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Indefeasibility

Sec. 340(1) confers indefeasibility for the time being upon registration.
Sec. 340(2): The title or interest shall be defeasible where it was obtained through
- (a) fraud or misrepresentation
- (b) forgery or an insufficient or void instrument
- (c) unlawfully acquired by a person in exercise of his power of authority
Sec. 340(3): Where the title or interest is defeasible for any one of the reasons
- (a) the title may be set aside to whomever it may subsequently be transferred
- (b) any interest may be set aside in the hands of any person in whom it is vested
- Provided that the title and interest was not acquired by a person in good faith and for
valuable consideration (bona fide purchaser for value)

- Muthammah v Masri Mohamed: ‘Indefeasible title’ means a title or an interest which


is free of all adverse claims or encumbrances not noted in the register.

- PJTV Denson v Roxy: Raja Azlan Shah CJ emphasised that the concept of indefeasibility
of title is where “the registration of the transfer of land under the NLC defeats all prior
unregistered interests in that land, unless the party who acquires the registered title
has been guilty of fraud.”

Types of indefeasibility:
Immediate indefeasibility
- When a person’s name is registered as the owner or interest holder on the RDT, he is
immediately guaranteed or assured that his title or interest is free from any adverse
claims (immune from attack), despite the fact that a void or voidable instrument has
been used to obtain registration. The act of registration cures the defect in the
instrument.

- Only when the title or interest is obtained through fraud will it then be open to attack.
- Any imperfections to the title or interest other than fraud will be waived.

- Parties to immediate indefeasibility:


- Transferor (true owner)  Forger  Immediate transferee
- The immediate transferee obtains immediate indefeasibility of title or interest
when he acts in good faith and for value regardless of the forgery

- Frazer v Walker: Where the land was mortgaged through forgery and a transfer was
subsequently registered, the Privy Council held that it could not be cancelled as the
interest had been registered, and was thus immediately indefeasible and immune
from any adverse claims.
- Adorna Properties v Boonsom Boonyanit: The respondent claimed that she was the
registered proprietor of a piece of land which had been sold and transferred to the
appellant, through forgery by the vendor. Held: The appellant had obtained
immediate indefeasibility of title as they acted in good faith and for value despite the
fact that the instrument of transfer was forged.

- The decision in Adorna Properties was overruled in Tan Yin Hong where the Federal
Court ruled that the Federal Court in Adorna Properties had misconstrued Sec. 340(3)
as the principle of deferred indefeasibility and NOT immediate indefeasibility
applies under the NLC.
- The exceptions in the NLC provides for more than just fraud; fraud is not the
only vitiating factor to an indefeasible title.
- The misinterpretation has caused many to take advantage of the error and
falsely transfer titles to themselves.

Deferred indefeasibility
- Upon registration, the title of the registered owner remains potentially open to attack
as the title will only be indefeasible “for the time being.”
- Registration does not cure any imperfection in the instrument.
- If the title or interest is obtained through a forgery, or a void or insufficient instrument,
it will still be open to attack. Thus, under this principle fraud is not the only ground
on which the title or interest can be challenged.

- Subramaniam v Sandrakasan: The title of a registered proprietor is indefeasible and


good against the whole world. But it is not indefeasible in cases where it has been
obtained by fraud, forgery, by means of an insufficient or void instrument, or by the
exercise of a power purportedly conferred by written law. If a title is acquired by any
of these means, then the title of the acquirer is liable to be set aside.

- Where registration was obtained through fraud, forgery or any other reason provided
under Sec. 340(2), the title or interest will be defeasible under Sec. 340(3) and cannot
be transferred by the proprietor to anyone else, unless the transferee (subsequent
purchaser) is a bona fide purchaser for value.
- The subsequent purchaser must be a person who has no knowledge that the
title is defeasible and purchases the land with valuable consideration.
- The title will become indefeasible only once it is transferred to a bona fide
purchaser for value.

- Where the title or interest, though obtained through fraud, forgery or any other
reason, has not been attacked, the person whose name is registered on the RDT is
treated as having an indefeasible title or interest which he can pass to others.
- However, one cannot pass a good title, if he does not have a good title.
- Parties to deferred indefeasibility:
- Transferor (true owner)  Forger  Immediate transferee  Subsequent
purchaser (bona fide purchaser for value)
- *The forger and immediate transferee can be the same person
- The immediate transferee gets a defeasible title, despite the fact that the land
was transferred to him in good faith and for value
- The subsequent purchaser, provided that he purchases in good faith and for
value, acquires an indefeasible title as he obtains statutory protection under
the proviso to Sec. 340(3)
- Deferred indefeasibility helps draw a line between the true owner and the
subsequent purchaser.

- If the principle of deferred indefeasibility had been applied in Adorna Properties, the
appellant would not have obtained an indefeasible title as they were not the
subsequent purchasers of the land within the meaning of Sec. 340(3).

