StatutorStatutory Lieny Lien

22

Prerequisite (necessary items in Prerequisite (necessary items in order for something to happen order for something to happen elements) of Statutory Lien:elements) of Statutory Lien:

1.1.Deposit of OR IDT/Duplicate leaseDeposit of OR IDT/Duplicate lease2.2.Keeping of IDTKeeping of IDT3.3.Intention to create lienIntention to create lien4.4.Entry/lodgment of Lien-Holder Entry/lodgment of Lien-Holder

CaveatCaveat

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1.Deposit of IDT/ Duplicate 1.Deposit of IDT/ Duplicate leaselease

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

33rdrd Party cannot create a lien on behalf of the Party cannot create a lien on behalf of the ProprietorProprietor

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

44

Other Cases: Other 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 Staghorn Hong Leong Finance bhd v Staghorn Sdn Bhd (2005) 5 MLJ 101Sdn Bhd (2005) 5 MLJ 101

United Overseas Bank (Malaysia) Sdn United Overseas Bank (Malaysia) Sdn Bhd v. UJA Sdn Bhd & Anor (2010)6 Bhd v. UJA Sdn Bhd & Anor (2010)6 CLJ 204 CLJ 204

55

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

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

66

Literally: the act of the Literally: the act of the proprietor handing over proprietor handing over the subject matter of lien to the lenderthe subject matter of lien to the lender AND the AND the act of keeping the subject matter of lien by the act of keeping the subject matter of lien by the Lender Lender will GIVE RISE TO A LIENwill GIVE RISE TO A LIEN

What can become the subject matterWhat can become the subject matter: : IDT-Registered Proprietor (Sec 281(1) NLC);IDT-Registered Proprietor (Sec 281(1) NLC); Copy of IDT- co-proprietor (Sec 343(6) NLC); andCopy of IDT- co-proprietor (Sec 343(6) NLC); and Duplicate lease-Registered lessee (Sec 281(1) Duplicate lease-Registered lessee (Sec 281(1)

NLC).NLC).

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

The The Lender Lender must keep the IDT at all material time. Case:• Sitambaram Chetty v Ramanathan Chetty (1922]

3FMSLR 8

88

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

Lender may part with the IDT provided that the lien Lender may part with the IDT provided that the lien is a statutory lienis a statutory lien

Section 281(4) briefly allowed the lien holder to Section 281(4) briefly allowed the lien holder to part with IDT upon:part with IDT upon:

i.i. written request made by proprietor or lessee; but written request made by proprietor or lessee; but

ii.ii. only restricted to produce the IDT or lease at any only restricted to produce the IDT or lease at any Registry or Land OfficeRegistry or Land Office..

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

99

Cases: Ormomrm Manickavasagam Ormomrm Manickavasagam

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

1010

3. Intention to Create Lien3. Intention to Create Lien

This can be inferred from: This can be inferred from: 1)1) the type of the type of transactiontransaction entered into by the entered into by the

parties;parties;2)2) the the conduct of the parties as a whole;conduct of the parties as a whole; 3)3) the nature of the agreement.the nature of the agreement.

Thus the transaction Thus the transaction MUST BE MUST BE a a security security transaction transaction i.e to obtain loan, the conduct of i.e to obtain loan, the conduct of the parties i.e the parties i.e deposit and keeping the IDTdeposit and keeping the IDT must be for the purpose of the loan and the must be for the purpose of the loan and the agreement executed by the parties is a agreement executed by the parties is a loan loan agreementagreement..

1111

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

NO AUTHORISATION BY THE NO AUTHORISATION BY THE PROPRIETORPROPRIETOR

1212

Cases:- Cases:- transaction does not transaction does not

include any loan include any loan arrangement.arrangement.

Master Strike Sdn Bhd v Master Strike Sdn Bhd v Sterling Height Sdn Bhd Sterling Height Sdn Bhd (2005) 3MLJ 585(2005) 3MLJ 585

1313

act of depositing title by Borrower to Lender act of depositing title by Borrower to Lender originatedoriginated from a loan transaction from a loan transaction

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

the agreement executed between the parties the agreement executed between the parties incorporate the intention to use the title as a incorporate the intention to use the title as a securitysecurity

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

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4. Entry/lodgment of LHC4. Entry/lodgment of LHC

Lodgment of LHC in pursuant of Section 330(1) Lodgment of LHC in pursuant of Section 330(1) NLCNLC

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

Effect of lodgment of LHCEffect of lodgment of LHC the lien is governed by the NLC;the lien is governed by the NLC; it will restraint all dealings with the land;it will restraint all dealings with the land; In the event of default by the Borrower, the Lender is In the event of default by the Borrower, the Lender is

entitled to invoke remedy available under Section entitled to invoke remedy available under Section 281(2) NLC281(2) NLC

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SECTION 281(2) NLCSECTION 281(2) NLC

LH is entitled to apply for an Order for LH is entitled to apply for an Order for Sale (OFS)Sale (OFS)

This can only be invoked after the lender This can only be invoked after the lender had obtained judgment from the court had obtained judgment from the court for the amount due to him from the for the amount due to him from the borrowerborrower

1616

Remedy available under Section 281(2) Remedy available under Section 281(2) NLC i.e right to recover debt (judgment NLC i.e 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.

Cases:Cases:Alagappa Chetti v Periyanayagam Alagappa Chetti v Periyanayagam

(1908) Innes 117(1908) Innes 117Cheong Kam v Loke Chow Cheong Kam v Loke Chow Tye (1924) 4 Tye (1924) 4

FMSLR 294FMSLR 294

1717

Effect of non-lodgment of LHCEffect of non-lodgment of LHC

o X lodgment of LHC the lien X lodgment of LHC the lien becomes an equitable lien becomes an equitable lien

o LHC can be entered at any timeLHC can be entered at any timeo Failure to caveat timeously will not, Failure to caveat timeously will not,

for that reason alone, cause the for that reason alone, cause the prior uncaveated lien to loose prior uncaveated lien to loose priority against later caveated priority against later caveated interest interest

oX 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)

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

1919

ConclusionConclusion

Advantages of Lien than of charge:-Advantages of Lien than of charge:-Simple form of securitySimple form of securitySecurity can be perfected in a Security can be perfected in a

shorter timeshorter timeCheaper and less time consuming Cheaper and less time consuming

(no payment of stamp duty)(no payment of stamp duty)Lien is useful as an interim measure Lien is useful as an interim measure

prior to the preparation of a chargeprior to the preparation of a charge