He acquires immediate indefeasibility by way of sub-s 1 and not via the
proviso. If he transfers his indefeasible title to a subsequent transferee in a regular manner, the
 Page 6 of 10
ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965 [2002] 2 MLJ lxvi

subsequent transferee's title would also be indefeasible (whether he is a purchaser in good faith or
otherwise) as sub-s 3 and the proviso do not apply to such a subsequent transferee;
(b) If an immediate transferee who is a purchaser in good faith acquires his title in any of the instances in sub-
ss 2(b) or 2(c), his title would be defeasible. He does not acquire immediate indefeasibility. If he transfers
his defeasible title to a subsequent transferee in a regular manner, the subsequent transferee's title would
still be defeasible because of sub-s 3 unless the subsequent transferee is a purchaser in good faith in
which case his title would be indefeasible because of the proviso.

In Boonsom Boonyanit v Adorna Properties Sdn Bhd,14 the plaintiff (Boonsom Boonyanit) claimed that without her
knowledge, her two pieces of land in Penang were transferred to the defendant (Adorna Properties Sdn Bhd) by a
forged transfer. She sued for the cancellation of the defendant's registered titles to the lands and for the return of
the lands. The defendant denied the transfer was forged and also claimed to be a purchaser in good faith with
indefeasible titles; it paid approximately RM1.8 million for the lands.15 After a trial, the High Court dismissed the
plaintiff's claim.

Assuming the defendant acquired its titles via a forged transfer, s 340(2)(b) would apply and by the wording of para
(b), the defendant's titles would be defeasible even if the defendant (an immediate transferee) was a purchaser in
good faith and did not know of the forgery. The question the judge then asked was, was the defendant protected by
the proviso in s 340(3)? The judge held that:16

(a) The plaintiff was the original registered owner but the lands had been sold and transferred to the
defendant.
(b) The standard of proof in a civil action for forgery was beyond reasonable doubt (similar to the standard in a
criminal case) and the plaintiff failed to prove the transfer was a forgery to this standard.
(c) But even if the plaintiff had proved forgery, the defendant was a purchaser in good faith and its registered
titles were indefeasible by virtue of the proviso which applied to an immediate transferee who was a bona
fide purchaser.

My view is further fortified by s 340(3) which provides that nothing in the sub-section shall affect any title or interest
acquired by any purchaser in good faith and for valuable consideration, or any person or body claiming through such a
purchaser. It is clear from this that the expression ‘any purchaser' should include a first purchaser/transferee (immediate
indefeasibility), and the word ‘or' before ‘by any person or body claiming through such purchaser' in the second limb of the
proviso, should be read disjunctively to mean a subsequent purchaser (deferred indefeasibility). Thus, the operative words
‘any purchaser', and not ‘any subsequent purchaser' makes clear the legislature's intention to grant immediate and not
merely deferred indefeasibility to a purchaser in good faith for valuable consideration. (Court's emphasis.) (Page 887.)

The Court of Appeal reversed the High Court's decision and held:

(a) The standard of proof in a civil action for forgery is the normal standard of a balance of probabilities and
the plaintiff had proved the transfer was forged.
(b) The proviso did not apply to the defendant who was an immediate transferee under sub-s 2 as the proviso
only applies to a subsequent transferee under sub-s 3.
(c) The defendant's registered titles were defeasible under sub-s 2 even if it was a purchaser in good faith.

In our judgment, the words ‘any purchaser' appearing in the proviso to s 340(3) do not include a registered proprietor
whose immediate title is rendered defeasible by one or more of the vitiating elements specified in the second sub-section to
s 340 of the Code. Any other construction would, in our view, denude sub-s (2) of all effect. The section should be read as
making defeasible the title of a proprietor who gets onto the register by means of one or more of the methods specified in
the second sub-section. However, if such a registered proprietor were to dispose of the land to a third party who, in good
faith, pays the purchase price, then, the latter, as well as all those who come onto the register after him, take title free of
any taint.17 (Page 85.)
 Page 7 of 10
ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965 [2002] 2 MLJ lxvi

On further appeal, the Federal Court reversed the decision of the Court of Appeal and reinstated the High Court's
decision. The Federal Court held:

(a) The standard of proof for forgery in a civil case is on a balance of probabilities, agreeing with the Court of
Appeal. (The decision does not say if the Federal Court also agreed with the Court of Appeal that the
plaintiff had proved forgery although this is not necessary in view of the next point.)
(b) The proviso in sub-s 3 applied to the defendant who was a purchaser in good faith and its registered titles
were indefeasible even if its titles were acquired by a forged transfer.

