LAND LAW IILAND LAW II(LIEN)(LIEN)

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Lecture OutlineLecture OutlineDefinitionDefinitionModus OperandiModus OperandiTypes of LienTypes of LienEssential Characteristic/elements Essential Characteristic/elements

of Lienof Lien

DefinitionDefinitionSection 281(1) NLC: Section 281(1) NLC: Any proprietor or lessee for Any proprietor or lessee for

the time being may deposit with any other person the time being may deposit with any other person or body, as security for a loan, his issue document or body, as security for a loan, his issue document of title or, as the case may be, duplicate lease; of title or, as the case may be, duplicate lease; and that person or body-and that person or body-

(a) may thereupon apply under Chapter 1 of Part (a) may thereupon apply under Chapter 1 of Part 19 for the 19 for the entry of a lien-holder’s caveatentry of a lien-holder’s caveat; and ; and

(b) shall, upon the entry of such a caveat, (b) shall, upon the entry of such a caveat, become entitled to a lien over the land or become entitled to a lien over the land or lease.lease.

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DefinitionDefinition

Halsbury Laws of England Halsbury Laws of England (Vol 19 p2.): “(Vol 19 p2.): “Right of one Right of one man to retain the property man to retain the property belonging to another man belonging to another man until certain demand of the until certain demand of the man in possession of the man in possession of the goods are satisfiedgoods are satisfied””

Modus OperandiModus Operandi

RP/Lessee Deposit IDT with Lender

As security for a Loan

LenderenterLHC

LienHolder

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AND SO . . . LIEN AND SO . . . LIEN

• … … is a transaction wherein the is a transaction wherein the Proprietor/co-proprietor/lessee Proprietor/co-proprietor/lessee intends to use the appropriate intends to use the appropriate document as security for a loan then document as security for a loan then advanced.advanced.

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Types of LienTypes of Lien

Equitable LienEquitable LienStatutory LienStatutory Lien

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Equitable LienEquitable Lien

IIs when Lender/Creditor fail to s when Lender/Creditor fail to enter Lien-Holder caveat (LHC) enter Lien-Holder caveat (LHC) BUT still keep the title as security BUT still keep the title as security

This act h/ever will not affect the This act h/ever will not affect the right of the lien holder known as right of the lien holder known as equitable lienequitable lien

This type of land creates an This type of land creates an “equitable” interest in the land or “equitable” interest in the land or lease.lease.

Creditor possess a right to a lien in equity Creditor possess a right to a lien in equity which is enforceable by way of specific which is enforceable by way of specific performance (contract entered by the parties-performance (contract entered by the parties-good in law under Section 206(3) NLC.good in law under Section 206(3) NLC.

Mercantile Bank Bhd v The Official Assignee of the Property of How Han Teh (1969) 2MLJ 169

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““In other words, although failure to In other words, although failure to lodge a caveat does not entitle the lodge a caveat does not entitle the depositee with whom the issued depositee with whom the issued document of title is deposited, to a document of title is deposited, to a lien under the Code, lien under the Code, he still he still possesses a right to it in equity, he possesses a right to it in equity, he can exercise that right by can exercise that right by registering the caveat….at any registering the caveat….at any timetime”( Raja Azlan Shah J)”( Raja Azlan Shah J)

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Standard Chartered Bank Bhd v Yap Sing Yoke (1989) 2 MLJ 49

Lamin J stated: “Lamin J stated: “as the IDT was at all as the IDT was at all time in the custody of the P, it had time in the custody of the P, it had acquired a lien in equity over the acquired a lien in equity over the land. land. The equitable interest is not The equitable interest is not affected by the absence of a caveat. affected by the absence of a caveat. The P had by right to lodge a caveat The P had by right to lodge a caveat and may do so at any time under the and may do so at any time under the provision of the NLC, 1965provision of the NLC, 1965””

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Statutory LienStatutory Lien

Prerequisite elements of Statutory Prerequisite elements of Statutory LienLien

Deposit of OR IDT/Duplicate leaseDeposit of OR IDT/Duplicate leaseIntention to create lienIntention to create lienEntry/lodgment of Lien-Holder Entry/lodgment of Lien-Holder

CaveatCaveat

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1.Deposit of IDT/ Duplicate lease1.Deposit of IDT/ Duplicate lease

The The right to create Lienright to create Lien belongs only to belongs only to Proprietor of the appropriate interest.Proprietor of the appropriate interest.

