UDL6323 Land Law II Tri 2, 2024/2025

Topic 2 Indefeasibility of Titles and Interests

Tutorials 02-03

1. By reference to the relevant statutory provisions and case law, explain the following
concepts:
(a) Definition of “indefeasibility of title”;
-once you register, nobody can claim for the land
-it can be defeasible if it falls under S.340(2) ：by fraud, forgery, unlawful

Under Section 340(1) of the National Land Code (NLC), once a person or entity is
registered as the rightful owner of land or as having a lease, charge, or easement, their title or
interest is generally protected from being challenged. This protection, known as
indefeasibility, shields registered proprietors from most claims against their land or interests.
However, this immunity is not absolute. It can be partially overridden under certain
conditions, such as when entries in the register are cancelled or corrected, or when personal
claims arise.

In the case of Dr. Ti Teow Siew & Ors v Pendaftar Geran-Geran Tanah Negeri Selangor,
the issue revolved around land alienation with a restriction that prohibited transfer or leasing
without the Ruler in Council's consent for 15 years. The question was whether this restriction
began from the date noted on the title (August 18, 1964) or from the date of registration
(November 9, 1967). The court clarified that under Section 78(3) of the NLC, land alienation
takes effect upon registration. Therefore, the restriction started from the registration date
(November 9, 1967), meaning the documents presented for registration in 1980 were rightly
rejected due to the ongoing restriction, which would expire on November 8, 1982.

(b) Differences between “deferred” and “immediate” indefeasibility of title;

🟦 Immediate Indefeasibility

You get strong ownership as soon as your name is registered, even if there were problems
with the documents — unless you cheated. 一旦您的名字注册，您就会获得强烈的所有权，即使文件有问题——除非
作弊。

🟨 Deferred Indefeasibility

You don’t get strong ownership right away if the documents were bad. Only the next
honest buyer gets full protection. 如果文件有问题，您不会立即获得强有力的所有权。只有下一个诚实的买家才能获得全面
保护。

Aspect Immediate Indefeasibility Deferred Indefeasibility

When
Only when land is transferred to a bona
protection Right after registration
fide third party (innocent buyer)
starts
Effect of
Registration still gives valid title Title is not valid – can be attacked
void/forged
(except in fraud cases) unless transferred to an innocent buyer
instrument
Key principle Registration cures the defect Registration does not cure the defect

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Topic 2 Indefeasibility of Titles and Interests

Aspect Immediate Indefeasibility Deferred Indefeasibility

Frazer v Walker: Land transferred Tan Ying Hong v Tan Sian San: Land
using a forged mortgage, but charged using forged power of attorney
Example case
registered proprietor (Walker) was – court ruled the bank’s title was
protected defeasible 可废止的
Originally followed immediate
Malaysia’s Now follows deferred indefeasibility 延
indefeasibility (Adorna Properties),
position 迟不可废止性 (clarified in Tan Ying Hong)
but this was an error
Registered owner is not protected if the
Registered owner is protected even
Main legal title came from forgery, fraud, or void
if the instrument is void (except for
outcome instrument – unless passed to innocent
fraud)
third party
Relevant section
Section 340(1) NLC Section 340(2) and (3) NLC
of law
Current legal
Accepted – as clarified by Tan Ying
stance in Not accepted anymore
Hong and Subramaniam v Sandrakasan
Malaysia

Immediate Indefeasibility (cases)

Frazer v Walker (New Zealand)
 Principle:
This case supports the immediate indefeasibility principle. Once a person is
registered as proprietor, their title is protected even if the document used to get the
title (like a mortgage or transfer) was void or fraudulent — unless they were involved
in fraud.
 Facts:
o Mrs. Frazer forged her husband’s signature on a mortgage to raise money.
o The mortgagee (R) sold the land to Walker when Mrs. Frazer defaulted on
payment.
o Walker was registered as the new owner.
o Mr. Frazer challenged the transfer, arguing the mortgage was based on fraud.
o Held: The court ruled Walker’s title was indefeasible because he was a bona
fide purchaser who was registered. Fraud by Mrs. Frazer did not affect
Walker’s title.

2. Doshi v Yeoh Tiong Lay (Malaysia)

 Principle:
This case also supports immediate indefeasibility — once registered, even if the
instrument is void (e.g., illegal moneylending agreement), the registered proprietor is
protected.
 Facts:
o Doshi (appellant) borrowed money and gave his land documents to the lender.
o The lender transferred the land to a company (Equitable Nominees) and then
sold it to Yeoh (respondent).
o Yeoh became the registered owner.
o Doshi tried to reclaim the land, arguing the loan agreement was void.
o Held: The registration gave Yeoh an indefeasible title. He was protected even
though the earlier transaction was void.

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Topic 2 Indefeasibility of Titles and Interests

Deferred Indefeasibility (Cases)
3. Tan Ying Hong v Tan Sian San & Ors (Malaysia)
 Principle:
This case supports deferred indefeasibility — if a person gets registered title through
a void or forged document, the title can be challenged. Indefeasibility is only given
to a later innocent buyer.
 Facts:
o Tan Ying Hong was the registered landowner.
o A power of attorney (POA) was forged in his name.
o Using the forged POA, someone created charges on the land to get loans from
a bank.
o Tan found out only when the bank demanded payment.
o Held: The charges were void due to forgery. The bank’s interest was not
protected, as it was the immediate holder — not a later innocent party.

