Samuel Naik Siang Ting v Public Bank Bhd [2015] 6 MLJ 1

Samuel Naik Siang Ting v Public Bank Bhd [2015] 6 MLJ 1

Federal Court (Putrajaya)

Priority Between Bona Fide Registered Title and Prior Unregistered Equitable Interest under the National Land Code [Act 828] (“NLC”)

1. Majlis Perbandaran Manjung (“MPM”) was the initial registered proprietor of a piece of land (“the land”), which was later subdivided into several smaller lots (“the lots”). Under a joint venture agreement, MPM appointed Bersatu Maju Properties Sdn Bhd (“BMP”) as the developer to undertake a mixed development project on the land. Pursuant to this arrangement, MPM and BMP executed several sale and purchase agreements (“SPAs”) with a group of buyers (“the earlier purchasers”).
2. To facilitate these purchases, the Respondent bank extended housing loans to the earlier purchasers. As the individual titles had yet to be issued, the loans were secured through loan agreements, deeds of assignment in favour of the Respondent, and letters of undertaking from MPM and BMP promising to deliver the individual titles upon issuance. Despite receiving the full loan disbursements, MPM and BMP failed to hand over the titles to the Respondent and instead resold the same lots to new purchasers, including the Appellant, by entering into fresh SPAs. The subdivided titles were subsequently registered under the names of these new purchasers.
3. When the Respondent discovered the resale, it lodged private caveats over the affected lots. Around the same time, the earlier purchasers defaulted on their loan repayments, prompting the Respondent to obtain judgments against them. The Respondent then initiated legal action against the new purchasers. The High Court ruled in the Respondent’s favour, declaring that (a) the earlier purchasers were the rightful owners, (b) the Respondent was the lawful assignee of the lots under the deeds of assignment, (c) the SPAs with the new purchasers were null and void, and (d) the transfers to the new purchasers were void ab initio, requiring their names to be removed from the land titles.
4. The Court of Appeal affirmed the High Court’s decision. Leave was later granted by the Federal Court to address the question of whether a bona fide registered proprietor without notice under the National Land Code (NLC) could have their title invalidated by an unregistered interest held by an assignee or lender under a prior SPA involving the same property. During submissions, however, counsel for the Appellant argued that MPM was not the registered proprietor at the time the SPAs were executed, claiming that the land title bore an endorsement indicating that the property had been surrendered and vested in the State Authority, thereby invalidating MPM’s authority to deal with the land.

Whether a bona fide registered owner under the NLC can lose their title due to an unregistered interest held by a lender or assignee from an earlier sale and purchase agreement involving the same land with different purchasers.

Whether a bona fide registered owner under the NLC can lose their title due to an unregistered interest held by a lender or assignee from an earlier sale and purchase agreement involving the same land with different purchasers.

(a) The Federal Court reaffirmed the long-standing rule in civil proceedings that parties are bound by their pleadings and cannot introduce new arguments or facts that were not previously pleaded. This ensures fairness and avoids prejudice. Citing cases such as State Government of Perak v Muniandy [1986] 1 MLJ 490 and Lee Ah Chor v Southern Bank Bhd [1991] 1 MLJ 428, the Court ruled that the Appellant’s late argument that MPM was not the registered owner when it entered the sale and purchase agreements was inadmissible as it was not part of the original pleadings and would unfairly disadvantage the Respondent.

(b) Based on the established facts, the sale and purchase agreements between MPM, BMP, and the earlier purchasers were held to be valid and legally binding. Consequently, the deeds of assignment and letters of undertaking executed in favour of the Respondent were also enforceable. The Court agreed with the Court of Appeal’s view that these deeds operated as equitable mortgages under subsection 4(3) of the Civil Law Act 1956, granting the Respondent the rights of an equitable mortgagee. When the earlier purchasers defaulted on their loan obligations, the Respondent was legally entitled to enforce its security interests as provided under the deeds.

(c)  The Court also held that after MPM sold the lots and received full payment, it became a bare trustee, holding legal title without beneficial ownership. Referring to Lysaght v Edwards (1876) 2 Ch D 499 and Temenggong Securities Ltd v Registrar of Titles, Johore & Ors [1974] 2 MLJ 45, the Court found that MPM no longer had the legal authority to sell or transfer the same lots to new purchasers. As a result, the later transactions with the new purchasers, including the Appellant, were void from the outset since MPM had lost its capacity to deal with the land.

(d) On the issue of indefeasibility of title, the Federal Court ruled that the Appellant’s registration as proprietor did not grant him an indefeasible title under section 340 of the NLC because the registration was based on a void instrument. Since the earlier sale and purchase agreements were valid, the Form 14A used to transfer ownership to the Appellant was legally defective and incapable of conveying any title.

(e)  The Appellant’s claim that the Respondent’s delay in lodging a caveat weakened its position was dismissed. The Court emphasized that a caveat serves merely as a notice of an existing interest in which it does not create new rights or extinguish equitable ones. Therefore, the Respondent’s equitable interest remained intact despite the delay.

(f)   Regarding the proviso to subsection 340(3) of the NLC, the Federal Court referred to Tan Ying Hong v Tan Sian Son & Ors [2010] 2 MLJ 1, which established that the proviso only protects subsequent bona fide purchasers, not immediate ones. Since the Appellant was an immediate purchaser who acquired title through a void transaction, he could not rely on the protection of indefeasibility under the NLC.

Decision

The Appellant’s appeal was therefore dismissed with costs, and the decisions of both the High Court and Court of Appeal were affirmed.

A bona fide registered owner without notice can still have his title defeated by a prior unregistered equitable interest of an assignee or lender under an earlier sale and purchase agreement.