Bayangan Sepadu Sdn Bhd v Jabatan Pengairan dan Saliran Negeri Selangor & Ors [2021] 1 MLJ 701

BAYANGAN SEPADU SDN BHD v JABATAN PENGAIRAN DAN SALIRAN NEGERI SELANGOR & ORS [2021] 1 MLJ 701

Federal Court (Putrajaya)

Indefeasibility of title

1. The subject matter of this appeal is a piece of land known as PT 18903, HS(M) 20109, Mukim Klang, Tempat Bukit Kemuning, Daerah Klang measuring 17.49 acres (“the Land”).

2. The Land was previously jointly owned by Newacres Sdn Bhd and Bumi-Murnin Sdn Bhd (“the Previous Owners”).

3. The Land then was purchased by Bayangan Sepadu Sdn Bhd (“the Appellant”) on 25 March 2011 through a public auction conducted by the Klang Land Office.  The public auction was held by the chargee, CIMB Bank Berhad (“CIMB”), after the Previous Owners defaulted in their loans.

4. The Appellant then appointed a licensed land surveyor to conduct a survey on the Land and discovered that there is a retention pond on the Land and other permanent structures, measuring 9.554 acres of the Land.

5. On 27 September 2013, the Appellant wrote a letter to the First and Second Respondent inquiring the relevant  documents and information to justify the Respondent’s occupation on the land.

6. Later on 25 October 2013, the First Respondent vide a letter informed that they were in the process of obtaining the relevant documents and information regarding the retention pond.

7. However, there is no indication that the retention pond and the structures were built there, nor was there any proof that the Respondents had been given a portion of the land by the Previous Owners when the Appellant conducted a search on the Land before the judicial sale.

8. After the public auction, on May 4, 2011, the Appellant conducted a second land search with the same result.  After that, on 30 November 2016 and 11 May 2017, the Appellant made another two land searches and discovered that the Respondents’ interest was not registered in the register document of title and there was no record of any surrender of the Land to the State.

9. The Respondent on 11 September 2014 then wrote to the Klang Land Administrator to apply to enter a Registrar’s Caveat on the Land and the caveat was subsequently entered on 19 September 2014.

10. A discovery application was filed by the Appellant via Originating Summons on 10 December 2014, to request the necessary documents from the First and Second Respondents.  The Shah Alam High Court allowed the application on 23 July 2015.

11. On 11 March 2015, the Respondents lodged a police report stating that they were unable to locate the project file namely Projek Rancangan Tebatan Banjir Taman Sri Muda Seksyen 25 Shah Alam and intended to gather documents and plans from Majlis Bandaraya Shah Alam (“MBSA”).

12. The Appellant’s solicitor, subsequently issued a letter of demand dated 16 March 2017 to the First Respondent for the delivery of vacant possession of the Land and removal of the fence and structure within three (3) days.

13. Due to the Respondent’s failure to comply with the Appellant’s demand, the Appellant then proceeded to file the suit in High Court on 20 March 2017.

14. At the High Court, the Appellant’s claim was dismissed and the Respondent’s counterclaim was allowed with damages to be assessed.

15. The essence of the High Court’s reasoning are as follows:

(a) There was sufficient evidence to support that the Previous Owners had given their consent and permission to surrender part of the Land for the purpose of constructing the retention pond to prevent recurrence of flood in Taman Sri Muda area.

(b) There was a valid surrender of the Land (approximately 14 acres) to build the retention pond and other structures

16.  The High Court was in the view that the terms and conditions specified in the proclamation of sale are not applicable to the Respondents on the basis that it is a contract between CIMB and the Appellant.  Nevertheless, the auction sales contract is based on as is where is basis and held that the Appellant has full knowledge and even accepted the location and description of the Land including the retention pond where the major part of the Land has been surrendered to the State Authority of Selangor.

17.  Since the Appellant was dissatisfied with the High Court’s judgment, the Appellant then appealed to the Court of Appeal.

18. The issue before the Court of Appeal was whether the Respondents had committed trespass by wrongly entering and proceeding to construct the retention pond on the wrong lot and the validity of the surrender of the Land by the previous owners to the State Authority.

19.  In its verdict 2:1, the Court of Appeal dismissed the Appellant’s appeal. Justice Hasnah Mohamed Hashim JCA and Justice Kamaludin Md Said JCA concurring held that-

(a) The Appellant’s claim against the Respondent for trespass and for damages is without basis and cannot be sustained; and

(b)There was a valid surrender of the Land measuring approximately 14 acres by the previous owners to the Third Respondent to build the retention pond and structures

20.  In a dissenting opinion, Justice Lee Swee Seng of the Court of Appeal upheld the Appellant’s appeal and held that the Respondents’ flood mitigation lake-related structures on the Appellant’s duly registered property constitute a trespass and that, in any case, the Respondents must pay the Appellant compensation for the presence of the lake (fenced-off/by the Respondents) and its related structures on the Appellant’s property.

21. The aggrieved party i.e. the Appellant then appealed to the Federal Court by way of leave which are-

(a) The register document of the title is conclusive evidence of ownership and the Respondents’ unregistered interest cannot defeat the indefeasible interest of the registered charge and correspondingly the indefeasible interest of the successful bidder under a public auction.

(b) It is a mandatory requirement under section 196(c)(1) read with 196(2)(a) of the National Land Code  1965 (“Act 828”) (conditions for approval of surrender) that consent in writing in respect of the CIMB charge must first be obtained before the Previous Owners can surrender the Land.

22.  The Respondents then submitted their reply to the leave questions by stating that-

(a) the Land has been surrendered to MBSA by the Previous Owners to the Respondents to obtain approval for planning permission from MBSA.