It is a cardinal rule of interpretation that a proviso to a particular section or provision of a statute only embraces the field
which is covered by the main provision. The object of a proviso is to qualify or limit something which has gone before it. Its
proper function is to except and deal with a case which would otherwise fall within the general language of the main
provision of the statute, and its effect is confined to that case. In other words, the object of a proviso is to carve out from the
substantive section or clause of a statute, a class or category of persons or things to whom or to which the main section
does not apply. The proviso cannot be divorced from the main clause to which it is attached. It must be considered together
with the section or sub-section of the statute to which it stands as a proviso.

The proviso to sub-s (3) of s 340 of the NLC deals with only one class or category of registered proprietors for the time
being. It excludes from the main provision of sub-s (3) this category of registered proprietors so that these proprietors are
not caught by the main provision of this sub-section. Who are these proprietors? The proviso says that any purchaser in
good faith and for valuable consideration or any person or body claiming through or under him are excluded from the
application of the substantive provision of sub-s (3). For        this category of registered proprietors, they obtained immediate
indefeasibility notwithstanding that they acquired their titles under a forged document.

We therefore, agree with the High Court Judge that, on the facts of this case, even if the instrument of transfer was forged,
the respondent nevertheless obtained an indefeasible title to the said lands. (Page 245.)

I would agree with the Federal Court that the proviso ‘excluded from the application of the substantive provision of
sub-s 3' registered proprietors who are purchasers in good faith.

But which class of purchasers in good faith does the proviso apply to? There are two classes of purchasers in good
faith:

(a) the class of purchasers in good faith who are immediate transferees covered by sub-s 2 and not sub-s 3;
and
(b) the class of purchasers in good faith who are subsequent transferees covered by sub-s 3 and not sub-s 2?

Now, the passages cited above say the purpose of a proviso is to exclude a sub-class of registered proprietors in
sub-s 3 (not sub-s 2) for special treatment – ‘It excludes from the main provision of sub-s (3) this category of
registered proprietors so that these proprietors are not caught by the main provision of this sub-section. Who are
these proprietors?'

Since sub-s 3 concerns only subsequent transferees (not immediate transferees), it must necessarily follow from
the Federal Court's own reasoning that the sub-class in the proviso to sub-s 3 must come from the main class of
subsequent transferees in sub-s 3, that is, subsequent transferees who are purchasers in good faith. The reasoning
then should be as follows:

(a) Sub-section 1 says that all registered owners have indefeasible titles unless the other provisions in the
section say otherwise.
(b) Sub-section 3 says all registered owners who are subsequent transferees (that is, transferees who acquire
defeasible titles from the immediate transferees) do not have indefeasible titles, subject to the proviso.
(c) The Federal Court says the proviso ‘excludes from the main provision of sub-s (3)' purchasers in good
faith.
 Page 8 of 10
ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965 [2002] 2 MLJ lxvi

(d) It must follow from the Federal Court's reasoning, the only purchasers in good faith who can be excluded
from sub-s 3 are purchasers in good faith who are subsequent transferees since sub-s 3 applies only to
subsequent transferees and does not apply to immediate transferees.
(e) Therefore, continuing the Federal Court's reasoning, only the titles of the subsequent transferees who are
purchasers in good faith are not to be affected by sub-s 3 in which case sub-s 1 continues to apply and
their titles are indefeasible.
(f) Therefore, since the defendant, although a purchaser in good faith, was not a subsequent transferee but
an immediate transferee who obtained its titles by forgery, its titles would not be excluded by the proviso
but would be defeasible under sub-s 2(b).

However, the Federal Court held the registered titles of the defendant who was obviously an immediate transferee,
were indefeasible. How it came to this conclusion that the proviso applies to an immediate transferee in sub-s 2,
after holding that the proviso applies only to sub-s 3 which affects a subsequent transferee only, is (it is humbly
submitted) not explained and this is the crux of the matter. Unless one holds the registered proprietor in sub-s 3 is
the same as the registered proprietor in sub-s 2 or includes the registered proprietor in sub-s 2. But the wordings of
the sub-sections do not show this.