4. Subramaniam A/L NS Dhurai v Sandrakasan A/L Retnasamy & Ors (Malaysia)

 Principle:
Reinforces deferred indefeasibility — title obtained through fraud, forgery, or void
instruments can be set aside unless it's transferred to a bona fide third party.
 Facts:
o The case involved issues of forged instruments used to transfer land.
o Gopal Sri Ram JCA highlighted that Adorna Properties was wrongly decided
(per incuriam).
o He reaffirmed the correct principle is deferred indefeasibility, following M &
J Frozen Foods v Siland.
o Held: A person who gains title by void means cannot claim protection — only
later innocent buyers can.

(c) Exceptions to concept of indefeasibility; and

The concept of indefeasibility under the NLC is not absolute. Under S340(2) of NLC, 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.

Under S340(3) of NLC, 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.

S5 of NLC defines “purchaser” as a person or body who in good faith and for valuable
consideration acquires title to, or any interest in, land. (includes transferee, chargee and
lessee, easement holder)

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Topic 2 Indefeasibility of Titles and Interests

Under S340(4) of NLC, 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. (4(a) referred to
SA or lessor to forfeit your land when breach of condition or failed to pay quit rent) (4(b) very
general cuz operation of law cover a lot of things including 4(a) situation)

Statutory exceptions to indefeasibility: S340(2), (3), (4)

a. Fraud : s 340(2)(a)
b. Misrepresentation : s 340(2)(a)
c. Forgery : s 340(2)(b)
d. void or insufficient instrument : s 340(2)(c)
e. registration done exceeding power : s 340(2)(c)
f. enforcement of s 340(4), including :
claim in personam;
powers of Registrar to correct errors under s 380 and power of the court under s 417;
enforcement of written law under s 4(2);
enforcement of other written law to avoid or to nullify dealings under NLC

Under S380(1) of NLC, where the Registrar is satisfied (a) that any document of title has
been registered or issued in the wrong name, or contains any misdescription of land or
boundaries, or other error or omission; or (b) that any memorial or other entry has been made
in error on any document of title or other instrument relating to land; or (c) that any memorial
or other entry made on any such document of title or instrument itself contains any error or
omission, he may, subject to subsections (2) and (3), make such correction on the document
or interest in question as may be appropriate in the circumstances of the case.

Under S417(1) of NLC, the Court or a Judge may by order direct the Registrar or any Land
Administrator to do all such things as may be necessary to give effect to any judgement or
order given or made in any proceedings relating to land, and it shall be the duty of the
Registrar or Land Administrator to comply with the order forthwith.

A defeasible title/interest is not an invalid title/interest. Nevertheless, it may be liable to be set

aside by a party who has locus to take the action to set it aside. Until such action is taken, the
title shall remain with the registered person.

The meaning of locus is provided in Cheng Hang Guan & Ors v Perumahan Farlim
(Penang) Sdn. Bhd. & Ors, the term locus standi or standing in a court of law means
entitlement to judicial relief apart from questions of the substantive merits and the legal
capacity of a plaintiff. There are two principles to bear in mind: first, the court is bound to
proceed on the basis that everything alleged in the statement of claim and in the documents
relied on is true; and secondly, the jurisdiction to uphold a plea of no locus standi should only
be exercised where there is no possibility of doubt.

(d) Defence of bona fide purchaser for value under proviso to s 340(3)of the NLC.

The defense of bona fide purchaser for value under the proviso to Section 340(3) of the
National Land Code (NLC) allows a person who acquires land in good faith and for valuable
consideration to protect their title against any defeasible claims outlined in Section 340(2) of
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Topic 2 Indefeasibility of Titles and Interests

the NLC. This provision acknowledges that, in some cases, a purchaser may be unaware of
any disputes or defects in the title they acquire. The defense ensures that their ownership is
not affected by such defeasible claims, provided certain conditions are met.
Key Elements of the Defense:
1. Good Faith: The purchaser must acquire the property without knowledge of any
adverse claim, dispute, fraud, or defect in the title. "Good faith" means acting
honestly, reasonably, and fairly in the transaction. Knowledge of a dispute or fraud
may disqualify the purchaser from this defense.
2. For Valuable Consideration: The purchaser must pay a fair price for the land. This
excludes any transaction involving gifts or nominal consideration. The payment must
be real and substantial.
3. No Defeasible Title: Under Section 340(3), the title or interest in the property may be
defeasible if it is affected by the circumstances in Section 340(2), but this defense
ensures that a bona fide purchaser for value is not affected by those defeasible claims.
Application of the Defense:
 No Fraud, Deceit, or Dishonesty: The purchaser must not be involved in fraud,
deceit, or any dishonesty in the transaction. The absence of these elements is crucial.
 Acting Honestly and Fairly: It is not enough for the purchaser to merely avoid fraud;
they must also ensure that the transaction was carried out in good faith and without
knowledge of any wrongdoing on the part of the seller or any third parties.
Case Law: (will not affect title and interest of purchaser in good faith)
In cases like T Sivam a/l Tharamalingam v Public Bank Berhad, courts determined that
whether a party acted in good faith is a matter of fact for the court to decide, based on the
specific circumstances and evidence in each case. Similarly, in Ong Ban Chai & Ors v Seah
Siang Mong, the court highlighted that knowledge of an adverse claim does not automatically
negate good faith unless the knowledge amounts to fraud.
Thus, the defense of bona fide purchaser for value can successfully protect a purchaser who
acts in good faith and for value, provided there is no knowledge of the defeasible nature of the
title at the time of the transaction.

