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How the Enactment of Torrens System Imparted Inconsistencies and Haunted Landowners for a Good 10 Years: Deferred Indefeasibility

Who would have ever wondered that a piece of issue document of title that is well-kept in one’s possession (ie: safe box) is capable of being stolen effortlessly by another.

It is no stranger that the Malaysia practices Torrens System, in a simpler context, registration means everything. That is to say, whomever name appears on the land title, the latter shall possess the legal ownership towards the said land. It is prudent to establish the aforementioned statement as it plays a vital role in determining in whose favour the title shall be indefeasible. Although that has always been the case, but the case of Adorna Properties Sdn Bhd v Boonsom Boonyanit [2001] 1 MLJ 241 have comprehensively reflected the technical-flaws of our very own National Land Code. In this very case that has garnered countless of criticism, the court ruled that the indefeasibility enacted under our Code is to be perceived as what we call the immediate indefeasibility.

To contextualise, immediate indefeasibility means that the immediate purchaser of title/interest would be conferred indefeasibility pertaining the acquisition of title/interest notwithstanding that preceding acquisition, the title/interest was obtained pursuant to vitiating circumstances stipulated under Section 340(2) of National Land Code.

Inversely, deferred indefeasibility means that only subsequent purchasers of land acquired by means of vitiating circumstances under Section 340(2) of National Land Code, are able to avail themselves to be afforded indefeasibility provided that they are found to be acting in good faith and have provided valuable consideration for the purchase of the disputed land.

Having said that, the crux of Adorna’s Properties is that since the name that appears on the land title is Adorna Properties, they have acquired an indefeasible title towards the land. This is further substantiated by the fact that, even if the land is acquired through vitiating circumstances as provided under Section 340(2) of the Code, the purchasers are saved by the proviso of good faith and valuable consideration under Subsection 3 of Section 340. The decision laid down by the court in allowing the purchasers to avail themselves to the proviso is gist that sparks the controversy.

Landowners were haunted for almost a decade, until the Adorna’s Properties being the precedent to disputes of indefeasibility was overturned. In the case of Tan Ying Hong v Tan Sian San & Ors [2010] 2 MLJ 1, the court was given a crucial opportunity to review the decision in Adorna’s case. The court opines that the Adorna’s Properties was incorrectly decided, as the proviso immediately after Section 340(3) of the Code was directed and meant only for subsection (3) and is not supposed to be applied in the earlier subsections. Therefore, Adorna Properties could not rely on the proviso to claim that their title should remain indefeasible even though they acquired through good faith and have provided valuable consideration for it, as the proviso boils down to one thing, the subsequent purchaser. As quoted by Zaki Azmin CJ in Tan Ying Hong, since Adorna Properties were never the subsequent purchasers to begin with, they could not possibly avail themselves to the proviso to prevent their title being impeached.

It goes without saying, the decision in Tan Ying Hong certainly brings relief to landowners who face the risk of losing their lands by reiterating the correct position of law in to attain its inherent purpose which is to prevent land conveyance that are exercised through vitiating actors stipulated under Section 340(2) of the Code. Nonetheless, it is to be borne in mind that landowners are highly unlikely to recover their lands once the transaction involves subsequent purchasers as per established previously.

To encapsulate, it is undeniable that the decision in Adorna Properties have rendered irreparable frauds and forgeries within the 10-year period before Tan Ying Hong was decided, not to mention that the damages done succeeding the decision of Adorna Properties.

On the positive spectrum, landowners are now better protected by the Code as it should, while the law is now clearer and reasonable to conclude that one should not be faulted for the sole reason that protection enacted under the legislation is equivocal.

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This article is intended to be informative and not intended to be nor should be relied upon as a substitute for legal or any other professional advice.

About the Author

Jeccy Khor Jing Chi
Associate, Real Estate and Banking & Finance
Halim Hong & Quek

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