PRIORITY OF CHARGES

How to change priority of charges?

Consolidation (s. 245)

Tacking (s.246)
Postponement (s.247)
 S. 245

CONSOLIDATION
 What is consolidation?

 Under Common Law

It’s an equity doctorine, developed to fetter the right
of com law mortgagor to redeem one out of several
assets used as security over a loan given by the
mortgagee
Case: Cummins v Fletcher (1880) 14 Ch D 799
 What is consolidation?

 Under NLC
S. 245 – allow consolidation if both parties i.e
chargor & chargee agree to it, and it must be
expressly stated in the charge
The right must be exercised before any application
for OFS is made
Case: Public Finance Berhad v Hock Seng Housing
Development & Ors [1991]3 CLJ 2210
 The elements:

SAME chargor
SAME chargee
DIFFERENT lands
 Scenario of consolidation

Loan
RM 2M
LAND
A

Chargor charges
Bank
D
LAND
B

Loan
RM 1M
 Effect of consolidation

On chargor: Lands will be relief from charges by

chargee only upon settlement of all loan secured by
the charges.
On subsequent chargees :alter the priority of
subsequent chargee by giving the consolidating
chargee an advantage
 s. 246

TACKING
 What is tacking?

When a chargee make further advances to rank in

priority to any subsequent charge of the SAME land
When making further advance is expressly
authorised by PRIOR charge
OR
Further advance are made with the consent of the
chargee who is entitled to the benefit
 The elements:

SAME chargor
SAME chargee
SAME land
 s. 247

POSTPONEMENT
 What is postponement?

When a chargee gives priority of charge to the

subsequent chargee by using form 16C
Case: See Ling Tee Huah Credit & Leasing Sdn Bhd
v Lii Tat Credit Mortgage Sdn Bhd [1990] 1 MLJ 46
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