2. A is the registered proprietor of a piece of land on which stands a house. He leases the
house to B for 10 years. A then enters into an agreement to sell the house to C.
Unknown to C, A had previously entered into a sale and purchase agreement to sell
the land to D. C is now registered as the owner of the land.

🧾 SCENARIO RECAP:
 🏠 A is the registered landowner.
 🧑‍🏫 B leases the land from A for 10 years.
 📜 D signs an agreement to buy the land from A.
 💰 But C later signs and completes a sale with A, and becomes the registered owner.

(a) Is C bound by the interests, if any, of B and D?

B (Tenant) – Lease for 10 years

Law:
-S.340 (3) of NLC
If C is a bona fide purchaser (good faith + valuable consideration), he is protected unless B's
lease was registered or caveated.

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Topic 2 Indefeasibility of Titles and Interests

In Tan Ying Hong v Tan Sian San & Ors [2010] 2 MLJ 1, the Federal Court clarified that
only subsequent purchasers in good faith are protected under S340(3) proviso.

Application: If B registered the lease or lodged a caveat: C will be bound because he’s taken
subject to B’s registered interest.

📜 D (First buyer) – Prior sale agreement

Law: NLC Section 340(3) + Proviso

If C acts in good faith and pays value, he gets indefeasible title — even though D had an
earlier unregistered agreement.

In Au Meng Nam v Ung Yak Chew [2007] 4 MLJ 131

Application: Section 340(3) applies only to subsequent purchasers (like C), and protects them
if they had no knowledge of prior claims.

Conclusion:

If C didn’t know about D, and paid value → C is protected.

If C knew about D → D can challenge C’s title (it’s defeasible).

(b) If C knew of A’s agreement with D but went ahead nevertheless with the
agreement. Does D have any remedy against C?

Now C lacks good faith → no protection under S340(3) proviso.

Law: NLC Section 340(3), Proviso

Protection is only for purchasers in good faith and fgr valuable consideration.
In T Sivam a/l Tharamalingam v Public Bank Berhad [2015] 4 MLJ 1, it is provided that
good faith = acting honestly, fairly, and without knowledge of fraud or dispute. Knowing
about D's agreement vitiates good faith. 损害诚信

Conclusion:
C’s title is defeasible and D can sue to set it aside.

(c) Again, on the assumption that C knew of the earlier agreement, would your
answer be different if C had induced A to sell the land to him instead of to D?

3. No. C’s title is still

defeasible because C

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Topic 2 Indefeasibility of Titles and Interests

is not acting in good

faith.
4. In a recent case of T
Sivam A/L [2018][4],
the Federal Court had
an opportunity to
reconsider
5. and revisit the
meaning of good faith
in Section 340(3) of
the NLC.
6. The dispute was about
the competing claims
on the same piece of
land between two
parties,
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Topic 2 Indefeasibility of Titles and Interests

7. namely the original

registered owner of
the land and a
chargee bank (who
was a subsequent
8. holder of interest in
the land) – both were
affected by the fraud
of a third party.
9. The crux of the
dispute was whether
or not the registered
interest of the chargee
bank (a
10. subsequent holder of
interest in the land)
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Topic 2 Indefeasibility of Titles and Interests

would be protected
under the proviso to
Section 340(3)
11. of the NLC.
12. The Federal Court in
discussing such issue
had laid down the
elements required to
prove the
13. existence of good
faith, as follows :
If C induced A to sell to him, knowing that A had already agreed to sell to D, this amounts to
fraud or dishonest conduct under Section 340(2)(a) of the NLC. C’s title is then clearly
defeasible, even if he is already registered. In Pekan Nenas Industries v Chang Ching Chuen,
the court emphasized that absence of due diligence or acting with dishonest intent voids the
claim of good faith. Therefore, D would have a strong remedy to set aside C’s registration
and reclaim the property.

(d) Assume that A and his wife, Z are registered co-owners of the land. A forges Z’s
signature and transfers the land to C. C is now registered. Can Z set aside C’s title?

If it can be proven that A forged Z's signature, then the transfer of the land to C is based on
fraud, and the title is defeasible. This means that Z can potentially set aside C’s title if C is
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Topic 2 Indefeasibility of Titles and Interests

the subsequent purchaser and is not protected by the National Land Code, Section 340(3). If
C bought the land in good faith and for valuable consideration, he could raise the bona
fide purchaser defence under the proviso in Section 340(3). If C was unaware of the forgery
and acted reasonably, then Z’s claim to set aside C’s title may not succeed. However, if C
knew of the forgery or acted dishonestly, the title remains defeasible, and Z could challenge it
successfully.

(e ) Assume that Z does not know of A’s deceit. C charges the land to Bank Anda. C is now
in default and Bank Anda plans to obtain an order to sell the land. Has Z any remedy at this
stage?

If Bank Anda tries to sell the land after C charged it to the bank and C defaults, Z may still
have a remedy if she can prove that A’s forgery made the transfer to C invalid. Since C's title
is based on fraud, it is defeasible. The bank’s charge on the land may also be defeasible
because it is based on C’s invalid title. Z could argue that the bank’s actions, including the
attempt to sell, are not valid because the title to the land is flawed. The court would need to
decide whether Bank Anda knew about the forgery when it accepted the charge. If the bank
knew or should have known about the fraud, Z could challenge the sale or the bank’s charge.

14. The debate of whether Malaysia recognised immediate indefeasibility or deferred

indefeasibility has been settled since 2010 by the Federal Court in the case of Tan
Ying Hong v Tan Siang Sang & Ors [2010] 2 MLJ 1. Nevertheless, the concept of
deferred indefeasibility seems to be extended by the Federal Court in Kamarulzaman
bin Omar & Ors v Yakub bin Husin & Ors [2014] 2 MLJ 768, which imposed a
requirement of double bona fide.

