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INDEFEASIBILITY OF TITLE

SECTION 340(1) NLC


Is the section that confers an indefeasible title on the registered
proprietor.
Meaning : ‘immune from attack’ – good against the whole world –
unchallengeable – cannot be defeated.
The register as exclusive and only evidence of title. (See Teh Bee’s
case)
PJTV DENSON (M) S/B V ROXY (M) S/B [1980]
“the concept of indefeasibility of title is so deeply embedded in our land
law that it almost seems trite to restate it. Therefore, the registration of the
transfer of the said land under the NLC defeats all prior unregistered
interests in that land unless the party who acquires the registered title has
been guilty of fraud.”
-Raja Azlan Shah, CJ-
TYPES OF INDEFEASIBILITY
Types of indefeasibility relate to the effect of registration obtained
through a defective instrument.
Examples of defective instruments:
a) Where the signature of transferor/transferee was forged.
b) Insufficient stamp duty.
c) Invalid power of attorney used to effect transfer.
TYPES OF INDEFEASIBILITY
DEFERRED INDEFEASIBILITY
IMMEDIATE INDEFEASIBILITY
Registration of a title through a
The register establishes title. defective instrument remains
The act of registration cures any potentially open to attack until the
defect in the instrument. title is transferred to another.
The next transferee, if bona-fide,
will then get an indefeasible title.
IMMEDIATE INDEFEASIBILITY
‘A’ transfers land to ‘B’ through a defective instrument. B’s title is
indefeasible.

A B
DEFERRED INDEFEASIBILITY
‘A’ transfers land to ‘B’ through a defective instrument. B’s title can be
defeated. If ‘B’ transfers the land to ‘C’ a bona-fide purchaser, ‘C’
gets an indefeasible title.

A B C
EXCEPTIONS TO INDEFEASIBILITY
OF TITLE
EXCEPTIONS - SECTION 340(2) NLC
1) Fraud/ Fraudulent Misrepresentation
2) Registration obtained by Forgery
3) Registration obtained by Insufficient or Void Instrument
4) Unlawfully acquired title or interest
FRAUD
The question of the existence or otherwise of fraud is one of fact to
be determined in the light of the facts and circumstances surrounding
each particular case.
(Federal Ct. in Tai Lee Finance Co. S/B v Official Assignee & Ors.
[1983] 1 MLJ 81)
ELEMENTS OF FRAUD
1) There must be ‘actual fraud’.
2) The registered proprietor whose title is to be defeated
must be party or privy to the fraud.
3) There must be intention to cheat.
ACTUAL FRAUD
Actual fraud is ‘dishonesty - a wilful and conscious disregard and
violation of the rights of other persons.’
(Waimiha Sawmilling Co. Ltd. v Waione Timber Co. Ltd. (1923) NZLR
1137, per Salmond J.)
TAI LEE FINANCE V OFFICIAL ASSIGNEE &
ORS.
Refer p.143 of your textbook.
Federal Court in this case held that there must be
actual fraud to defeat a person of his title or
interest.
Citing Assets Co. v Mere Roihi [1905] AC 176, the
Federal Court held that ‘fraud in actions seeking
to affect a registered title means actual fraud,
dishonesty of some sort, not what is called
constructive or equitable fraud.’
THE REGISTERED PROPRIETOR WHOSE TITLE IS TO BE DEFEATED
IS PARTY OR PRIVY TO THE FRAUD.
See wordings of section 340(2)(a) on this requirement.
In Assets Co. v Mere Roihi, the Privy Council observed that:
“ The fraud must be brought home to the person whose registered title is
impeached or to his agents.”
DATUK JAGINDAR SINGH V TARA RAJARATNAM
[1983] 2 MLJ 196
The registered prop., Tara, lived on the land with her husband Devan
and 5 children.
Devan’s brother, Dr. Das obtained a loan from HK and Shanghai Bank
in Singapore to finance his computer medical centre.
Dr. Das consulted Devan who persuaded Tara to put up the land as
security for the loan.
DATUK JAGINDAR’S CASE:
Jagindar, a lawyer, was a guarantor of Dr. Das’s loan. He and his 2
friends, Suppiah and Arul went to Tara’s house in March 1974 and
Tara was asked to sign several documents.
They misrepresented to Tara that the security on the land was to be
effected by a transfer.
DATUK JAGINDAR’S CASE:
Without knowing it, Tara had transferred her land to Suppiah and 18
days later, Suppiah transferred the land to Arul.
Later, the land was transferred to a developer company belonging to
Datuk Jagindar.
The land was subdivided and sold to various purchasers.
HELD:
There was fraud to defeat Suppiah’s title, Arul’s title and also the
developer company’s title.
Tara Suppiah Arul Company

