This was an appeal brought by Pendaftar Hak Milik Negeri Selangor against Caesius Development Sdn Bhd & Others in a land related dispute. In this appeal, the land owner, Caesius Development Sdn Bhd, was the plaintiff in a High Court matter (“Plaintiff”) who sued against amongst others, the appellant, who was the 7th Defendant in the High Court matter.
In the High Court, the Plaintiff claimed for damages on the grounds that he was the true and sole registered owner of the land and that the change of name was fraudulently made. The Plaintiff contended that the transfer of the land and the issuance of the computerised individual document of title (“IDT”) to the 1st and 2nd Defendants were null and void. As a result, the 1st and 2nd Defendants’ title to the land was defeasible under Section 340(2) of the National Land Code (“NLC”) and they were not bona fide purchasers for valuable consideration and, therefore could not be protected by the proviso to Section 340(3) of the NLC. The Plaintiff also averred that the 7th Defendant was negligent and had breached its statutory duty.
In a nutshell, the High Court Judge concluded that the land registration to the 3rd Defendant was null and void as there was evidence of forged documents and fraudulent means of transfer. This also meant that the subsequent transfer of ownership to the 1st and 2nd Defendants be set aside. The High Court Judge also held that there was negligence and breach of statutory duty by the 7th Defendant. However, despite that finding, there was no evidence that the Plaintiff suffered any actual loss due to this fraudulent transaction. Hence, the High Court Judge dismissed the Plaintiff ’s claim for damages.
Dissatisfied with the Decision of the High Court, the 7th Defendant filed an appeal to the Court of Appeal. The Court of Appeal eventually dismissed the appeal and affirmed the decision of the High Court.
Issues on Appeal
The following issues were decided on appeal:-
1. Whether the suit filed by the Plaintiff against the 7th Defendant was time-barred by virtue of Section 2(a) of the Public Authorities Protection Act 1948 (“PAPA”)
2. Whether Sections 5 and 6 of the Government Proceedings Act 1956 (‘GPA’) applied?
PRELIMINARY ISSUES
The 7th Defendant raised two preliminary issues: The first concerned whether the action against the 7th Defendant was time-barred; while the second issue dealt with the correctness of bringing the action against the 7th Defendant.
For the first issue, the Court of Appeal ruled that the matter was not time-barred or caught under the 36 months limitation period under the Public Authorities Protection Act 1948. The Plaintiff had discovered the fraudulent transaction; i.e. the change of name to the title; in May 2012. This was within the 36 months period of limitation when the suit was commenced at the High Court. The Court of Appeal also ruled that an action under the Public Authorities Protection Act 1948 is to be initiated on the outset of the trial before the witnesses were called. This action is not to be taken after witnesses have given their testimonies and the trial is completed.
As to the second issue, the Court of Appeal ruled that this issue of jurisdiction cannot be raised at this appeal stage when the issue was abandoned by the 7th Defendant in the High Court proceedings.
3. Whether the 7th Defendant – breached its statutory duty under the NLC and was therefore negligent when it registered the change of name and, later, in registering the name of the 3rd Defendant as the owner of the land?
4. Whether the title of an immediate purchaser, held by the 1st and 2nd Defendants were liable to be set aside under Section 340(2) of the NLC?
NEGLIGENCE / BREACH OF DUTY BY THE 7th DEFENDANT
To resolve issues 3 and 4 above, the Court of Appeal looked into the usual administrative process of change of name in a title by the 7th Defendant and the actions taken by the 7th Defendant during the change of name from the 3rd Defendant to the 1st and 2nd Defendants.
The Court of Appeal looked into Section 8 of the Fourteenth Schedule of the NLC. Paragraph (c) of subsection 8(9) of the Fourteenth Schedule of the NLC states clearly that a conversion (change) is not to be valid unless the previous original title was submitted to the Registrar. The 7th Defendant had continued to convert and register the title without the submission of the previous original title.. There was indeed a flow chart of how to convert or change a title from a previous owner to a new owner; and this flow chart was not adhered to by the officer in the 7th Defendant’s office. The original title was not surrendered and/or no investigations were made by the officer in the 7th Defendant’s office as to the veracity of the title being destroyed.
The Court of Appeal did not disturb the findings of the High Court and held that the action of changing the ownership from the Plaintiff to the 3rd Defendant was in breach of this paragraph because the original title was physically held by the Plaintiff. This would conclusively make the 7th Defendant negligent in their action of changing the name to the 3rd Defendant.
In line with this, the Court of Appeal also commented on the action of the officers of the 7th Defendant as follows:-
“As a keeper of all land titles, for a particular State (in this case Selangor) it is reasonable to impose upon the land office, including the seventh Defendant, a duty of care towards all landowners, to ensure that the landowners’ interests are well protected and safeguarded. The land office, including the seventh Defendant, has to ensure that the law and proceedings are followed strictly, failing which it can cause the landowners losing their lands.”
In the subsequent issue of the 1st and 2nd Defendants being bona fide purchasers; the Court of Appeal referred to the Federal Court case of Kamarulzaman Omar & Ors v Yakub Husin & Ors [2014] 1 CLJ 987. In this case, it was held that the defeasible title of a bona fide immediate purchaser is still liable to be set aside. It is also mentioned that the defeasible title of a bona fide immediate purchaser only becomes indefeasible when it is subsequently passed on to a bona fide subsequent purchaser.
Reflecting on the current Court of Appeal case and following the findings of the High Court, the 1st and 2nd Defendants were the immediate purchasers from the 3rd Defendant. Therefore, their title is defeasible and is liable to be set aside. If the scenario was changed; i.e. another party had purchased the property from the 1st and 2nd Defendants and that party was a bona fide purchaser, then, in that situation, the title is indefeasible. In such a scenario, it is possible to prove that there were damages suffered by the Plaintiff and the Plaintiff would then be successful in its claim for damages.
CONCLUSION
In summary, there were two major issues; i.e. the negligence of the Pendaftar Hak Milik Negeri Selangor in registering the title and the validation of the registration of title at the land office.
It is established through this case that all parties to a land transaction deal must be vigilant and perform background checks on owners of a land, be it individuals or companies, and conduct a land search of the property intended to be purchased.
Also note that a registered title is indefeasible except in cases where there is fraud . In this case, the title which was transferred and thereafter sold, even to a bona fide purchaser, would not make the title indefeasible to the new owner. The title would be returned to the original owner if fraud had taken place.
By Sarah Kambali and Marcus Leong
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.