With reference to recent case developments, show who is or should be a subsequent

purchaser eligible to the defence of bona fide purchaser for value under the proviso to
section 340(3) of the National Land Code (Revised 2020).

(Total: 25 marks)
[Question 1, Tri 2, 2022/2023 Final]

POSITION OF SUBSEQUENT PURCHASER TAKING DEFEASIBLE

TITLE/INTEREST (9 Case)

Under S340(3) of NLC, 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.

The question is must para (a) and (b) be proven together in order to invoke bona fide purchase
defence?

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Topic 2 Indefeasibility of Titles and Interests

In T Sivam a/l Tharamalingam v Public Bank Berhad, the presence or absence of good faith
is ultimately a question of fact to be determined based on the evidence of each individual
case. It is not enough to prove that there was no deceit or fraud; rather, the purchaser must
also demonstrate that they acted honestly, reasonably, and fairly. For instance, awareness of
a dispute regarding ownership or of possible fraud may be enough to vitiate a claim of good
faith.

In Ong Ban Chai & Ors v Seah Siang Mong, the court clarified that to be considered a bona
fide purchaser, one must have entered into the transaction in good faith and for value. Merely
having knowledge of an adverse claim does not in itself amount to fraud. Importantly, the
time at which good faith is assessed is the time of the transaction itself.

In Pekan Nenas Industries Sdn Bhd v Chang Ching Chuen,reiterated that the basic
requirement of good faith includes the absence of dishonesty and also an absence of
knowledge—or means of acquiring such knowledge—of fraud at the time the transaction was
entered into.

1 TRANSACTION

The issue of when Section 340(3) can be invoked was addressed in Au Meng Nam & Anor v
Ung Yak Chew & Ors. The court held that Section 340(3) is intended to apply only to
subsequent purchasers, not to immediate purchasers. This is made clear by the wording of the
proviso, which refers to "this subsection", meaning it only applies to subsection (3) and not to
subsection (2). In this case, the registration of the title in the name of the first defendant was
obtained by forgery, and since the first defendant was an immediate purchaser, the protection
under s 340(3) did not apply. Furthermore, although the first defendant had entered into a sale
and purchase agreement and had paid the full purchase price, these factors alone were not
sufficient to prove that they were a bona fide purchaser. The court emphasized that other
relevant circumstances, including the lack of proper investigation into the ownership of the
land, must be taken into account.

In Tan Ying Hong v Tan Sian San & Ors, the Federal Court clarified the scope of the
proviso to Section 340(3). It held that a proviso to a subsection only creates an exception to
that specific subsection, and not to other subsections. Therefore, the proviso after Section
340(3) could not be extended to apply to subsection (2). The court criticized the earlier
decision in Adorna Properties, where it had been wrongly concluded that the proviso applied
across both subsections (2) and (3). The court in Tan Ying Hong corrected this interpretation
and held that only subsequent transferees may rely on the protection of the proviso under s
340(3), and not immediate purchasers whose titles are affected by forgery or other defects
under s 340(2).

In AmFinance Bhd. v Lebik bt Hj Ali & Ors, the plaintiff did not make any enquiries as to
why the defendants who resided hundreds of miles apart from the borrower and who received
no benefit at all from the transaction and who were not related at all with the borrower were
willing to charge their land to the plaintiff. The plaintiff equally did not inquire as to how the
defendants' thumbprints got affixed on the charge documents when the plaintiff was under a
duty to monitor and witness the execution of the charge. This may infer that the plaintiff was
most likely aware of the forgery and did nothing to prevent it. Hence, the plaintiff is not a
bona fide purchaser. It is trite law that the registration of a charge document obtained by way
of fraud, forgery or by means of an insufficient or void instrument will render the interest of
the chargee defeasible under s 340(2) of the NLC. In this case, although the prints of the first
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Topic 2 Indefeasibility of Titles and Interests

and second defendants were genuine nevertheless the whole charge document and its
registration thereafter was vitiated by the forgery of the third defendant's thumbprints. The
plaintiff’s interest to the land was defeasible. As the plaintiff was not a subsequent purchaser
but an immediate purchaser of the land, the protection afforded by s 340(3) did not apply.
Thus, the plaintiff's interest over the land was simply defeasible and thus liable to be set
aside.

2 TRANSACTION

In Owe Then Kooi v Au Thiam Seng & Anor, the court ruled that Au Thiam Seng's title was
not secure (defeasible) due to fraud. The land ownership went back to the original owner,
Owe Then Kooi. However, the bank’s charge on the land remained. This shows that even if
ownership is restored to the original owner, a bank's interest (if created in good faith) might
still survive.

In OCBC Bank (M) Bhd. v Pendaftar Hakmilik Negeri Johor Darul Takzim, the appellant
bank was the chargee of a plot of land in Johor. The charge was made in favor of the appellant
bank to secure an overdraft facility from the appellant by Ng See Chow. When the said Ng
See Chow failed to pay for the overdraft facility, the appellant applied for, and the court
granted, an order for sale of the land. Complications arose when one Ng Kim Hwa lodged a
police report claiming that the land belonged to him. He claimed that he had not executed any
transfer form in favor of Ng See Chow in respect of the land. A registrar's caveat was entered
against the land preventing its sale by the appellant. The appellant applied to have the caveat
removed contending that their charge was indefeasible as they had no knowledge of the fraud.
As the appellant's interest as chargee over the land had been granted by Ng See Chow, whose
title may have been acquired through a forged transfer and therefore liable to be defeated
under s 340(2)(b) of NLC, the registrar had ample grounds to enter his caveat against the sale
of the land. There is no protection afforded for the appellant even though it was an innocent
purchaser for value as the proviso under s 340(3) of NLC is not applicable to a situation
arising under S340(2)(b) of NLC. (OCBC’s charge was based on a title obtained through
forgery. Even though the bank was innocent and didn’t know about the fraud, the court
allowed a caveat to stop the sale. The court clarified that even innocent chargees may not be
protected under s 340(2)(b) if the title was originally forged.)

