The Sunday Star (Used by permission)
Comment by Roger Tan

There is a general sigh of relief with the Federal Court’s decision in favour of a landowner who was cheated of his property, overruling the decision in Adorna Properties which has wreaked havoc in land transactions and increased the number of land scams in the last nine years.

THE decision by the Federal Court last Thursday in Tan Ying Hong v Tan Sian San & 2 Ors to depart from its previous decision made in Adorna Properties Sdn Bhd v Boonsom Boonyanit 2000 has finally and correctly restored the principle of deferred indefeasibility in our Torrens system of registration after a gruelling wait of more than nine years.

For the benefit of the readers, let me first explain this principle in simple terms.

Under the Torrens system , the State will guarantee an indefeasible title to anyone whose name is registered on the register of titles.

This is enshrined in section 340(1) of the National Land Code, 1965 (“NLC”) which applies to West Malaysia.

However, sub-section 340(2) provides that a title or interest can still be defeasible if it is acquired, inter alia, by fraud, misrepresentation, forgery or through an insufficient or void instrument.

Sub-section 340(3) then goes on to say that if the immediate purchaser subsequently transfers the title or interest to a subsequent purchaser, the said title or interest is still liable to be set aside unless the subsequent purchaser is a purchaser in good faith (or bona fide) and for valuable consideration.

In other words, only the subsequent bona fide purchaser/transferee and not the immediate bona fide purchaser/transferee will get an indefeasible title created out of a defeasible title.

(Under the NLC, a purchaser is defined to include a bank taking a charge over the land.) To put it in another way, for example, A is the registered proprietor of the land.

B forges A’s signature and transfers the land to himself. B later sells and transfers the land to C. C, who has no knowledge of the forgery, will obtain an indefeasible title. Or if B forges A’s signature and transfers the land from A to C and C later transfers the land to D, then, D and not C, who has no knowledge of the forgery, will obtain an indefeasible title. C and D in the first and second examples are known as subsequent purchasers under s 340(3).

However, if the principle of immediate indefeasibility espoused in Adorna Properties applies, C will still get an indefeasible title if B forges A’s signature and transfers the land immediately from A to C without first having transferred to B himself.

That was exactly what happened in Adorna Properties.

An impostor of the genuine landowner, Boonsom Boonyanit, made a false statutory declaration that she had lost the original title to two pieces of lands in Penang, and successfully managed to obtain a certified copy of the title from the land office.

With that, the impostor registered the transfer of the lands to Adorna Properties Sdn. Bhd. (“Adorna”) for a sum of RM12mil.