33rdrd Party cannot create a lien on behalf of Party cannot create a lien on behalf of the Borrowerthe Borrower

It was decided by the court that the right It was decided by the court that the right to deposit the title as security for a loan to deposit the title as security for a loan is restricted only to the proprietor (is restricted only to the proprietor (Peter P’Chient v Ramasamy ChettyPeter P’Chient v Ramasamy Chetty (1923) 3 FMSLR 220)

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Cases: Cases: Perwira Habib Bank (M) Bhd v Megat

Najmuddin Megat Khas & Ors (1999) 5MLJ 334

Perwira Habib Bank (M) Bhd v Loo & Sons Realty Sdn Bhd & Anor (No. 1)(1996) 3 MLJ 409

Hong Leong Finance bhd v Hong Leong Finance bhd v Staghorn Sdn Bhd (2005) 5 MLJ Staghorn Sdn Bhd (2005) 5 MLJ 101101

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Hong Leong Finance Bhd v Hong Leong Finance Bhd v Staghorn Sdn Bhd (2008) 5 MLJ Staghorn Sdn Bhd (2008) 5 MLJ 101- 101-

Allowed lien to be created over a 3Allowed lien to be created over a 3rdrd pty loan provided that there is an pty loan provided that there is an authorisation by the registered authorisation by the registered proprietor for the borrower to use the proprietor for the borrower to use the proprietor’s land as security for a proprietor’s land as security for a loan granted in favour of the loan granted in favour of the borrower by the lenderborrower by the lender

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Literally: the act of the proprietor handling Literally: the act of the proprietor handling over the subject matter of lien to the over the subject matter of lien to the Lender and the act of keeping the Lender and the act of keeping the subject subject matter of lien matter of lien by the Lender will give rise by the Lender will give rise to a liento a lien

Subject matterSubject matter: : IDT-Registered Proprietor (Sec 281(1) IDT-Registered Proprietor (Sec 281(1)

NLC);NLC);Copy of IDT- co-proprietor (Sec 343(6) Copy of IDT- co-proprietor (Sec 343(6)

NLC); andNLC); andDuplicate lease-Registered lessee (Sec Duplicate lease-Registered lessee (Sec

281(1) NLC).281(1) NLC).

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Can the Lender part with the IDT?Can the Lender part with the IDT?

Lender may part with the IDT provided he Lender may part with the IDT provided he enters LHC on the landenters LHC on the land

Section 281(4) briefly allowed the lien holder Section 281(4) briefly allowed the lien holder to part with IDT upon written request made to part with IDT upon written request made by proprietor or lessee but it by proprietor or lessee but it only restricted to only restricted to produce the IDT or lease at any Registry or produce the IDT or lease at any Registry or Land OfficeLand Office..

Parting with the possession of IDT for purpose Parting with the possession of IDT for purpose for which it is required under NLC or any for which it is required under NLC or any other laws, will not cause the lien to be lost.other laws, will not cause the lien to be lost.

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Sitambaram Chetty v Ramanathan Sitambaram Chetty v Ramanathan Chetty (1922] 3FMSLR 8Chetty (1922] 3FMSLR 8

Ormomrm Manickavasagam Ormomrm Manickavasagam Chetty of Teluk Anson v Thomas Chetty of Teluk Anson v Thomas James Mc Gregor of Penang (1933) James Mc Gregor of Penang (1933) MLJ 295MLJ 295

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2. Intention to Create Lien2. Intention to Create Lien

Can be inferred from the relevant Can be inferred from the relevant circumstances of the situation or circumstances of the situation or transaction. Inference can be made from transaction. Inference can be made from the conduct of the parties as a whole.the conduct of the parties as a whole.