Exceptions to indefeasibility:
Sec. 340(2): The title or interest shall be defeasible
- (a) in any case of fraud or misrepresentation to which the person was a party or privy
- (b) where registration was obtained by forgery, or an insufficient or void instrument
- (c) where it was unlawfully acquired by a person in exercise of any power of authority
Sec. 341: There is no time limit for the recovery of land under Sec. 340(2)
Fraud & Misrepresentation
- Assets Co Ltd v Mere Roihi: Fraud is actual fraud that is dishonesty of some sort, not
what is called constructive or equitable fraud.

- In establishing fraud, the burden of proof is on the party alleging it. It must be proven
that:
- There was actual fraud and not constructive fraud (mere knowledge)
- Tai Lee Finance: Mere knowledge of the existence of an unregistered
interest shall not be imputed as fraud.
- The person accused of fraud must be a party or privy to the fraud
- Datuk Jagindar Singh: Fraud must be committed by the person or his
agent and as a result his name was registered on the RDT and IDT.
- If a person is not a party or privy to the fraud, his title is indefeasible.
- There was an intention to cheat
- Goh Hooi Yin: It is insufficient to show that the transfer had the effect
of depriving the plaintiff of a known existing right. The transfer must
have been executed with the intention of cheating the plaintiff of such
right.
- Datuk Jagindar Singh v Tara Rajaratnam: The respondent’s brother-in-law persuaded
her to put up her land as security for a loan he obtained from a bank in Singapore. The
appellants approached the respondent at her home and asked her to sign various
documents, misrepresenting to her that the security on the land would be effected by
a transfer. Without realising it, she had transferred her land to one of the appellants,
who then transferred it to another. The land was then transferred to a developer
company and was later subdivided into 70 lots and sold to purchasers. The respondent
brought an action claiming that she was induced by fraud. Held: The court found the
appellants guilty of fraud, and that the titles in the transaction could clearly be
impeached as they were all party and privy to the fraud. However, although damages
was awarded to the respondent, the title of the purchasers could not be defeated as
they were bona fide purchasers for value who were protected under the proviso to
Sec. 340(3).

- Lim Kim Hua v Ho Chui Lan: The plaintiff who was old, illiterate, had poor memory and
was dependent on the defendant, sought for a declaration that the transfer of the
shophouse to the defendant was null and void as it was obtained through fraud or
dishonesty. The defendant, who was fully aware of the contents of the will, had
actively concealed the matter. Held: The transfer was found to be null and void as
fraud was established against the defendant as she had a moral duty to lay all
information regarding the contents of the will to the plaintiff.

- Chu Choon Moi: The appellant sought a declaration that the land belonged to the
appellant's husband and should be transferred to the estate on his death. The
respondent is the wife of the deceased’s son, who had transferred the property to his
wife instead of including it in the estate of his deceased father. The respondent was
the one who filled in the necessary documents and forms related to the transfer.
Held: The transfer of the land to the respondent was fraudulent and although she was
the registered owner she could not claim indefeasibility of title under Sec. 340 because
of fraud to which she was privy, nor could she be termed a bona fide purchaser in
good faith and for valuable consideration in order to protect her title or interest.

- Misrepresentation under Sec. 340(2)(a) has been taken to refer to fraudulent


misrepresentation, which is a species of fraud.
- Fraudulent misrepresentation is a false statement made by a person who
knows that the statement is not true and not believing that the statement he
made is true as in Datuk Jagindar Singh.

- Vijayaletchimy v Annamalai: In most cases courts do not distinguish between


fraud and misrepresentation, as what is essentially pleaded as fraud includes
fraudulent misrepresentation. Thus, courts often treat fraud and
misrepresentation as part of the same offence.
Under Sec. 340(2)(b), all that needs to be proven is that the registration was obtained by
forgery or an insufficient or void instrument.
- It is immaterial whether or not the immediate proprietor was a party or privy to the
forgery or use of insufficient or void instrument (his name need not be registered on
the RDT and IDT)
OCBC Bank v Pendaftar Hakmilik Johor: Under the principle of deferred indefeasibility, if the
instrument was forged or was insufficient or void, the title of the registered proprietor may
be set aside.
Forgery
Forgery is when, without the knowledge of the registered proprietor:
- A person copies the signature of the registered proprietor on any instrument of
dealings, or
- An imposter falsely represents to a third party that he is the registered proprietor and
signs the transfer form in the name of the registered proprietor

- Frazer v Walker: Registration vests and divests title and not the antecedent
documents. If the registered proprietor is not guilty of fraud, then the title is
indefeasible, regardless of whether the instrument is a nullity.
- This principle is inapplicable in Malaysia where forgery is treated as a factor
which could set aside indefeasibility.
- Under deferred indefeasibility, the effectiveness of the instrument used to
obtain registration is vital.

