What service upon demands sums not lawfully

What cause of contrary ? in the case of Low
Lee Lian v Ban Hin Lee Bank Bhd (1997) 1 MLJ 77 , Gopal Sri Ram has stated that
if cause of contrary could be established by the charger , it would defeat the
application for order of sale. The case divided cause to contrary into three
parts that were (i) the case of the chargor fells within the vitiating factor
of indefeasibility of title under s340(2) , (b) chargee had failed to comply
with the conditions precedent to the application for an order of sale , as an
example of didnt give notice, (c) the order of sale will be contrary to the ROL
and equity. With regard to the second category to the supreme court , through
Gopal Sri Ram JCA , said that , secondly , a chargor may show cause to the
contrary within s256(3) of the code by demostrating that the chargee has failed
to meet the condition precedent for the making of an application for an order
for sale. For example , failure on the part of the chargee to prove the making
of a demand or service upon demands sums not lawfully due from the chargee.

Order 83 of the RHC 1980 is the modality
upon which the chargor seeks to enforce his rights. In this regard , in Low Lee
Lian V Bee Hin Lee Bank Bhd ( 1997) 1MLJ 77 Gopal Sri Ram JCA , we have said
that s256(3) must be read norrowly. It does not however , follow from this that
the chargor who is unable to satisfy the court of cause to the contrary is left
without any remedy whatsover. Allegations that fail to amount to cause to the
contrary may, as observed earlier, nevertheless form the basis of an action in
personam against the chargee. Take the facts of this very case. Based upon what
we have said thus far, it is clear that the instant appellant failed to meet
the requisite legal test of what amounts to a cause to the contrary. The judge
therefore quite correctly made order for sale. But that does not bring the
matter to end. It is open to the appellant to bring an action in personam for
breach of contract against teh bank based upon the first and second ground of
complaint advanced by counsel during argument, subject to the proof of any
alleged breach of contract against the bank based upon the first and second
grounds of complaint advanced by counsel during argument ,subject to the proof
of any alleged breach as well as any defences that may be fairly available to
the chargee, including the plea of limitation. However , it is no answer for
the respondent to say that the appellant’s claim is barred by issue estoppel or
res judicata. A judge who makes an order for sale merely finds that the facts
relied upon by the chargor to resists the chargee’s application do not
constitute cause to the contrary. He is unconcerned with the issue whether the
same facts are sufficient to support to support an action in personam of an
issue or cause for an estoppel to operate against the chargor’s action.

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In contravention of statues in defeasible
section 340(2) , In the case of UMBC v Syarikat Perumahan Luas, the first limb
was considered. The chargee in this case applied for an order for sale and the
chargor restricted the said application on issue that the registration of the
charge was in breach of the s.120 of the Code which prohibits the charging of a
land without the written sanction of the state authority and therefore, the
court held that the chargee’s title is defeasible because the registration
thereof was obtained by means of an insufficient or void instrument according
to s.340(2)(b) and also because the Registrar of Titles, in registering the
charge, had acted ultra vires of the power presented upon him by s.340(2)(c).


The exceptions to indefeasibilty are fraud
and misrepresentation falls under section 340(2)(A) , The malaysian courts have
adopted the defination of fraud in Assets Company Ltd v Mere Roihi , Lord
Lindley defined fraud as meaning “actual fraud, dishonesty of some sort , not
what is called constructive or equitable fraud, the mere fact that he might
have found out fraud if he had been more vigilant and he made more enquiries
which he omitted to make , does not itself prove fraud on his part , but if
shown that his suspicious were aroused and he abstained from making inquiries
for fear of learning the truth , the case is very diffrent anf fraud may be
propery ascribed to him.

In section 340(2) the title or interest of
any such person or body shall not be indefeasible (a) in any case of fraud to
which the person or body or any agent of the person or body was a party or
privy or (b) where registration was obtained by forgery or by means of an
insufficient or void instrument or (c) where the title or interest was
unlawfully acquired.”however the title or interest so acquired is liable to be
set aside under section 340(2) where it has been obtained by inter alia , fraud
or forgery. In the case of fraud , section 340(2)(a) provides for the title or
interest obtained to be defeasible where proprietor or his agent is a party or
privy to the fraud. In the case of forgery , section 340(2)(b) provides for the
title or interest so acquired by the proprietor or transferee immediately to
the forgery to be defeasible and liable to be set aside. This is so irrespectve
of whether the said proprietor or transferee acted in good faith in acquiring
the title or interest. This is because there is no similar requirement , as in
the case of fraud , that he must also be a party or privy to the forgery. In
section 340(3) “where the title or interest of any person or body is defeasible
by reason of any of the circumstances specified in subsection(2)(a) it shall be
liable to be set aside in the hands of any person or body to whom it may
subsequently to be tranferred and (b) any interest subsequently granted
thereout shall be liable to be set aside in the hands of any person body in
whom it is for the time being vested’. Where the title or interest is subsequently
transferred, section 340(3)(a) gives that the subsequent proprietor or
transferee will correspondingly get a defeasible title or interest. Likewise
under section 340(3)(b), any interest subsequently allowed out of a title which
is defeasible under section 340(2)(a) and (b) will draw in a similar outcome. In
section 340 (3) “Given that nothing in this sub-section might influence
any title or interest procured by any buyer in good faith and for valuable
consideration, or by any individual or body guaranteeing through or under such
a buyer.” However, where the subsequent proprietor or transferee acts in
good faith and gives valuable consideration for the title or interest being
referred to, the stipulation to section 340(3) gives assurance on such a
subsequent proprietor or transferee with the end goal that his title or
interest will be indefeasible.


In Forgery, Insufficient Or Void
Instrument, In OCBC Bank v Pendaftar Hakmilik, Johor, the Court of Appeal held Under
s 340(2)(b), the registered title of the proprietor or registered charge or
lease holder,becomes defeasible where the registration was obtained by forgery…
. In s 340(2)(b) there is no similar limitation as in s 340(2)(a) for the
immediate proprietor, chargee or renter to be party or privy to the ‘forgery’
before the registered title or interest becomes defeasible. In this nation,
under the provisions of s 340(2)(b), the very fact of forgery suffices to make
a registered title or interest defeasible irrespective of the absence of
information or implication of the immediate proprietor, chargee or resident.


It is clear that under the NLC ss 340(2)(a)
and (b) are distinct heads. Under s 340(2)(a), there is a clear limitation
requiring the registered proprietor or its agent to be party or privy to the
fraud or misrepresentation. Whereas, under s 340(2)(b), all that is should have
been demonstrated is that the registration was obtained by forgery or an
insufficient or void instrument. It is irrelevant whether the immediate
registered proprietor was a party or privy to the forgery or a bona fide
purchaser for good value.

The Court, in an unanimous decision,
presumed that the judges in the Federal Court in Adorna Properties Sdn Bhd v Boonsom
Boonyanit @ Sun Yok Eng SJLS 2002  had
misconstrued Section 340(1), (2) and (3) of the NLC by coming to the incorrect
conclusion that the proviso to subsection (3) applied equally to subsection
(2). By so doing, the Federal Court in Adorna Properties gave recognition to
the idea of immediate indefeasibility under the NLC contrary to the provisions
of Section 340.

In conclusion, even if you hide your land
title in bank vault, it might avail to you nothing once a bona fide buyer
bought over your land. In the meantime, try lobby for the Parliament to set up
a claim mechanism where losses due to the mistake by State Authority in land
matters can be claimed. 

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