Protecting Your Land and Investment
Published on 20 April 2020 by Brian Ernest Cumming
The Covid-19 Pandemic & Its Aftereffects
Just months into the year 2020, the world has been unwittingly thrust into a new global pandemic scientifically known as Covid-19 and various countries have grappled with different means of containing its spread. In an effort to stem the spread and control the unexpected new unseen enemy, the Malaysian Government issued a Movement Control Order (“the MCO”) pursuant to the Prevention & Control of Infectious Diseases Act, 1988 and the Police Act, 1967 effectively shutting down businesses categorized as non-essential effective 18th March 2020, -then extended to 14th April, 2020 and now further extended to 28th April,2020 .
The current pandemic is certain to give rise to economic turmoil, recession, high unemployment rates and liquidations if businesses are ordered to shut down over a longer period of time in an effort to combat the threat. Whilst the rate of crime has steadily fallen during the enforcement of the MCO period, it is foreseeable that crime rates including instances of fraud would increase after the MCO is lifted as a direct consequence of increased unemployment, economic difficulty or lack of income faced by the workforce.
In such difficult times, crimes relating to real, movable and immovable property would be on an uptrend to the extent owners ought to be extra vigilant in protecting their assets. This article considers instances where innocent landowners lose their land or immovable property to 3rd parties.
The Title to Your Precious Land
Picture this, you are a landowner happily attending to your daily affairs after the MCO is lifted smug in the knowledge that you have in your possession and safekeeping the original Manual Title to the said plot of land which is registered in your name. You are the sole owner having purchased the land through you own effort and have paid off the bank loan in full after much sacrifice as well as sheer hard work.
For many years, you have been paying the yearly quit rent payable for the said plot of land. One fine day you realise you have not received the current annual quit rent statement from the relevant land authority but whilst finding it odd, you seek to justify the omission as an inadvertence or the result of a mere delay on the part of the land authority in issuing the said quit rent statement. Perhaps there is a backlog in the processing of the statements you think.
You are not suspicious at all for the original Manual Title is in your name and is still in your possession when you checked it a few days ago. Weeks and months pass yet you have not received the quit rent statement but you have no cause for concern. Not long after, you receive a call from a relative asking whether you are finally building the house you always wanted on your plot of land.
With a feeling of dread and a tinge of cold sweat developing, you think to yourself “Surely there must be some mistake, I have not commenced any development work on the land nor have I sold the land off to anyone. The original Manual Title is still in my safe under lock and key. How can this be?”
You rush to the plot of land and lo and behold, someone is actually building a house on YOUR land, YOUR very own land! You approach E, the person who appears to be directing the building contractor to find out what is happening and are told that he owns the plot of land having purchased it 2 months ago from D. E then pulls out a computerised Issue Document of Title (“IDT”) from the file he is clutching and shows it to you. Your eyes widen in disbelief when you sight E’s full name being printed on the IDT under the heading “Pemilik”.
You insist there is a mistake as you are still the registered owner but E digresses stating he had purchased and paid for the land. You then rush to the Land Office to conduct a title search and is shocked beyond belief to discover you had transferred the land to D who in turn transferred the land to E over a span of the last year.
Where do you stand being in possession of the original Manual Title in your name as opposed to the computerised IDT for the same plot registered in E’s name? Can you get your precious plot of land back?
The Torrens System
First the basics, our Malaysian system of land registration is commonly referred to as the Torrens System which is the brainchild of Sir Robert Richard Torrens. The nub of the Torrens System of land registration is that the land register is conclusive evidence of the description of the land. Persons conducting an inquiry of the land need not go beyond the register to ensure that the land he or she is about to purchase is not fraught with encumbrances.
Statutory recognition of this principle is apparent in S89 of the National Land Code, 1965 (“NLC”) which inter alia provides for the conclusiveness of title to land being vested in a person or body for the time being named therein as proprietor.
However, the conclusiveness of the register documents of title is subject to the provisions of the Act, namely S340 NLC which specifies several instances as to when a person’s title is defeasible or in layman’s terms, circumstances when a registered owner may be dispossessed of his ownership to the land, subject of course to the proviso to S340 (3) NLC which seeks to protect the rights of a bona fide purchaser for value without notice.
The proviso to the latter section provides for deferred indefeasibility wherein a subsequent purchaser in good faith may raise the shield of indefeasibility against the world at large upon
registration and that his title may only be set aside if the interest is not acquired in good faith.
The law reports are replete with authorities narrating the proposition above and its essence is nicely captured in the more recent case of T Sivam Tharamalingam v Public Bank  6 CLJ 1 as follows :-
“The concept of indefeasibility of title is central to our Torrens System of registration of title, which provides for the registration of all titles and interests. Under it, a title is made conclusive on registration, subject however to statutory exceptions, so that the State guarantees the title is unimpeachable.
The cardinal principle is that the register is everything and that except in cases of actual fraud on the part of the person dealing with the registered proprietor such person upon the registration of the title under which he takes from the registered proprietor has an indefeasible title against the entire world (see Teh Bee v Maruthamuthu (1977) 2 MLJ 7.”