Purchasers??
HELD:
The purchasers’ titles could not be defeated as they were bona-fide
purchasers for value with no notice of the fraud.
So Tara could not claim the land back and the court awarded
damages.
INTENTION TO CHEAT
Goh Hooi Yin v Lim Teong Ghee [1990]:

“It is not enough to show that the transfer had the effect of depriving
the plaintiff of a known existing right. It must be demonstrated that
the transfer was executed with the intention of cheating the plaintiff of
such right…”
ONUS TO PROVE FRAUD?

NOW:
Used to be: “On a balance of
“Beyond reasonable doubt” probabilities”
 - Saminathan v Pappa [1981]
FC decision in
Letchumanan Chettiar
Alagappan v Secure
Plantations S/B
[2017] 4 MLJ 697
SEE OTHER CASES ON FRAUD:

Owe Then Kooi v Aw Thiam Seng & Anor. [1990] 1 MLJ 234
Nallammal v Karuppanan [1993] 4 CLJ 454
FORGERY
Forgery involves the act of falsifying someone else’s signature.
Although it is a species of fraud, it is not within the meaning of actual
fraud as required under the NLC.
The elements of forgery are different from fraud.
FORGERY:
Forgery invalidates the instrument of dealing, thus the focus is on the
instrument, not the act of the parties.
No need to prove that the proprietor whose title is to be defeated
was party of privy to the forgery.
Just prove that the signature on the instrument was forged.
GIBBS V MESSER
P, Mrs. Messer = proprietor of land
She had executed a POA to her husband, Mr. Messer with power to
transfer the land.
In 1884, the P and husband left the country.
She left the land title and POA in the custody of a solicitor, Mr.
Creswell.
Creswell forged Mr. Messer’s signature…
GIBBS V MESSER
And transferred the land to a ‘Mr. Cameron’, a fictitious person.

Messer transfer Cameron

forgery
GIBBS V MESSER
Creswell, posing as an agent of Mr. Messer presented the transfer for
registration.
Transfer was registered.
Creswell then posed as agent for ‘Mr. Cameron’ and borrowed money
from the McIntyres and created a mortgage on the land in favour of
the McIntyres.
GIBBS V MESSER
In 1886, the P returned and Creswell absconded.
P brought action against the Registrar, Mortgagee and Creswell for an
order to cancel the certificate of title in the name of ‘Mr. Cameron’
and for issuance of a new title to the P, free from the mortgage.
GIBBS V MESSER
Issue:
Whether the P could defeat the mortgage on grounds of ‘forgery’?
Held:
Mortgage invalid due to forgery.
BOONSOM BOONYANIT V ADORNA PROPERTIES
SDN. BHD. [1995] 2 AMR 1828

Pf, holding a Thai passport was the registered


proprietor of the land.
24/5/1989 – Df presented a stamped
memorandum of transfer (M.O.T.) purportedly
signed by Pf to transfer the land to the Df and
this was registered at the land office.
Pf claims that the said M.O.T. was procured by
forgery and /or fraud as she did not enter into
any agreement with the Df.
BOONSOM (CONT.)

The Pf also denied executing a M.O.T. in favour


of the Df.
The Pf also said that her Thai international
passport confirms that she was not in Malaysia
when the M.O.T. was signed.
Pf claimed recovery and reinstatement of her
right to the title and a declaration that the
transfer of the land to the Df was void ab initio.
BOONSOM (CONT.)
Df averred in their defence that it was a bona fide purchaser of the
said land for value and had acquired an indefeasible title through
registration of the title.
HIGH COURT:

1) He who alleges forgery must prove this beyond


reasonable doubt as ‘forgery involves a high element of fraud’.
(BOONSOM DECISION, CONT.)

2) Considering the heavy burden on the P’s shoulders, it is


insufficient merely to assert that the signature was not hers and
that she was not in Malaysia at the material time. She ought
to have called a signature expert and the attestors to
conclusively prove that she was not the person who
signed as transferor. Onus thus, not discharged.
(BOONSOM DECISION, CONT.)

3) Section 340(1) NLC conferred on the D an indefeasible


title. Immediate indefeasibility.

P appealed to the COA.


