SCOPE OF STUDIES

UDL3622 LAND LAW II

1. Definition 2. Creation of Liens s 281

Topic 7: LIENS

3. Effect of Liens 4. Rights and Duties of Parties 5. Determination of Liens

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

1.

Definition

2.

Creation of Liens s 281

there must be a deposit of the IDT or duplicate lease; the IDT must have been deposited with the lender as security for a loan and not for any other purposes; there must be an entry of a lien-holders caveat as provided for under s 330.

Three requirements which must be fulfilled A lien, unlikely a charge, is a dealing which gives rise to a non-registrable interest in the land: s 206(2)(b). Lien may be created over the land or lease thereof by the deposit, as the case may be, of the issue document of title or duplicate lease with the lender who will then apply for the entry of a lienholders caveat over the said land or lease: ss 281(1)(a),(b), 330 and 343(6) NLC. Lien may also be created over a coproprietors undivided share. See s 343(3).
Week 9 Tay Eng Siang, FOL, MMU (Tri 2 2013/2014) 3 Week 9

Lien may only be created by registered proprietor or registered lessee: Perwira Habib Bank Malaysia Bhd v Loo & Sons Realty Sdn Bhd. cf: Perwira Affin Bank Bhd. v Selangor Properties Sdn. Bhd.
Tay Eng Siang, FOL, MMU (Tri 2 2013/2014) 4

(a) Intention to Create Lien

Intention may be gathered from the fact that the IDT to the land has been deposited with the lender as a security for the loan and for no other purposes: Paramoo v Zeno Ltd (FC). A registered chargee who has custody of the title may be able to claim a lien pending registration of the charge: Standard Chartered Bank v Yap Sing Yoke & Ors. However, it would appear that after the registration of the charge, the lien or the right to a lien ceases: Peter PChient v Ramasamy Chetty . Tay Eng Siang, FOL, MMU (Tri 2
Week 9 2013/2014) 5 Week 9

Loan to be secured need not be a fresh loan; the deposit of an IDT in consideration of a forbearance given by a creditor to withhold legal proceedings against the debtor for recovery of the full payment of a loan, was held to evince an intention to create a security for a loan: Heap Huat Rubber Co Sdn Bhd v United Overseas Bank Ltd. Intention is not satisfied if possession of the IDT was obtained through fraud or misrepresentation and the deposit of the title as security was never authorised by the registered proprietor: Nallammal & Anor v Karuppannan & Anor.
Tay Eng Siang, FOL, MMU (Tri 2 2013/2014) 6

HLBB v Staghorn [2008] 2 MLJ 622 FC

Bank (A) granted loan to Park Avenue Homes S/B 3rd party charge created by R (purchaser of the land from original reg. proprietor). R appointed Teck Lay Realty S/B as nominee in the transfer (yet to be registered) Title was forwarded by Park to As solicitors LHC entered Park defaulted. A obtained judgment against Park A applied for OS: s 281(2) NLC A named reg. proprietor & Teck Lay Realty S/B as Ds in OS OS granted and sold by public auction R filed SIC to intervene in OS and to set aside Order for sale and auction sale

HC: Leave to intervene granted and order for sale was set aside. CA: dismissed As appeal on both issues. Leave to appeal to FC on 5 issues
1. Whether s 281(1) & 330 envisage that a registered proprietor may deposit his IDT as security for a loan to the proprietor and never to a 3rd party? 2. In O/S proceedings (a) whether court, after making O/S, may permit a party which is found to have no proprietary rights in land to intervene to proceedings; (b) whether O/S may be set aside on interveners application in absence of any challenge by reg. proprietor &/or beneficial owner?