But how does this help you, you ask? You have the original manual title in your name but E has the computerised IDT to your plot of land in his name. What gives?
Computerized Land Registration System
To appreciate the computerized IDT, one must analyse the governing provisions for the conversion of manual titles to computer printed titles.
S5A(1) NLC explicitly provides for the coming into force of the Computerized land registration system in any land registry whilst S5A(3) NLC prescribes for the application of the 14th Schedule once the computerization comes into force in Malaysia. Para 3 to the 14th Schedule provides for the computer printed issue document of title to be in Form 5BK or Form 5CK as the case may be whilst Para 8 expounds detailed provisions relating to the compulsory conversion of existing register documents of title to computerized versions and the subsequent issuance of computerized IDTs just like the one in E’s possession.
A registered proprietor may apply for conversion on his own under Para 8(4) and Para 8(5) provides a Registrar of the land office can start the conversion on his own accord without any application being made under Para 4. Para 8(3) provides that the existing issue document of title shall continue to be in force and valid for all purposes until the relevant computer printed issue document of title is prepared and issued to the proprietor after the register document of title is converted. Para 8(9) on the other hand contains mandatory provisions relating to the duties of the Registrar upon conversion of an existing document of title to a computer printed issue document of title.
Many land offices in Malaysia commenced the conversion to computerized registry titles in the early 2000’s depending on the States and Gazetting by the Minister as to the coming into force dates of the different Land Registries.
Unfortunately, the implementation of the noble intention has been subjected to various forms of abuse by fraudsters or issued as a result of negligence on the part of the Land Office itself. Various Malaysian cases have shown it is not uncommon for one to find computerized IDTs issued in unrelated 3rd parties’ names, to have the IDT issued in a misspelt name, to have 2 computerized IDTs for a plot of land issued in 2 different persons names when the manual title was in the name of another and the like.
The perpetrators employed various creative methods to cause the computerized IDTs to be transferred to their own names or even the names of others with the intent to unlawfully benefit from the deed. And such lands are usually transferred more than once by the time the original owner in
possession of the manual comes into the picture upon finding out. (See – Shayo (M) Sdn Bhd v Nurlieda Sidek & Ors  7 MLJ 755; Uptown Properties Sdn Bhd v Pentadbir Tanah Wilayah Persekutuan & Ors  3 CLJ 271; Overseas Realty Sdn Bhd v Wong Yau Choy & Ors  8 CLJ 107 to name a few).
Current Position of the Law
The Federal Court in Pushpaleela R Selvarajah & Anor v Rajamani Meyappa Chettiar & Ors  3 CLJ 441 was faced with a similar predicament when it had to decide questions of law relating to the competing interests of the owner in possession of the original manual title as opposed to that of a subsequent bona fide purchaser for value in possession of a computerized IDT.
Briefly, the Plaintiff was the original owner who possessed the manual Title (IDT1). The 5th & 6th Defendant Land Office generated a computerized issue document of title for the land in the name of the Plaintiff (IDT2) but this was never issued or surrendered to the Plaintiff or anyone for that matter. The 3rd Defendant was a fraudster who entered into a Sale and Purchase Agreement (“SPA”) to sell the Plaintiff’s land to the 2nd Defendant. Upon signing the SPA, the 3rd Defendant lodged a false Police report alleging she lost her handbag containing the title document for the land. With the Police Report, SPA and Statutory Declaration, the 3rd Defendant then instructed her solicitor to apply to the 5th Defendant for a replacement issue document of title on her behalf. Faced with such documentation, the 5th Defendant issued a replacement IDT in the name of the 2nd Defendant (IDT3).
Subsequently, the 2nd Defendant sold the land to the 1st Defendant who charged the same to CIMB Bank as security for the loan. As a result of the dealing, the 5th Defendant issued another computerized document of title in the name of the 1st Defendant (IDT4).
The Federal Court (“FC”) noted the fact that the 1st computerized version of the IDT was issued in the Plaintiff’s name but the subsequent replacement was in the name of the 2nd Defendant and the final version was in the name of the 1st Defendant.
It affirmed the High Court’s finding that the land title would only be void ab initio if and only if the Land Registry had in blatant breach of its duty under the NLC wrongfully registered any land in the register document of title and issued the replacement issue document of title in the name of a 3rd party.
The FC considered the fact IDT2 was issued in the name of the Plaintiff and found the Registrar had correctly issued IDT2 on his own initiative pursuant to his duty to convert the title to a computerized version. The Registrar was not obliged to hand over the computerized title to the registered proprietor until the original manual title was surrendered to him and consequently was not in breach of S168, S170(2) & S 433 NLC.
IDT3 was held not to be void ab initio if the Land Registry had been duped into issuing a replacement title in continuation to IDT2. The FC found that whilst the 3rd Defendant fraudulently procured the registration or issue of the document of title was guilty of an offence under S422 (c)(i) NLC, it did not render the title issued void ab initio. The Land Office was entitled to register the transfer to the 2nd Defendant by dispensing the need to produce the original document of title pursuant to S299(1)(a) NLC due to the police report about the lost title and the pending application for a replacement title at the material time.
