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New Straits Times
by Salleh Buang
TEN years ago, the Federal Court committed an unfortunate blunder: It held that
we practise immediate indefeasibility (see Adorna Properties Sdn Bhd v
Boonsom Boonyanit [2001] 1 AMR 665).
In so doing, it held that a party who had acquired a piece of land in Penang
directly from an imposter and a forger (in this case a con woman who had since
disappeared and could not be found) had an indefeasible interest in the property
because it was regarded (by the then three-member Federal Court) as a "bona fide
purchaser for value without notice" (BFP).
In the words of a Court of Appeal judge, who believed the Federal Court had
misconstrued the relevant section of the National Land Code (NLC), that awful
decision had caused a "havoc" in the country's land law.
Most of us viewed the decision as blatantly wrong and feel that a wrong
committed by the highest court in the land is not acceptable and must be put
right.
In the last decade, many people including myself adopted a two-pronged approach
to reverse the decision: One, to persuade the judiciary to correct its own
earlier mistake; if that fails or it takes too long, then action must be taken
to bring out the corrective reform through Parliament.
The Ministry of Natural Resources and Environment took an active part to set the
record straight. I was involved in its brainstorming sessions in Putrajaya and
elsewhere. The others involved include Roger Tan and his colleagues from the Bar
Council, members of the academia and legal experts from the Attorney- General's
Chambers.
On one occasion while delivering a talk on the issue, I was asked, "In simple
terms, what should be done?"
I said our work must be spread out in two phases. The first phase is to correct
the mistake in Boonsom. That is done by (a) the judiciary reversing its earlier
decision and then to restate the law clearly that we in this country practise
deferred indefeasibility; and (b) if section 340 of the NLC is considered still
confusing, then amend it to make its meaning crystal clear.
In phase two, action must be taken to protect and compensate innocent BFPs who
had become victims of land scams.
For that, we have to consider the need for introducing some compensatory
mechanism, either in the form of an Assurance Fund, a Compensation Fund, or a
mandatory title insurance.
With the decision of the fivemember Federal Court on Jan 21, 2010, item (a) of
the first phase of our work is done. After that, we have to sit down together to
decide whether s.340 NLC (as it stands today) still needs to be revamped or not.
Subject to space constraint in this column, let's look at the recent decision.
In his 29-page judgement, Chief Judge of Malaya Tan Sri Arifin Zakaria
explained: "Before the decision of Adorna Properties the prevailing view was
that s.340 of the NLC confers deferred indefeasibility as opposed to immediate
indefeasibility. This was confirmed by the Federal Court in Mohammad bin Buyong
v Pemungut Hasil Tanah Gombak & Others [1982] 2 MLJ 53. This is further
reinforced by the Supreme Court's decision in M & J Frozen Food Sdn Bhd & Anor v
Siland Sdn Bhd & Anor [1994] 1 MLJ 294 ...."
The Chief Judge then said, "The effect of Adorna Properties is to confer
immediate indefeasibility to the registered proprietor ..."
The Chief Judge then referred to the decision of Raus Sharif JCA (as he then
was) in Au Meng Nam & Anor v Ung Yak Chew & Ors [2007] 4 CLJ 526, where that
Appeal Judge held that, "To me, by virtue of s.340(2)(b) of the Code, the title
of Adorna Properties was not indefeasible as the registration was obtained by
forgery. S.340(3) does not apply to s.340(2)."
The Chief Judge also referred to the decision of Gopal Sri Ram JCA (as he then
was) in the same Au Meng Nam case where that Appeal Judge held that "the Federal
Court's decision in Adorna Properties was decided per incuriam and should not be
treated as binding".
Sri Ram had gone on to say in the Au Meng Nam case that the "Federal Court in
Adorna Properties when arriving at its decision overlooked at least two
authorities which hold that the Code provides for deferred indefeasibility ...
Mohammad bin Buyong v Pemungut Hasil Tanah Gombak & Ors [1981] 1 LNS 114 and M &
J Frozen Food Sdn Bhd & Anor v Siland Sdn Bhd & Anor [1994] 2 CLJ 14 ...."
Having looked at the existing authorities, the Chief Judge summed up by saying
the real issue before the court is "one of proper interpretation to be accorded
to s.340 (1), (2) and (3) of NLC".
The Chief Judge then held that the present bench of the Federal Court is of the
view the proviso in sub-section (3) of s.340 "is directed towards the provision
of sub-section (3) alone and not to the earlier sub-section (2)".
In the circumstances, the Chief Judge concluded:
"For the above reasons, with respect, we hold that the Federal Court in Adorna
Properties had misconstrued s.340 (1), (2) and (3) of the NLC and came to the
erroneous conclusion that the proviso appearing in sub-s.(3) equally applies to
sub-s.(2). By so doing the Federal Court gave recognition to the concept of
immediate indefeasibility under the NLC which we think is contrary to the
provision of s.340 of the NLC."
Delivering a separate but concurring five-page judgement, Chief Justice Tun Zaki
Azmi said: "I totally agree with the learned Chief Judge of Malaya's view that
the error committed by the Federal Court in Adorna Properties Sdn Bhd v Boonsom
Boonyanit @ Sun Yok Eng was to read the proviso to sub-section (3) as being a
proviso to sub-section (2) as well. The error is very obvious ..."
The Chief Justice then concluded:
"I am legally obligated to restate the law since the error committed in Adorna
Properties is so obvious and blatant. It is quite a well known fact that some
unscrupulous people have been taking advantage of this error by falsely
transferring titles to themselves. I hope that with this decision, the Land
Authorities will be extra cautious when registering transfers."
There is a feel-good sentiment among those who have fought long and hard to have
the Federal Court overturn and reverse its earlier erroneous decision.
But there is still a lot of work ahead.
Salleh Buang is senior advisor of a company specialising in competitive
intelligence. He is also active in training and public speaking and can be
reached at
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