Applicability of English Equitability Principles in Malaysian Torrens System

1. To what extent English law is applicable to our Malaysian land law? Discuss with reference to
relevant cases, statutory provisions and journal articles.

2. “Our land law, despite based on the substratum of Torrens system, is still being haunted by the
English land law.” To what extent do you agree?

Introduction

The Malaysian Torrens system as embodied and codified in the National Land Code 1965 is a system
of “title by registration” which was designed to provide simplicity and certitude, and is a totally
different land law system from the English deed system which practices the registration of title
documents rather than the title of the land itself. Accordingly, the extent to which English land law
and general equitable principles are applicable in the Malaysian Torrens system has always been a
vexed question. As will be seen, case law does not take a uniform position on the application of English
land law and general equitable principles in the Malaysian Torrens system, and this problem is even
exacerbated due to the lack of clarity in the pronouncements by the courts.

Arguments not in favour of equity

S. 3 of the Civil Law Act 1956 (“CLA”) allows the general reception of English common law and
equitable principles established up until the cut-off date in Malaysia when there is any lacuna in the
local law or legal system, but with certain conditions or modifications to suit the local circumstances,
to the extent of necessary. However, in the effort of safeguarding the Malaysian Torrens system, S. 3
of the CLA is qualified by S. 6 of the CLA which categorically prohibits the application of any part of
the law of England to land tenure, conveyance, succession or assurance in Malaysia. The effect of S. 6
of the CLA was explained in Datin Siti Hajar v Murugasu, that is to oust the application of common
law and rules of equity relating to land tenure, transfer or transmission of immoveable property.

The rationale behind this may be derived from the judgement of Lord Keith of Kinkel in United
Malayan Banking Corporation Bhd v Pemungut Hasil Tanah Kota Tinggi that the National Land Code
is a complete and comprehensive code of law governing the tenure of land in Malaysia, and therefore,
there is no room for the importation of any rules of English law in that field unless the Code itself
expressly allows it. In this case, the State Authority forfeited the appellant’s land for not paying the
rent. Therefore, the appellant applied for relief against forfeiture according to rules of equity. The
Privy Council held that the relief against forfeiture is within the English rules of equity concerning
tenure which is prevented by S. 6 of the CLA.

Another rationale supporting the prohibition under S. 6 of the CLA was given in T Damodaran v Choe
Kuan Him that the whole purpose of the Malaysian Torrens system applied through the National Land
Code is to get away from the complicated system of rules which regulates land dealings in England.

The rationales derived from the above two cases appeared to concur the essence of Lord Dunedin’s
speech in Haji Abdul Rahman & Anor v Mahomed Hassan that the system of registration of title and
land dealings contained in a codifying enactment generally does not permit the application of the
doctrines of equity relating English land tenure to land matters in Malaysia.

In a similar vein, on the applicability of the bare trust concept to a vendor or purchaser situation in
the Malaysian Torrens system, the Privy Council in Chin Choy v Collector of Stamp Duties, in view of
S. 6 of the CLA, had by way of obiter, expressed reservation that the principle that once a valid contract
for sale is concluded, the vendor becomes in equity a trustee for the purchaser of the estate sold is a
peculiarity of English land law, but S. 6 of the Civil Law Ordinance expressly prohibits the reception of
any English law pertaining to land matters in Malaysia.

The above obiter appears consistent to the High Court’s opinion in Tan Wee Choon v Ong Peck Seng,
that the common law and equitable rights previously procurable in this country are no longer available
since the passing of Ss. 3(1) and 6 of the CLA and the National Land Code, wherein the intention to
preclude the continued importation of common law and equitable rights into this country is further
substantiated in S. 6 of the CLA.

From the cases discussed above, it would appear that there is no room for the application of English
land law concepts and equitable principles relating thereto where such application would only serve
to erode the policy objectives of the Malaysian Torrens system as embodied in the National Land Code
and S. 6 of the Civil Law Act 1956.