The 1st Defendant only surfaced after the issuance of IDT3. He had conducted all the necessary searches on the land via his solicitor which showed the 2nd Defendant as the registered proprietor and the land free from encumbrance. He applied for a bank loan to finance the purchase and there was no allegation of forgery of the SPA and transfer forms relating to his purchase. His name was registered on IDT4 which was a new document of title issued after a dealing pursuant to Para 16 of the 14th Schedule NLC. Consequently, S89 NLC (and S340(1) NLC for that matter) mandates IDT4 is conclusive evidence that the1st Defendant is the registered proprietor unless defeasible pursuant to S340 (2) & (3) NLC.
The FC found the 1st Defendant was a bona fide purchaser in good faith who had acquired an indefeasible title notwithstanding the 2nd Defendant’s title was itself defeasible.
In concluding the replacement title in continuation generated by the Land Registry when the original issue document of title was at all material time in the possession of the original owner is valid and capable of validly passing title to the 1st Defendant purchaser, the FC stated as follows :-
“The Court of Appeal was more concerned with the fact that the Plaintiff had in her possession IDT1 but overlooked and failed to appreciate the fact that the register document of title was in the name of the 1st Defendant……In our opinion, in a dispute for title between an innocent original owner and an innocent subsequent purchaser in good faith and for valuable consideration, it must, and always be decided based on the principle of deferred indefeasibility as provided in the proviso to S340(3)NLC, rather than the Judge’s individual preference as to which side the scales of justice tilts.”
Where Do You Stand?
Looking back to your predicament, it would appear from the case above the first thing to do would be to check whether the first computerised version of the IDT was issued to your name or alternatively, to the name of a 3rd party. You can do this by looking at the Version Number printed at the bottom right hand corner of the title identified by a running number each time a computerized IDT is generated eg. Version 1,2,3 and so on.
If the latter, the title is void ab initio from inception and is defeasible notwithstanding it may have been subsequently transferred to several other parties for a title which does not exist cannot be passed on or transferred to another. If the former, the next step would be to investigate if the title is currently registered in the name of an immediate purchaser or alternatively, in the name of subsequent purchasers.
If the title is in the name of an immediate purchaser, his title may be defeasible or set aside if you manage to establish and prove fraud or misrepresentation, the registration was obtained by forgery or by means of an insufficient or void instrument or where the title was unlawfully acquired in the purported exercise of a power or authority conferred by any written law. (See S340(2) & (3) NLC).
If the title is registered in the name of a subsequent purchaser, you would have to investigate the manner in which he came to purchase the land such as the duration of time it took to complete the purchase, the mode of financing, whether the purchase was at an undervalue, whether he had notice of the fraud or previous transaction, were searches conducted and a myriad of other factual considerations depending on each case with the aim of establishing bad faith and failure of consideration. A subsequent purchaser would not be able to successfully rely on the proviso to S340(3) NLC to raise the shield of indefeasibility to protect his title if he is mala fides.
It is clear from a dispute such as this the law favours the subsequent bona fide purchaser for value and where the dispute is between the original registered proprietor and bona fide immediate purchaser, the immediate purchaser stands to lose by reason of the fraud of another. Unfortunately, the NLC as it now stands provides absolutely no remedy to innocent parties who are deprived of their lands due to fraud or forgery.
The relevant Malaysian authorities have no other option but to consider and establish a statutory assurance fund to mitigate the losses suffered by registered owners because of fraud or forgery as adopted by other jurisdictions with the Torrens system of land registration such as Canada, New Zealand or Australia.
The lacuna in the law is unsatisfactory and fair implementation of the Torrens system as how it was originally conceived is imperative to ensure justice for all.
With the above in mind, one could take several practical steps to be extra vigilant in ensuring that your land is safe and that you will not be a victim to land fraud as follows :-
- Surrender your Manual Title to the relevant Land Office and obtain a Computerized Issue Document of Title if you have not done so;
- Conduct an official search on your land periodically to ensure you are the registered proprietor;
- Follow up with the relevant authorities immediately if you do not receive quit rent or assessment statements timely;
- Visit and inspect your plot of land periodically to ensure the status quo remains;
- Place a signboard on the land stipulating the land is not for sale and that any enquiries relating to the same should be directed to you with details provided;
- Obtain a small loan from financial institutions and charge the land to the Bank as security. Any attempt to discharge the charge by 3rd parties would trigger the Bank to investigate;
- Enter or cause to be entered on the land a Private Caveat provided you have a Caveatable Interest.
The suggestions above are not exhaustive and steps should be taken depending on the circumstances of each particular case.
The contents of this article are not intended to constitute legal advice on any specific matter and should not be relied upon as a substitute for specific legal advice on matters or transactions.
For further information, please contact the author of this article.