INDEFEASIBILITY OF TITLE

Sharifah Zubaidah AljunidDecember 2011

Section 340(1) NLC

• Is the section that confers an indefeasible title on the registered proprietor.

• An indefeasible title means a title ‘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• IMMEDIATE

INDEFEASIBILITY• The register

establishes title.• The act of registration

cures any defect in the instrument.

• DEFERRED INDEFEASIBILITY

• Registration of a title through a defective instrument remains potentially open to attack until the 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.

• Read the case at 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?

• “Beyond reasonable doubt”– - Saminathan v Pappa [1981]

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 Camerontransfer

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 21st 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• 1) Focuses on the

‘fraudulent act’ and ‘intention to cheat’.

• 2) Onus of proof is ‘beyond reasonable doubt’.

FORGERY• 1) The focus is on the

effect of forgery on the instrument of dealing. It nullifies the instrument thus making it DEFECTIVE.

• 2) Onus of proof is ‘on a balance of probabilities’.

FRAUD v FORGERYFRAUD• 3) The party whose title is

to be defeated must be ‘party and privy’ to the fraud.

FORGERY• 3) No such requirement.

Signature experts need only prove that the 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(transferor) B

(transferee)

C(bona-fidepurchaser)

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.