In Pushpaleela Selvaraja v Rajamani, the court held that a later buyer acting honestly and
paying for the property is protected. However, this protection can be removed if the buyer was
dishonest or knew of any wrongdoing.

In Doshi v Yeoh Tiong Lay, the appellant was the former registered owner of premises. He
obtained a loan from Chooi Mun Sou and deposited his documents of title to the premises.
The appellant failed to repay the said loan and Chhoi Mun Sun then transferred the premises
to Equitable Nominees Sendirian Berhad who then sold the land to the respondent. The
respondent, as registered proprietor, requested the appellant to quit and deliver possession
which he failed to do. The respondents hence brought and action for recovery of possession.
The appellant contended that the transfer of premises to Equitable Nominees was void and
constituted a fraud for Chooi Mun Sou and his wife were the sole shareholders and directors
of the Equitable Nominees. Chooi Mun Sou, being the respondent’s solicitor must have
imputed the knowledge of the previous transaction to the respondent and hence he bought the
premises not in good faith. The appeal was dismissed and the judgment was to be entered
against the appellant. In this case, the solicitor's knowledge of the fraud could not be imputed
to the respondent. Even if the loan agreement was void as it was a money-lending transaction,
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the registration of the transfer to the respondent was effective to vest title in him as a
registered proprietor notwithstanding that he acquired his interest under an instrument that
was void (immediate indefeasibility). (Even though the property was sold under a suspicious
loan arrangement, the buyer became the legal owner once the transfer was registered. The
solicitor’s knowledge of the earlier fraud was not counted against the buyer. So, the buyer's
title stood firm (immediate indefeasibility)

In Engtex Marketing Sdn. Bhd. v Zinma Housing Development Sdn. Bhd. & Anor, the
second buyer registered the land after the first buyer had filed for specific performance but did
not lodge a caveat. The court said the second buyer’s registration was valid because it
happened before the winding-up petition, and there was no fraud. The first buyer only had a
right to sue for damages, not for the land.

In Ahmad Md Daud & Anor v Che Yah Man, the court emphasized that the protection under
s 340(3) only applies to someone who actually buys the land. Since the appellants' mother did
not buy the land but was gifted it, she (and her heirs) couldn’t get protection under that
section. Only genuine buyers acting in good faith get the benefit.

In Rajamani a/p Meyappa Chettiar v Eng Beng Development Sdn. Bhd. & Ors, the court
held that the appellant acquired indefeasibility under S 340(1) upon registration of the land
and such indefeasibility could only be defeated by any of the specified statutory grounds
under sub-s (2) of the s 340 of the NLC or other grounds of equity. The plaintiff’s title was
never and had never been impeached by reason of s 340(2) or other grounds of equity.
Therefore, the first respondent’s replacement title in respect of the land had to be void, which
hence does not confer indefeasibility. The mere fact that the first defendant had purchased the
land in good faith and for valuable consideration did not confer indefeasibility to its title if
such title was otherwise void at inception. The only way the first defendant could have
acquired valid and indefeasible title to the land was by having the land lawfully transferred to
it by the plaintiff as the registered proprietor and not by some fraudster who had no title to the
land. Subsections (1) and (3) merely confer indefeasibility upon registration of title. However,
where the title itself was void ab initio, the registration would not confer indefeasibility and
the proviso to s 340(3) would not apply to assist the first respondent. To give effect to the
spirit of art 13(1) of the Federal Constitution, in a contest for title between an innocent
landowner whose title was protected by s 340(1) of the NLC and an equally innocent bona
fide purchaser for valuable consideration who claimed protection under s 340(3), the scales of
justice must tilt in favour of the innocent landowner. The 3rd and 4th defendant was negligent
to the appellant in failing to take all necessary steps to verify the true identity and status of
Rajamani. The fifth and sixth defendants failed to discharge their statutory duties and no one
person could be singled out for these breaches of statutory duties or negligence. The seventh
defendant had actual and not only constructive knowledge of the fraud committed by the
second defendant and was privy to it. The seventh defendant had acted in concert with the
third and fourth defendants to achieve the attestation and witnessing of the signatures of
Rajamani on the agreement and the memorandum of transfer. (The land was originally owned
by Rajamani. Fraudsters transferred it to someone else. Even though that person later sold the
land to an innocent buyer, the court ruled the original owner (Rajamani) must be protected.
The new buyer’s title was void because it was based on a fraudulent origin.)

In Tan Ong Ban v Teoh Kim Heng, at the time of the dispute, the property did not yet have a
strata title. Because of that, the protections under s 340(3) didn’t apply. Instead, the court
looked at who paid the full purchase price. Since the respondent did, they were considered the
true (beneficial) owner, even if not yet officially registered.
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Topic 2 Indefeasibility of Titles and Interests

In Liputan Simfon Sdn. Bhd. V Pembangnan Orkid Desa Sdn. Bhd., To qualify as a
purchaser in good faith and for valuable consideration under s 340(3), the purchaser must
show:

 no fraud, deceit, or dishonesty, and

 That they acted as a reasonably prudent purchaser (i.e., took ordinary precautions).