Then, there is the other crux of the matter. Even if the proviso is interpreted to mean that nothing in sub-s 3 is to
affect the title of a purchaser in good faith including an immediate transferee (such as the defendant), the proviso
does not prohibit sub-s 2(b) from denying indefeasibility to the title of such a purchaser in good faith who is an
immediate transferee (such as the defendant). So, why was s 2(b) not applied to the defendant to defeat its titles?
Was it an oversight?

If one were to paraphrase the Federal Court's interpretation, it should read as follows:

Provided that nothing in sub-s 3 (‘this sub-section') shall affect any title or interest acquired by any purchaser in good faith
and for valuable consideration ( including a purchaser in good faith and for valuable consideration who is an immediate
transferee), or by any person or body claiming through or under such a purchaser.

This interpretation still does not prohibit nor prevent sub-s 2(b) or 2(c) from affecting the title of the immediate
transferee, that is, deny indefeasibility to such an immediate transferee whether he is a purchaser in good faith or
otherwise.

Since we are encouraged to interpret s 340 by considering the plain language of s 340 only, this should mean
anyone should be able to follow the Federal Court's reasoning on the proviso in s 340(3) as to whether it is correct
or otherwise.18
1

Indefeasibility is not defined in the National Land Code. In Frazer v Walker [1967] AC 569 on the New Zealand land registration
which is also based on the Torrens system, the Privy Council at p 580 defined ‘indefeasibility of title' to mean ‘a convenient
description of the immunity from attack by adverse claim to the land or interest in respect of which he is registered, which a
registered proprietor enjoys. This conception is central in the system of registration.'
2 It should be remembered that the Torrens system was devised by Sir Robert Torrens as an alternative (and, presumably, a
better) system for recording and proving ownership and other dealings in land, to the common law system of conveyancing by
deeds and the central register and concept of indefeasibility are the main innovations in this alternative system. In Torrens Title
by Robert Stein and Margaret Stone, it is said at p 31: ‘The Torrens system seeks to avoid the position at common law together
with its need for repetitive searching of title to establish that the title is ‘good' or ‘marketable' so that a purchaser will not buy a
lawsuit which is unlikely to be successful. It does this (in theory) through ‘indefeasibility of title' which means that once a
particular person is registered as proprietor, title cannot be divested without statutory approval contained either in the Act
establishing the system or some overriding enactment. In other words, the Register is everything: the aim was that once
registered the interest is as stated and if it is not recorded, then it does not exist. This overstatement represents the general
idea.'
3 The Court of Appeal's decision is reported in [1997] 2 MLJ 62. According to the Court of Appeal, this is the first case to decide
on the issue as to whether the National Land Code confers immediate or deferred indefeasibility – p 82.
4 The Federal Court's decision is reported in [2001] 1 MLJ 241.
 Page 9 of 10
ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965 [2002] 2 MLJ lxvi
5 All emphases in this article are made by the author unless stated otherwise.
6 Section 340(1) confers indefeasibility on a registered title, lease, charge and easement. Although, for easy reference, my
analysis in this article is confined to registered titles, the reasoning (right or wrong) should also apply to the other registered
dealings. Also, it will be noted that there is no discussion of s 340(4) as this sub-section is not relevant to the subject matter of
this article.
7In Ong Ban Chai & Ors v Seah Siang Mong [1998] 3 MLJ 346, the Court of Appeal at p 370 says good faith means bona fide
which means absence of fraud, deceit and dishonesty.
8 If C acquires his title from B under one of the three instances in sub-s 2, then C would not be considered a subsequent
transferee but an immediate transferee governed by sub-s 2, not sub-s 3.
9 See ch 3 of Torrens Title and the Court of Appeal's decision in Boonsom Boonyanit at p 82 for discussions on these two
principles. Whether the Torrens system of a particular country shows immediate indefeasibility or deferred indefeasibility is a
matter of construction of the relevant statutory provisions of the system. Neither principle is necessarily superior to the other
although one may argue that the immediate indefeasibility principle is truer to the intent of the Torrens system. By this principle,
the registered titles of all purchasers in good faith (whether immediate or subsequent transferees) would be indefeasible while in
the case of the deferred indefeasibility principle, the registered title of an immediate transferee would be defeasible and this
would undermine the integrity of the central register. On the other hand, it can be difficult to accept that an innocent owner of a
