SECURITY TRANSACTION IN

LAND

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 Meaning…
• A situation where a proprietor uses his land as
a security for a loan granted by the lender to
the borrower
• The lender might be a person or non person
• The loan could be for the proprietor of the
land or to others not being a proprietor but
obtain consent from same.

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• In the event of default towards payment of
the loan, the land which has been pledged as
security towards the loan will be used to
recover the amount due.
• This can be done through the remedies
provided by the NLC.

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 LAW 554

JUAL JANJI (JJ)

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 Definition of JJ

A sale of a promise in the form of

conditional sale where the LAND is
used as security to secure the loan
which is small in size and value.

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 Example
• Eg: Mama ‘sell’ her land to Ella in
consideration of a loan given to Mama by Ella
with a promise that if Mama is able to pay off
the loan before the end of a term agreed
between Mama & Ella, Ella will return the
land to Mama.

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 Elements of Jual Janji
1. Lender

2. Borrower

3. Loan

4. Land

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Origin & reason of Jual Janji
JJ come into existence after the coming of
Islam to the Tanah Melayu

to avoid the practice of usury

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Concept of JJ in early days

JJ is :
form of oral understanding
between the creditor and borrower
on the transfer of land from the borrower
to the lender; as security for the loan ;
where lender will return land to borrower
upon full settlement of the loan; no actual
documentation or registration of any
documents takes place.

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 Tengku Zahara v Che Yusuf
[1951] MLJ 1

• Briggs J: “ The whole

purpose of jual janji
transaction is to
provide a procedure for
securing a loan…
without infringing the
prohibition of usury
which is binding on the
conscience of all good
Muslims.”

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 Effect of NLC on JJ
• When National Land Code 1965 was introduced and owner
must comply with the mandatory requirement for
registration of land titles, Jual Janji transaction was also
affected.
• Dealings were regulated and Jual Janji has to conform to the
procedures of transfer of land.

• The land will be transferred into the name of the lender and a
collateral agreement will be executed whereby the
lender is obliged to transfer the property to the borrower
upon full repayment of the loan.

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 HOW IT WORKS?
LOAN
Lender
Borrower

COLLATERAL
‘sell’ LAND AGREEMENT

On condition/promise tt land
to be transfered back to B
upon full settlement of loan –
fail become Jual Putus

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Application of JJ thru Judicial
Opinions/Views
A. Strict interpretation
– Purely contract of sale where time is of essence
(general rule)
– Exceptions to the general rule:
 Extension of time
 Evading payment of loan

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 Cont…
B. Liberal interpretation
– Principle of equity (mortgage)

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 A. STRICT INTERPRTATION
Purely Contract - time is of essence

• Leading case:
Hj Abdul Rahman v Hassan (1917) AC 209
– “it was not a security transaction or mortgage as
the only form of mortgage in Malaysia is charge or
lien. Since it was a contract, the claim was
statute barred”

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 Cont…
• Cases supporting Hj Abdul Rahman’s
case:
– A Kanapathy Pillay v Joseph Chong
(1981) 2MLJ 117 (FC)
– Wong See Leng v Saraswathy Ammal
[1954] MLJ 141 CA
– Ibrahim v Abdullah (1964) MLJ 139

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 So when JJ is a contract…
• If the Borrower failed to comply with the
terms of the contract, the court will not assist
him to invoke the terms of the agreement i.e.
to obtain retransfer of the land

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 Exceptions:
1. Extension of time
– Ismail Hj Embong v Lau Kong Han (1970)
2MLJ 213
– Abdul Hamid Bin Saad v Aliyasak Ismail
[1999] 1AMR 105

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2. Evading payment of loan
– Ahmad Bin Omar v Hj Salleh Bin Shaikh
Osman [1987] 1MLJ 338
– Hatijah Bte Rejab v Abdullah Saad
[2004] 2 AMR 665

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 B. LIBERAL INTERPRETATION
Equitable Principles

• The collateral agreement for a retransfer in a

jual janji transaction is in the nature of an
equitable security transaction whereby the
right to redeem remains
irrespective whether the period for
repayment had lapsed

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 Cases applying lib. int
– Yaacob Bin Lebai Jusoh v Hamisah Bt Saad
[1950] MLJ 255
– Nawab Din v Mohamed Sharif [1953] 19
MLJ 12
– Halijah v Morad [1972] 2 MLJ 166

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 Recent Development in Malaysia

• The Malaysian courts are reluctant to deviate from the case of

Haji Abdul Rahman although acknowledged the existence of
JJ as a Malay customary loan transaction.
– Hatijah bte Rejab v Abdullah Saad (2004) 2 AMR 665
– Mastiara Sdn Bhd v Motorcycle Industries (M) Sdn Bhd &
Ors [1999] 1 MLJ 681 COA

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Related provisions to be considered in
should JJ is to be accepted as a
security transaction:
• Section 4(2)(a)
• Section 206(3)

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