Good faith is determined based on conduct up to the time of registration, and only registered
proprietors can invoke protection under s 340(3).

In Lee Kin Sin v Pegawai Pentadbir Pusaka, Malaysia, previously, the plaintiff was involved
in an accident at work place and the 2nd defendant’s father was the employer. The 2nd
defendant’s father was ordered to pay compensation to the plaintiff but no payment was made.
Hence, the 2nd defendant’s father was declared bankrupt. He died and his land was
transferred to the 2nd defendant. The plaintiff alleged fraud and sought a declaration from the
court that the transfer was void and to have the Registry of Pahang cancel the memorial.
There was no evidence of fraud existed. The plaintiff had no locus standi to fail the suit
against the 2nd defendant for he had no interest whatsoever either under the law or in equity.
The transfer of land in Form 14A was fit for registration under S 301 where there is no defect
visible on the form.

In Adorna Properties Sdn Bhd v Boonsom Boonyanit @ Sun Yok Eng, the court agreed with
the Court of Appeal that the standard of proof required to prove forgery in civil cases is one
on a balance of probabilities. S 340 protects a purchaser who, in good faith and for valuable
consideration, acquires title to land. It also protects the successors in title of such a purchaser.
Subsection (3) says that where that title is defeasible under any of the three circumstances
enumerated under sub-s (2), the title of the registered proprietor to whom the land was
subsequently transferred under the forged document, is liable to be set aside. By virtue of the
proviso to sub-s (3) of S340 of NLC, any purchaser in good faith and for valuable
consideration, are excluded from the application of the substantive provision of sub-s (3). For
this category of registered proprietors, they obtained immediate indefeasible title to the lands.
Therefore, on the facts of this case, even if the instrument of transfer was forged, the
respondent nevertheless obtained an indefeasible title to the land. In other words, if such a
registered proprietor were to dispose of the land to a third party who, in good faith pays the
purchase price, then, the latter, as well as all those who come onto the register after him, take
title free of any taint.

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Topic 2 Indefeasibility of Titles and Interests

15. Edmond (husband) and Cecilia (wife) co-own a piece of 38-acre land, Lot 007 at
Mukim Jasin, Melaka (‘the land’). Cecilia has been away from the country to
accompany their son who is pursuing his tertiary education in Australia since 2013.
She entrusted her husband to take care of their properties, including the land. She did
not empower Edmond to sell, transfer and charge the land. Edmond was keen to start
his own butterfly farm business on part of the land but he was short of funds. He
approached SuperDan Berhad (‘SBB’) for a loan and in June 2014 a third-party
charge was created on the land. With the solicitors’ permission, he brought back the
loan documents including the instrument of charge in Form 16A to be executed by his
wife. In fact, he had executed it himself by forging his wife’s signature. The charge
was registered. By April 2015, Edmond was unable to make ends meet and was
unable to pay his instalment to SBB. As the loan fell into the non-performing loan
category, SBB transferred the charge to Asam Ganas Bank Berhad (‘AGBB’) in June
2015. AGBB applied to the High Court for an Order for Sale after Edmond was
unable to comply with the notice of default. The order was granted in mid-October
2015 and the public auction was to be held in early January 2016. Cecilia only
discovered this whole episode after returning from Australia in January 2016.

Advise her as regards her right to recover the land, particularly her half undivided
share. Would her position be different if the land was now registered in the name of
the purchaser in the public auction?
(Total: 25 marks)
[Question 2, Tri 2, 2015/2016 Final]

Issue 1: Whether SBB obtained an indefeasible title despite the forgery

Law:
 Section 340(1): A registered interest is generally indefeasible.
 Section 340(2): However, a title obtained through fraud, forgery, misrepresentation, or
unlawful means is defeasible.
 The concept of indefeasibility under the NLC is not absolute. Under S340(2) of NLC,
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.
 Tan Ying Hong v Tan Sian San:

In the case of Tan Ying Hong v Tan Sian San & Others, the first respondent claimed he had
the authority to act under a power of attorney and used it to create a charge on the
appellant’s land in favour of United Malayan Banking Corporation (UMBC), the third
respondent. This charge was meant to secure loans for Cini Timber Industries Sdn. Bhd.,
the second respondent.

However, the appellant only found out about the charge when he received a notice of
demand from the bank. He denied ever signing a power of attorney and claimed it had been
forged. The High Court later confirmed that the appellant had never given such power of
attorney, meaning the first respondent had no authority to charge the land. Therefore, the
charge was based on forgery or fraud.

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Topic 2 Indefeasibility of Titles and Interests

Despite this, the High Court followed the earlier Adorna Properties decision, which held that
a bank could still obtain indefeasible title, even when the charge was created through fraud
or forgery.

The appellant appealed. The key questions for the Federal Court were:

 Does Section 340 of the National Land Code (NLC) give immediate or deferred
indefeasibility to registered interests?
 Was the decision in Adorna Properties correct?
 How should Section 340(1), (2), and (3) be properly interpreted?

The Federal Court allowed the appeal. It ruled that the proviso in Section 340(3) (which
protects bona fide purchasers) only applies to Section 340(3) itself, and not to Section
340(2). This is clear from the words “in this subsection” used in the proviso. So, the
protection for good faith purchasers does not extend to cases involving forgery under
Section 340(2).