Arguments in favour of equity

Nevertheless, although S. 6 of the CLA prohibits the application of English land law and the rules of
equity relating thereto in Malaysia, English equitable principles of general application to the extent
that they are not consistent with the general framework of the Torrens system as embodied in the
National Land Code are applicable by virtue of S.3 of the CLA to land law in Malaysia. This is illustrated
in the case of Devi v Francis where the appellant occupied the portion of the respondent's land on
which the appellant's house was built. The appellant had begun occupying the house after buying it
from the respondent's mother, and the transaction was later put into contract. The respondent served
notice and claimed ownership of the part of the land where the house was built. The court applied the
principles of equitable estoppel and rejected the contention by the counsel for the respondent that
English equity was not applicable to land matters in Malaysia in view of S. 6 of the CLO. The court
distinguished the English land law and principles of equity and held that S.6 of CLA does not include
equity. Justice Chang Min Tat said that “The land law in England is one thing and equity another
matter.”

This is affirmed in the case of Wilkins v Kannamal where it was held that the system of Torrens is a
system of conveyance; it does not repeal the rules of equity. The rationale behind this may be derived
from Motor Emporium v Arumugam where Terrel CJ held that the courts have on many occasions
acted on equitable principles, not because of English rules of equity apply but because such rules
happen to conform to the principles of natural justice. This shows that equity is applicable because
the court has an inherent jurisdiction to do justice between the parties.

In Woo Yok Wan v Loo Pek Chee, the defendant was a registered owner of a shophouse. He rented it
to the plaintiff under a tenancy agreement for 12 years. Before the tenancy ended, the Town Council
declared the premise to be in a dangerous condition. Thus, the defendant sent the plaintiff a notice
to quit and sold the shophouse to a third party. The plaintiff claimed registrable interest and specific
performance of the tenancy under English law. It was held that S. 6 of the CLA does not exclude the
English equitable principle. The tenancy agreement was substantially performed by the plaintiff. Even
though the agreement was not registered, the plaintiff was entitled to enforce the agreement for the
remaining period in equity as an equitable interest in land. Ajaib Singh J noted that S. 6 of the CLA
does not preclude the application of the English principles relating to equitable interest in land, but
precludes only the English Law relating to tenure or conveyance or assurance of or succession to any
immovable property or any estate, rights or interest therein.

Apart from that, S. 206(3) of the National Land Code (“NLC”) provides statutory authority for the
liberal application of equity whenever there is a basis for that. It is required by S. 206(1) of the NLC
that all land dealings defined under S. 205(1) of the NLC, namely transfers, charges, leases and
easements must be registered, but S. 206(3) of the NLC provides that the failure to register those land
dealings shall not affect the contractual operation of any transaction relating to alienated land or any
interest therein.

in Templeton v Low Yat Holdings Sdn Bhd & Anor, the vendor retained some land for right of way
when he sold his land. Later, the buyer began construction work on the land he had purchased,
obstructing access to the vendor’s land, which became landlocked as a result. The vendor filed a right
of way claim. The court found that S. 206(3) of the NLC does not affect the contractual operation of
any transaction relating to alienated land, and that this subsection authorises the liberal usage of
equity whenever there is a justification for doing so. This shows that the court did not strictly interpret
S. 6 of the CLA, but it was intended to any direct relation to land matters.

By virtue of S. 206(3) of the NLC, the court is therefore allowed to enforce ‘in personam’ claims relating
to unregistered dealings as seen in Karuppiah Chettiar v Subramaniam. In this case, the vendor sold
land to the buyer , and the transaction was completed but not registered. The buyer placed a private
caveat on the land on November 13, 1968. The judgement creditors secured a judgement against the
vendor on April 14, 1969, and a prohibitionary order was placed on the property that had previously
been transferred to the buyer. The buyer applied to the court to set aside the order. The court held
that since the vendor had previously sold his whole interest in the land and collected the full purchase
price, the order could not be set aside. Therefore, the vendor (judgement debtor) was just acting as a
bare trustee.

Accordingly, S. 6 of the CLA does not abrogate the applicability of in personam claims under S. 206(3)
of the NLC. This can be seen in Oh Hiam v Tham Kong, where the parties entered into a contract of
sale of certain pieces of land. The transfer included land on which stood the house on the ground of
common mistake. The High court set aside the sale and the transfer of the land. On appeal, the Federal
Court allowed the appeal on the ground there was no mistake. When the matter reached the Privy
Council, the issue was whether the equitable remedy of rectification was available to the appellant
notwithstanding the purchaser being the new registered owner of the fact his title was indefeasible
under the NLC. The Privy Council held equitable remedy of rectification was available to the appellant
when the claim was based on right in personam.