COA HELD: [1997] 2 MLJ 62

1) Section 340 provides for deferred, rather than immediate


indefeasibility. Hence, the forged instrument does not give a
good title to the D.
2) The standard of proof required for forgery is ‘ a balance of
probabilities’.
3) The P shall be reinstated as the true owner of the land.
FEDERAL COURT (HELD):

Agreed with the High Court decision and overturned the Court of
Appeal decision.
The D, Adorna obtained an immediate indefeasible title
notwithstanding the forged M.O.T. and that the D was a bona fide
purchaser for value.
TAN YING HONG V TAN SIAN SANG & ORS.
(DELIVERED ON 21 ST JAN. 2010)
App.= RP of land in Kuantan, Pahang.
1st Resp., purportedly acting under a POA, executed 2 charges in
favour of UMBC (3rd Resp.) to secure 2 loans in favour of the 2nd Resp.
(Cini Timber Industries S/B)
App. claimed that he did not sign the POA. Claimed forgery and
sought court declaration that the charges were VOID.
ISSUE:
Whether s. 340 NLC confers immediate or deferred indefeasibility?
HELD: (FEDERAL COURT)
That the Federal Court decision in Boonsom Bunyanit was incorrectly
decided.
That the proviso to sub-section (3) of section 340 cannot apply to
subsection (2).
That Malaysia applies deferred indefeasibility.
Therefore, charges were void and appeal allowed.
DIFFERENCES BETWEEN FRAUD AND FORGERY

FRAUD FORGERY
1) Focuses on the 1) The focus is on the
‘fraudulent act’ and effect of forgery on the
‘intention to cheat’. instrument of dealing. It
nullifies the instrument
thus making it
DEFECTIVE.

2) Onus of proof is 2) Onus of proof is ‘on a


‘beyond reasonable balance of
doubt’. probabilities’.
FRAUD V FORGERY

FRAUD FORGERY
3) The party whose title is 3) No such requirement.
to be defeated must be Signature experts need
‘party and privy’ to the only prove that the
fraud. person who signed the
transfer was not the
transferor.
REFRESHER ON TYPES ON INDEFEASIBILITY
TWO TYPES OF INDEFEASIBILITY
1) Immediate Indefeasibility
2) Deferred Indefeasibility

The difference between the two is concerning whether or not


indefeasibility is conferred when the transferee is registered despite
the existence of a defect in the instrument of dealing.
HOW CAN THERE BE A DEFECT IN AN
INSTRUMENT OF DEALING?
Examples:
- It was signed by a minor.
- It was signed under an invalid power of attorney.
- Insufficiently stamped.
- Not attested.
- Signature of party was forged.
IMMEDIATE INDEFEASIBILITY
The register establishes title. One who is registered as proprietor has
a title that is immune form attack, notwithstanding that a void or
voidable instrument has been used to obtain registration.
The act of registration cures the defect in the instrument. (Breskvar v
Wall (1971) 46 AJLR 68)
FRAZER V WALKER (1967) AC 569
See facts.
Held: (Privy Council)
The husband was unable to cancel registration of the new mortgage-
it was immune form adverse claims.
DEFERRED INDEFEASIBILITY
On registration, the title of the registered owner, obtained without
fraud, remains potentially open to attack, if certain circumstances
exist, until the title is transferred to another.
SCENARIO:
A transferred land to B under a void instrument (e.g. forged instrument)
B’s title is defeasible- can be attacked, until B transfers it to C, a bona-fide
purchaser for value without notice of the earlier defect.

A C
B (bona-fide
(transferor)
(transferee) purchaser)
CONT.:
Thus, under deferred indefeasibility, registration DOES NOT cure the
defect in the instrument.
Boyd v Mayor of Wellington [1924] NZLR 1174 – “Registration does
not cure the defects in a statutory instrument but acts merely as a root
of title.”
MOHAMMAD B BUYONG V PHT GOMBAK
& ORS. [1982] 2 MLJ 53
In this case, the Registrar had rejected the instrument of transfer as it
was signed by the transferor under an invalid power of attorney.
The transferee in this case appealed claiming to be entitled to
indefeasibility.
HELD:
Appeal dismissed as nothing in favour of the appellant had been
registered.
This case has been used to support the view that Malaysia applies
deferred indefeasibility as even if the transfer HAD been registered,
the court would still hold the appellant’s title to be defeasible due to
the invalid POA.
CONCLUSION:
Malaysia applies the concept of Deferred Indefeasibility.
The first transferee cannot claim to be a bona fide purchaser.
The title of the first transferee is still open to attack where registration
is effected through a defective instrument.