land can unknowingly lose his land by forgery to a purchaser in good faith under the immediate indefeasibility principle.
10 In the first interpretation, if an immediate transferee, B, who acquires his title under sub-s 2(b) or 2(c) and is a purchaser in
good faith, is given immediate indefeasibility and he transfers his title to C in a regular manner, C's title would be indefeasible
(whether C is a purchaser in good faith or acquires his title without consideration) and would not be caught by sub-s 3 which only
applies to a subsequent transferee who acquires his title from an immediate transferee whose title is defeasible. If B is not a
purchaser in good faith, his title would be defeasible and if it is transferred to C, C's title would also be defeasible under sub-s 3
unless C is a purchaser in good faith in which case his title would be indefeasible by virtue of the proviso. This means even in
the first interpretation, the proviso applies to sub-s 3 in addition to sub-s 2.
11 There should be no problem with regard to sub-s 2(a) since the very wording here (‘party or privy') shows that the registered
title of a person who acquires his title by fraud or misrepresentation would only become defeasible if he participates in, or knows
of, the fraud or misrepresentation. If he is a purchaser in good faith, his title would not be caught by sub-s 2(a) and would be
indefeasible under sub-s 1. This would mean immediate indefeasibility applies to such a purchaser in good faith but not by way
of the proviso. Assuming sub-s 2(b) does not allow immediate indefeasibility, why is it that a purchaser in good faith who
acquires his title by fraud has indefeasibility and a purchaser in good faith who acquires his title by forgery (which is a kind of
fraud) has defeasibility? One obvious answer is, this is the intention of Parliament. And     the next obvious question is, why did
Parliament make such a fine distinction?
12 Aside from the placing of the proviso in sub-s 3, one may also want to consider the wording of sub-s 4 which specifically
states, ‘Nothing in this section …' which means sub-s 4 applies to the whole section, and compare this to the wording of the
proviso in sub-s 3 which only states, ‘Nothing in this sub-section …'.
13 As defined in the Concise Oxford Dictionary, if a statutory provision is susceptible to two interpretations, one of which makes
the provision redundant or superfluous and the other makes the provision meaningful, the rules of statutory interpretation say the
second interpretation is to be preferred – see Craies on Statute Law (7th Edn) pp 103–106.
14 The High Court's decision is reported in [1995] 2 MLJ 863.
15 The facts in the High Court's decision suggest (since the High Court held forgery was not proved to the legal standard of
beyond reasonable doubt) that a third party, claiming to be the registered owner, obtained replacement titles for the lands from
the relevant authority by claiming the originals were lost and then sold the lands to the defendant by way of the replacement
titles and a forged transfer and this ‘vendor' was represented by a solicitor in the sale to the defendant but the solicitor was not
called to give evidence. Therefore, we do not know who this ‘vendor' is. Also, there was no evidence that the defendant knew of
the forgery.
16The High Court's decision on s 340 is found at pp 881–888. It shows the judge came to his conclusion by also comparing s
340 with the indefeasibility provisions of other countries and s 42 of the former FMS Land Code.
17 It may not be strictly accurate to say that if the proviso is interpreted to apply to sub-s 2, this would ‘denude sub-s (2) of all
effect'. Sub-section 2 covers other types of immediate transferees aside from a purchaser in good faith. For example, an
immediate transferee who receives his title as a gift or as a nominee. If such an immediate transferee acquires his title by forgery
but he does not know of it, his title would still be defeasible under sub-s 2(b) and the proviso would not help him even if it applies
to sub-s 2. Therefore, sub-s 2 is still useful even in the first interpretation to prevent such a transferee (as opposed to a
purchaser in good faith) from acquiring indefeasibility.
18 It is taken for granted that this article is to be subject to the same scrutiny as to its soundness. The difference is that if this
article is wrong, it can be ignored. A Federal Court decision cannot be ignored. In Mr Yang Pei Keng's article, ‘Immediate
Indefeasibility or Deferred Indefeasibility?' published in [2001] vol 30 no 3 of Insaf, at p 85 on the same subject matter as this
article, he said that the Federal Court's decision appears to have been delivered after one of the Federal Court judges in the
coram had retired and for this reason, it may not be a valid decision and may be reviewed by another Federal Court for the
 Page 10 of 10
ON THE PROVISO IN SECTION 340(3) OF THE NATIONAL LAND CODE 1965 [2002] 2 MLJ lxvi

reasons stated in the Federal Court's decision of Chia Yan Tek & Anor v Ng Swee Kiat & Anor [2001] 4 MLJ 1 - see pp 97–98 of
the article. If so, does this mean that Madam Boonsom may go one more round in the Federal Court?

End of Document