(b) The retention pond existed before the transfer of the Land to the Appellant and the Land was even being surrendered by the Previous Owners before it was being charged to CIMB.  Thus, there is no necessity to obtain CIMB’s approval.

1. Whether the Appellant’s title and interest in the Land was indefeasible and unaffected by any registered interest claim by the Respondents?

2. Whether there was a valid surrender of the Land under section 196(c) read with 196(2)(a) of the Act 828?

3. Whether Respondents were liable to pay damages to the Appellant for trespassing upon the Land?

1.     The Torrens System and Indefeasibility of Title

(a) Section 89 of Act 828 provides that-

“Conclusiveness of register documents of title

89. Every register document of title duly registered under this Chapter shall, subject to the provisions of this Act, be conclusive evidence –

(a) that title to the land described therein is vested in the person or body for the time being named therein as proprietor; and

(b) of the conditions, restrictions in interest and other provisions subject to which the land is for the time being held by that person or body, so far as the same are required by any provision of this Act to be specified or referred to in that document”.

(b) Section 340 of Act 828 provides that-

“Registration to confer indefeasible title or interest, except in certain circumstances

(1) The title or interest of any person or body for the time being registered as proprietor of any land, or in whose name any lease, charge or easement is for the time being registered, shall, subject to the following provisions of this section, be indefeasible.

(2) The title or interest of any such person or body shall not be indefeasible-

(a) in any case of fraud or misrepresentation 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 by the person or body in the purported exercise of any power or authority conferred by any written law.

(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 be transferred; and

(b) any interest subsequently granted thereout shall be liable to be set aside in the hands of any person or body in whom it is for the time being vested:

Provided that nothing in this subsection shall affect any title or interest acquired by any purchaser in good faith and for valuable consideration, or by any person or body claiming through or under such a purchaser.

(4) Nothing in this section shall prejudice or prevent-

(a) the exercise in respect of any land or interest of any power of forfeiture or sale conferred by this Act or any other written law for the time being in force, or any power of avoidance conferred by any such law; or

(b) the determination of any title or interest by operation of law”.

(c)  There are two fundamental principles of the Torrens System which are-

(i)             mirror principle; and

(ii)            curtain principle

(d) It is crucial to remember that the Torrens System major features and characteristics include the principle of indefeasibility of title.  The idea behind it is that if someone registers as the owner or interest on a piece of land, they acquire a title that cannot be vitiated unless specifically allowed for under section 340 of Act 828.

(e) Therefore, the Federal Court has agreed with the submission made by the Appellant’s counsel that a successful bidder at a public auction conducted according to the Act 828 acquires an indefeasible title of the Land.

2.     Surrender of the Land

(a) While Section 196(1)(c) of the Act 828 provides the following:

“Conditions for approval of surrender

(1) No surrender, whether of the whole or a part only of any alienated land, shall be approved by the State Director or, as the case may be, Land Administrator unless the following conditions are satisfied:

(c)  that every person or body specified in subsection (2) has consented in writing to the making of the application”.

(b) Section 196(2)(a) of the Act 828 is as follows:

“(2) The said persons and bodies are-

(a)  any person or body who, at the time when the approval was applied for, was entitled to the benefit of any registered interest affecting the land or, as the case may be, the part to be surrendered (including a charge of any lease or sublease).”

(c)  The applications for approval of surrender of part under Section 200 of the Act 828-

“Approval of surrender of part

(1) Any application for approval by a proprietor wishing to surrender a part only of the land comprised in his title shall be made in writing to the Land Administrator in Form 12b, and shall be accompanied by—

(a)  such fee as may be prescribed;

(b)  a plan showing the details of the proposal, together with such number of copies thereof as may be prescribed or, in the absence of any such prescription, as the Land Administrator may require;

(c)  all such written consents to the making of the application as are required under paragraph 196(1)(c); and

(d)  subject to subsection (3), the issue document of title to the land”.

(d) In order to have a valid surrender, the procedure under Section 200 of the Act 828 must be complied with.  The surrender of any private land must be made with the consent of both the registered proprietor and the State Authority and must adhere to the relevant statutory provisions to avoid any invalid surrender.

(e)  In the absence of the consent of CIMB (chargee) and by merely relying on the documents produced by the Respondents, it cannot be assumed that all of the mandatory requirements have been fulfilled when the State Authority gave its consent to transfer.

(f)   In light of the presumptions and consistency with the Torrens System that registration is everything, it is a mandatory requirement of Act 828 that consent in writing in respect of the CIMB must first be obtained before the Previous Owners can surrender the Land to the Third Respondent.

(g) However, there was no consent in writing has been obtained by the previous owners to the Respondents from CIMB to surrender the Land to the Third Respondent.

3.     Trespass of the Land

(a) In this case, since there is no valid surrender of land to the State, it can be concluded that there was indeed a trespass on the Land by the Respondents.

(b) Regarding the date on when the action of trespass arises, the Federal Court concluded that the action of trespass only occurred on 20 March 2017 (the date the Respondent neglected and/or failed to vacate the Land) after a letter of demand was issued by the Appellant on 16 March 2017, requiring the Respondent to deliver the vacant possession of the Land and to remove structured on the Land within three (3) days.

(a) Immediate indefeasibility which means that an immediate purchaser of title/interest will have indefeasible title notwithstanding that the title/interest was obtained pursuant to vitiating circumstances

(b) Deferred indefeasibility where the land is acquired by the subsequent purchaser by means of fraud and/or forgery, and they acted in good faith and has purchased the land with valuable consideration, an indefeasible title of the Land shall be obtained.

2. The Malaysian laws have implemented the doctrine of deferred indefeasibility, according to which only the title registered by a bona fide third party purchaser is immune from any other outside attack, and such third party must demonstrate that he possesses and obtains such title or interest in good faith.