The Court said the earlier decision in Adorna Properties was wrong because it misread
Section 340 by applying the proviso in (3) to (2). This mistake needed to be corrected to
protect the rights of genuine landowners.

Even though Section 340(3)(a) and (b) refer to situations listed in (2), they only apply to
subsequent transfers or interests — not to the immediate holder like the third respondent in
this case.

Since the bank’s charges were based on forged documents, the instruments were void, and
the bank’s interest could be set aside. It did not matter whether the bank acted in good faith or
paid value — because the charges were invalid from the start. (The Federal Court confirmed
that forged titles are defeasible under Malaysian law.)

Application:
Cecilia and Edmond co-own the land. Cecilia did not give Edmond authority to sell, transfer,
or charge the land. Despite this, Edmond forged Cecilia’s signature on the Form 16A charge
document to obtain a loan from SBB. The charge was registered based on this forgery. Since
SBB’s interest was created through forgery, Section 340(2) applies and the title they received
is not protected.

Conclusion: SBB’s title is defeasible because it was obtained through forgery, and Cecilia
did not authorize the charge.

Issue 2: Whether AGBB obtained an indefeasible title as the subsequent chargee

Law:
Section 340(3): A subsequent purchaser's title is also defeasible if the original title was
defective.

Proviso to Section 340(3): However, a subsequent purchaser who is a bona fide purchaser for
value and acted in good faith may obtain an indefeasible title.

In Datuk Jagindar Singh & Ors v Tara Rajaratnam, the appellants who were advocates and
solicitors colluded to obtain possession of the respondent’s land in Kulai by fraud. The
respondent had agreed to transfer her land to the 2nd appellant as security for an advance of
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Topic 2 Indefeasibility of Titles and Interests

$220,000 to her account. The money was to be used to pay off a charge on the land and also
to pay the 1st appellant an amount payable by her brother-in-law for whom the first appellant
had stood in surety. The 2nd appellant executed a transfer of the aforesaid land to the 3rd
appellant in consideration of $220,000 but no consideration was in fact passed. Subsequently,
the land was again transferred to a land development company almost wholly owned by the 1st
appellant and this land was eventually subdivided and sold to the public. The court found the
appellants guilty of fraud and awarded damages to Tara. The court found that the appellants’
titles in the transaction could clearly be impeached as they were ‘party and privy’ to the fraud.
However, the title of the purchasers could not be defeated as they were bona fide purchasers
for value without notice of the fraud and were protected under S.340(3) of the NLC. Tara
could not get back her land as it had fallen into the hands of bona fide purchasers.

In Low Huat Cheng & Anor v Rozdenil bin Toni and another appeal, The plaintiff,
administrator of his late parents' estate, discovered that his brother (2nd defendant) had
forged documents to unlawfully transfer estate land to the 3rd and 4th defendants, who were
innocent purchasers. They later sold the land to the 5th defendant, who charged it to HSBC
(6th defendant). Upon default, the land was auctioned to the 7th defendant.
The plaintiff sued under s 340 of the National Land Code (NLC) to set aside the transfers
and alternatively for damages in negligence. The High Court, relying on Tan Ying Hong v
Tan Sian San, ruled that the 3rd and 4th defendants' titles were defeasible as they were
immediate purchasers via a void instrument (forgery). However, by the time the plaintiff
filed suit, the title had passed to the 5th defendant—a bona fide subsequent purchaser—
thus making the title indefeasible.
Although the High Court awarded damages to the plaintiff from the 3rd and 4th defendants,
the Federal Court later held that:
 Relief under s 340 NLC is statutory and in rem, limited to setting aside the title;

 Damages cannot be awarded under s 340 unless there's an independent cause of

action;

 The plaintiff failed to prove negligence, and the 3rd and 4th defendants were bona
fide with no notice of the forgery.

Conclusion: The plaintiff’s claim under s 340 failed due to the title becoming indefeasible
before action commenced. His negligence claim also failed for lack of evidence, and the
award of damages was outside the court's jurisdiction.

Application:
AGBB took over the charge from SBB in June 2015. Since the original charge to SBB was
forged, AGBB’s title is also affected, unless they can prove they are bona fide — that is, they
acted in good faith, gave valuable consideration, and had no knowledge of the forgery. If
AGBB did not suspect any wrongdoing and followed proper procedures, their title may be
protected under the proviso to Section 340(3).

Conclusion: AGBB’s title is defeasible, unless they can prove they are a bona fide purchaser
who acted in good faith and without notice of the forgery.

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Topic 2 Indefeasibility of Titles and Interests

Issue 3: Whether Cecilia can recover her half share if the land was sold to a public auction
purchaser

Law:
Proviso to Section 340(3): A purchaser who acquires the land in good faith for value will
obtain an indefeasible title, even if the prior registration was defective.

In Low Huat Cheng & Anor v Rozdenil bin Toni and another appeal, The plaintiff,
administrator of his late parents' estate, discovered that his brother (2nd defendant) had
forged documents to unlawfully transfer estate land to the 3rd and 4th defendants, who were
innocent purchasers. They later sold the land to the 5th defendant, who charged it to HSBC
(6th defendant). Upon default, the land was auctioned to the 7th defendant.
The plaintiff sued under s 340 of the National Land Code (NLC) to set aside the transfers
and alternatively for damages in negligence. The High Court, relying on Tan Ying Hong v
Tan Sian San, ruled that the 3rd and 4th defendants' titles were defeasible as they were
immediate purchasers via a void instrument (forgery). However, by the time the plaintiff
filed suit, the title had passed to the 5th defendant—a bona fide subsequent purchaser—
thus making the title indefeasible.
Although the High Court awarded damages to the plaintiff from the 3rd and 4th defendants,
the Federal Court later held that:
 Relief under s 340 NLC is statutory and in rem, limited to setting aside the title;

 Damages cannot be awarded under s 340 unless there's an independent cause of

action;

 The plaintiff failed to prove negligence, and the 3rd and 4th defendants were bona
fide with no notice of the forgery.