The deposit must be with the intention of The deposit must be with the intention of creating lien.creating lien.

Thus, if it is a deposit for safe-keeping, no Thus, if it is a deposit for safe-keeping, no lien will be createdlien will be created

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The element of intention is The element of intention is not satisfied not satisfied if if possession of possession of IDT was obtained through IDT was obtained through fraud or misrepresentation and the fraud or misrepresentation and the deposit of IDT as security was never deposit of IDT as security was never authorised by the Registered Proprietor.authorised by the Registered Proprietor.

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Examples:- Examples:- transaction does not include any loan transaction does not include any loan

arrangement.arrangement. Master Strike Sdn Bhd v Sterling Height Master Strike Sdn Bhd v Sterling Height

Sdn Bhd (2005) 3MLJ 585Sdn Bhd (2005) 3MLJ 585

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Intention can be determined thru:Intention can be determined thru:

(1)(1) depositing of title by Borrower to depositing of title by Borrower to Lender originated from a loan transactionLender originated from a loan transaction

Standard Chartered Bank Bhd v Yap Sing Standard Chartered Bank Bhd v Yap Sing Yoke (1989) 2 MLJ 49Yoke (1989) 2 MLJ 49

(2)(2) the agreement executed between the agreement executed between the parties incorporate the intention to the parties incorporate the intention to use the title as a securityuse the title as a security

Paramoo v Zeno Ltd (1968) 2 MLJ 230Paramoo v Zeno Ltd (1968) 2 MLJ 230

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3. Entry/lodgment of LHC3. Entry/lodgment of LHC

Lodgment of LHC in pursuant of Section Lodgment of LHC in pursuant of Section 330(1) NLC330(1) NLC

Lien is created upon the entry of LHC and Lien is created upon the entry of LHC and not before.not before.

Effect of lodgment of LHCEffect of lodgment of LHC same effect as a private caveat- it will same effect as a private caveat- it will

restraint all dealings with the landrestraint all dealings with the land In the event of default by the Borrower, the In the event of default by the Borrower, the

Lender is entitled to invoke remedy Lender is entitled to invoke remedy available available under Section 281(2) NLCunder Section 281(2) NLC

Effect of lodgment of LHC:Effect of lodgment of LHC:i. same effect as a private caveat- it will i. same effect as a private caveat- it will restraint all dealings with the landrestraint all dealings with the land

ii. in the event of default by the Borrower, ii. in the event of default by the Borrower, the the Lender is entitled to invoke remedy Lender is entitled to invoke remedy available available under Section 281(2) NLCunder Section 281(2) NLC

X lodgment of LHC-equitable lien (LHC can X lodgment of LHC-equitable lien (LHC can be entered at any time)be entered at any time)

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Failure to caveat timeously will not, for Failure to caveat timeously will not, for that reason alone, cause the prior that reason alone, cause the prior uncaveated lien to loose priority against uncaveated lien to loose priority against later caveated interest (later caveated interest (

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Remedy available under Section 281(2) Remedy available under Section 281(2) NLC / right to recover debt (judgment NLC / right to recover debt (judgment debt) is still within limitation allowed debt) is still within limitation allowed under Limitation Act. Delay will render under Limitation Act. Delay will render the action statute barred. the action statute barred. Allagappa Chetti v Perianayagam (1908) Allagappa Chetti v Perianayagam (1908)

Innes 117Innes 117Cheong Kam v Loke Chow (1924) 4 FMSLR Cheong Kam v Loke Chow (1924) 4 FMSLR

294294

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ConclusionConclusion

Advantages of Lien:-Advantages of Lien:-Simple form of securitySimple form of securitySecurity can be perfected in a shorter timeSecurity can be perfected in a shorter timeCheaper and less time consuming (no Cheaper and less time consuming (no

payment of stamp duty)payment of stamp duty)Lien is useful as an interim measure prior Lien is useful as an interim measure prior

to the preparation of a chargeto the preparation of a charge

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