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

3. If reg. proprietor deposits his IDT as security for loan to 3rd party, whether judgment obtained under s 281(2) is a judgment against the borrower of loan or against reg. proprietor? 4. Does s 281(1) requires as a condition precedent for validity of a lien-holder caveat that reg. proprietor do personally effect the deposit of his IDT or would the requirements of s 281(1) be satisfied by evidence that IDT had been deposited by a 3rd party on instructions or with authorisation of consent of reg. proprietor? 5. Was O/S made pursuant to a LHC created by deposit of IDT by 3rd party with consent of reg. proprietor to be illegal & liable to be set aside? FC Held: allowed intervention. Dismissed application to set aside O/S.

(b) Deposit of IDT

Parting with the possession of the IDT or duplicate lease for a purpose other than that of surrendering the lien, as when the title is delivered to the registered proprietor or lessee for a purpose for which it is required under the NLC or any other laws, will not cause the lien to be lost: ORMORM Manickavasagam Chetty v TJ McGregor [1933] MLJ Rep 295.

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

10

Cont.d
The IDT must have been deposited with the lender as a security for a loan and not for any other purposes, such as for safekeeping or to facilitate the subdivision of the land: Minang Bina Sdn Bhd lwn Yahya bin Mohd Said & Lain-Lain [1991] 1 CLJ 70.

(c) Entry of Lien-holders Caveat

Mercantile Bank Ltd v The Official Assignee of the Property of How Han Teh [1969] 2 MLJ 196 failure to enter a lienholders caveat will not necessarily deprive the lender of a right to a lien in equity so long as the prerequisite intention to so create a lien coupled with the deposit of the title to the land are present. Entry of lien-holder caveat: ss 281, 330.

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

11

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

12

3. Effect of Liens
Lien is only created upon the entry of lien-holder caveat and not before Form 19D & s 330. ORMORM Manickavasagam Chetty v TJ McGregor failure to create a lien-holder caveat will deny the rights and security of lien-holder caveat. cf Vallipuram Sivaguru v Palaniappa Chetty - recognised the right to a lien in equity. Heap Huat Rubber Co Sdn Bhd v United Overseas Bank Ltd
Week 9 Tay Eng Siang, FOL, MMU (Tri 2 2013/2014) 13 Week 9

Cont.d
For the effect if lien-holder caveat is not entered, see: Mercantile Bank Ltd v The Official Assignee of the Property of How Han Teh the lender has, pending such entry of lien-holders caveat, a right to a lien in equity. Vallipuram Sivaguru v Palaniappa Chetty Standard Chartered Bank v Yap Sing Yoke & Ors Perwira Habib Bank Malaysia Bhd v Loo & Sons Relaty Sdn Bhd
Tay Eng Siang, FOL, MMU (Tri 2 2013/2014) 14

Cont.d
The lender is entitled to exercise that right by entering a lien-holders caveat at any time. Hence, in a case of conflicting equities, a lender who is prior in time and with whom the title has been deposited, will not lose his priority merely on account of his failure to enter a lien-holders caveat. The right of the lender in such a case will also prevail over that of a judgment creditor who may have entered a prohibitory order against the land: Paramoo v Zeno Ltd; Standard Chartered Bank v Yap Sing Yoke & Ors.
Week 9 Tay Eng Siang, FOL, MMU (Tri 2 2013/2014) 15 Week 9

4.

Rights and Duties of Parties

Like a chargee, a lien-holder is entitled to realise his security by applying for an order to sell the land, undivided share or lease as the case may be. See s 281(2) requirement.

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

16

5.

Determination of Liens

Jual Janji
Definition Malay customary security transaction outside NLC Borrower (owner) transfers (used in a loose sense) his land to lender who thereby takes possession of it. Whatever profits the lender may make out of the land will be his to keep as a reward, akin to interest, for loan. Borrower is entitled to resume land upon discharging the debt except that, where a period was fixed for repayment of loan, default will turn original arrangement into an absolute sale, jual putus. (David SY Wong)

s 331

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

17

Week 9

Tay Eng Siang, FOL, MMU (Tri 2 2013/2014)

18