- Tan Yin Hong: The appellant was the registered proprietor of a piece of land, which
was charged to the United Malayan Banking Corp, the third respondent, to secure
loans made in favour of Cini Timber Industries Sdn Bhd, the second respondent. The
first respondent, purporting to act under a power of attorney, had executed the
charges in favour of the third respondent bank. The appellant only became aware of
the charges when he received a notice of demand from the third respondent.
Held: The charges registered in favour of the third respondent were based on void
instruments as they were not executed by the appellant and thus, were liable to be
set aside. As the third respondent was an immediate holder of these charges, it could
not take advantage of the proviso to Sec. 340(3). The fact that the third respondent
acquired the interest in question in good faith for value was immaterial as the charges
arose from void instruments. Thus, such charges were liable to be set aside at the
instance of the registered proprietor.
Insufficient or Void Instrument
- Insufficient or void instrument is an instrument of dealing that is unfit for registration
for not fulfilling the conditions set out under Sec. 301, and thus cannot pass a good
title.
- E.g: Signature is forged; instrument is not attested or is insufficiently stamped;
fake power of attorney (Tan Yin Hong).

Unlawfully acquiring the title or interest


- M & J Frozen Food v Siland: The certificate of sale issued by the senior assistant
registrar was ultra vires the statutory provisions of the Code and thus, the title was
unlawfully acquired by the appellant. Failure to comply with the statutory
requirements in Sec. 258(a) & (b) and Sec. 261(c) was not a mere irregularity, but was
an illegality which struck at the root of the respondent’s right. Once the title is
unlawfully acquired, it thus, becomes defeasible.

Sec. 340(3): Where the title or interest is defeasible under any one of the exceptions
- (a) the title may be set aside to whomever it may subsequently be transferred
- (b) any interest may be set aside in the hands of any person in whom it is vested
Provided that the title and interest was not acquired by a person in good faith and for valuable
consideration (bona fide purchaser for value)
- Sec. 340(3) does not apply until and unless a registered title or interest is found to be
defeasible under Sec. 340(2)
- Even after the title or interest is found to be defeasible, Sec. 340(3) will only apply to
a purchaser who subsequently buys from the registered proprietor
- The title or interest of the subsequent purchaser can then be set aside unless he falls
within the proviso to Sec. 340(3) that is a bona fide purchaser for value
Sec. 5: A purchaser is a person or body who in good faith and for valuable consideration
acquires title to, or any interest in land.
Only a subsequent purchaser can claim and provide proof that he is a bona fide purchaser for
value without notice.
- Tan Yin Hong: It is immaterial whether or not an immediate purchaser is a bona fide
purchaser for value, as the proviso to Sec. 340(3) only applies to subsequent
purchasers. As the bank in this case was an immediate holder of the charges, and not
a subsequent holder, regardless of whether the bank was a bona fide purchaser for
value, the title to the property must be reverted back to the appellant.
Under the proviso to Sec. 340(3), a subsequent purchaser cannot automatically claim to be a
bona fide purchaser for value without notice and protect his title as being indefeasible.
- The burden is upon him to prove on the balance of probabilities that he is a bona fide
purchaser for value without notice.
- Abu Bakar Ismail v Ismail Husin: The proof that one is a bona fide purchaser for value
lies on the person asserting it.
A bona fide purchaser for value must:
- Pay valuable consideration
- Consideration made must be valuable (payment of money)
- It cannot merely be consideration for natural love and affection or nominal
consideration
- Chu Choon Moi: Where the respondent’s husband fraudulently transferred the
property of his deceased father to the respondent, his wife, without any
consideration, the respondent could not be termed a bona fide purchaser in
good faith and for valuable consideration.

- The party invoking the proviso must prove that he is a purchaser and not a
volunteer.
- Where a transfer of title or interest is made without consideration, the
transferee is treated as a volunteer.
- Mohamed Moidu v Hassan Kadir: Where payment had been made, but there
was no registration of transfer until the defendants’ father passed away, the
defendants were volunteers by reason of the registration of the title into their
names through a transfer. They were not and could not be termed as bona fide
purchasers for value for the reason that no consideration arose from the
transfer.

- Act in good faith


- The purchaser must not have any knowledge, be it actual or constructive, that
the title or interest is bad in law.

- Au Meng Nam: Two imposters claimed to be the proprietors of the land and
entered into a sale and purchase agreement with the defendant, who claimed
to be a bona fide purchaser for value. Held: The defendant knew at the time
he bought the said land that the purchase price was below the market value,
but he wanted to take advantage of the low price. In doing so he disregarded
his obligations to investigate the alleged proprietors and the genuineness of
the documents. A purchaser in good faith does not include a purchaser who is
careless or who had been negligent.
- The existence of a sale and purchase agreement and payment of the
purchase price in full cannot be the only indicator to show whether a
person is a bona fide purchaser for value.

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