Nevertheless, to attract the applicability of equitable principles by virtue of S. 206(3) of the NLC, the
court in Kwong Hing Realty Sdn Bhd v Malaysia Building Society Bhd ruled that it is a condition
precedent that there is in existence a transaction relating to alienated land or an interest therein which
is valid and enforceable as a contract. In this case, the court found the condition precedent for the
application of S. 206(3) of the NLC was absent because the relevant provisions of the Debenture relied
upon by the Bank as conferring upon it a power to sell the lands were void.

In lnter-Continental Mining Co San Bhd v Societe Des Etains De Bayas Tudjuh, the agreement
between the parties was in substance a sublease of mining land though not in statutory form, and was
treated as effective as an agreement to enter into a sublease to which S. 206(3) of the NLC applied,
and equity would specifically enforce it.

In Margaret Chua v Ho Swee Kiew & Ors, the Court of Appeal had to consider the legal effect of an
agreement in writing which was incapable of registration as a lease. It was thus incapable of conferring
upon the purported lessees any real interest in the land and so as a lease it was a nullity. Thomson CJ
speaking for the court considered that although the agreement might be a nullity as a lease, it could
be, and indeed was, a good enforceable agreement for a lease under which the appellant as registered
proprietor had undertaken the obligation to grant a lease.

In Mercantile Bank v The Official Assignee of How Han Teh, Raja Azlan Shah J (as His Majesty then
was) had occasion to issue the reminder that independent of our land legislation our courts have
always recognized equitable and contractual interests in land. In this case, the applicants had an
equitable right to a lien during the declaration of bankruptcy and had better titles than trustees. He is
susceptible to the same equities that afflicted the bankrupt’s property and has rights to order for sale
with prior interest. The court held that the applicants had equitable lien.

In Yaacob b Lebai Jusoh v Hamisah, to get a loan, appellant sold his land to respondent with a contract
to resell the land for the same price in three years. Respondent refused to retransfer the property
after the appellant failed to repay the loan within 3 years. The court determined that the parties’ true
intention was to create a mortgage and thus the resell contract is an equitable security transaction
and time is not of essence.

S. 205(1) of the NLC which defines the dealings capable of being effected under the NLC with respect
to alienated lands and interests, namely transfers, charges, leases and easements has also in a way
given room for the continued attempt to apply English equitable principles by virtue of S. 206(3) of
the NLC.

One of the equitable land transactions and concepts recognised in Malaysia is equitable ownership. In
Munah v Fatimah, the court instructed the beneficiaries of an estate who had agreed to sell the land
to the plaintiffs but had neglected to formally transfer the land to the plaintiffs to do so. It recognised
that the plaintiff was the equitable owner of the land after entering into the agreement.

Another equitable land transaction recognised in Malaysia is equitable lease. In Margaret Chua v Ho
Swee Kiew, the court held that an unregistered lease is still good as an agreement for a lease.

Apart from that, equitable charge is also recognised in Malaysia. In Mahadevan v Manilal & Sons, the
Federal Court held that There is no provision in the NLC which prohibits the creation of equitable
charges. Such a charge gives rise to an equitable right in favour of the creditor.

Conclusion

In conclusion, English land law and equitable principles relating thereto generally have no application
in the Malaysian Torrens system in light of S. 6 of the CLA and the NLC. Nevertheless, it is clear that
certain aspects of English land law and equitable principles do continue to apply to fill the lacuna in
the Malaysian Torrens system by virtue of S. 3 of the CLA which provides for the continued general
application of equitable principles, and S. 206(3) of the NLC which provides statutory authority for the
liberal application of equity in appropriate circumstances. Notwithstanding that the Malaysian Torrens
statutes are a complete and comprehensive code of law governing the tenure of land in Malaysia and
its incidents, equitable principles of general application and relevant aspects of English land law may
continue to apply provided they are not in conflict with and do not offend the policy objectives of the
Malaysian Torrens system.