Conclusion: The plaintiff’s claim under s 340 failed due to the title becoming indefeasible
before action commenced. His negligence claim also failed for lack of evidence, and the
award of damages was outside the court's jurisdiction.

Frazer v Walker and CIMB Bank v AmBank: Subsequent good faith purchasers are protected.

Application:
If the land has already been sold in a public auction, and the buyer had no knowledge of the
forgery and paid value in good faith, their title becomes indefeasible. Even though Cecilia did
not consent to the charge, the auction purchaser had no way of knowing. The law protects
such innocent buyers.

Conclusion:
Cecilia cannot recover her half share if the land is now registered in the name of a good faith
purchaser from a public auction, as their title is indefeasible under the law.

Reading List to include BUT not limited to the following:

o s 340(2)(b), s 340(3) & proviso, s 319(2), s 321(3)(c) NLC
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Topic 2 Indefeasibility of Titles and Interests

o Chiew Lip Seng v Perwira Habib Bank (M) Bhd,
o In Chiew Lip Seng v Perwira Habib Bank (M) Bhd., the court held that since the fact of
forgery is, by itself, sufficient to make a registered title defeasible, regardless of the absence
of knowledge on the part of the proprietor, the title of an immediate proprietor is defeasible,
though he being an innocent purchaser for value. (The court ruled that if a document is
forged, it can void a registered title, even if the current owner didn't know about the forgery
and bought the property in good faith.)

o OCBC Bank (M) Bhd v Pendaftar Hakmilik Negeri Johor (CA),

In this case, OCBC Bank was the chargee of a piece of land in Johor. The charge was created to
secure an overdraft facility provided by the bank to Ng See Chow. When Ng See Chow
defaulted on the facility, the bank obtained a court order to sell the land.

However, things became complicated when Ng Kim Hwa lodged a police report, claiming that
he was the true owner of the land and that he never signed any transfer of the land to Ng See
Chow. Because of this, the Registrar entered a caveat on the land title to prevent the sale.

OCBC Bank then applied to remove the caveat, arguing that it was an innocent party and that
its charge should be indefeasible, as it had no knowledge of the alleged fraud.

But the court held that since Ng See Chow’s title might have been acquired through a forged
transfer, his registration as owner was liable to be set aside under Section 340(2)(b) of the
National Land Code (NLC). This meant the bank’s charge, which was based on Ng See
Chow’s title, was also defeasible.

Importantly, even though OCBC Bank acted in good faith and gave value, no protection is
given under the proviso to Section 340(3) in this kind of case, because Section 340(3)’s proviso
does not apply to forgery or fraud cases under Section 340(2)(b).

As a result, the Registrar was justified in maintaining the caveat to protect the interest of Ng
Kim Hwa, the alleged true owner.

o EON Bank Bhd v Hotel Flamingo,

In EON Bank Bhd. v Hotel Flamingo and another case, the court held that the standard of
proof required is on a balance of probabilities.

o Boonsom Boonyanit v Adorna Properties Sdn Bhd (CA & FC),

o In Adorna Properties Sdn Bhd v Boonsom Boonyanit @ Sun Yok Eng, the court agreed with
the Court of Appeal that the standard of proof required to prove forgery in civil cases is one
on a balance of probabilities. S 340 protects a purchaser who, in good faith and for valuable
consideration, acquires title to land. It also protects the successors in title of such a purchaser.
Subsection (3) says that where that title is defeasible under any of the three circumstances
enumerated under sub-s (2), the title of the registered proprietor to whom the land was
subsequently transferred under the forged document, is liable to be set aside. By virtue of the
proviso to sub-s (3) of S340 of NLC, any purchaser in good faith and for valuable
consideration, are excluded from the application of the substantive provision of sub-s (3). For
this category of registered proprietors, they obtained immediate indefeasible title to the lands.
Therefore, on the facts of this case, even if the instrument of transfer was forged, the

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Topic 2 Indefeasibility of Titles and Interests

respondent nevertheless obtained an indefeasible title to the land. In other words, if such a
registered proprietor were to dispose of the land to a third party who, in good faith pays the
purchase price, then, the latter, as well as all those who come onto the register after him, take
title free of any taint.

o Tan Ying Hong v Tan Sian San & Anors (FC),

Thus, under deferred indefeasibility, registration does not cure the defect in the instrument.

In Tan Ying Hong v Tan Sian San & Ors, the appellant is the registered owner of a piece of land
in Kuantan, Pahang. The 1 respondent purporting to act under a power of attorney executed 2
st

charges in favour of United Malayan Banking Corporation Berhad, the 3 respondent, to secure
rd

two loans granted to Cini Timber Industries Sdn. Bhd., the 2 respondent. The appellant claimed
nd

that he did not sign the power of attorney and that it was forged. The appellant only became
aware of the forgery when he received a notice of demand from the 3 respondent. The principal
rd

issue is whether S.340 of the NLC confers immediate or deferred indefeasibility upon the
registered proprietor or any person having registered interest in the land. The court concluded that
the judges in Adorna Properties had misconstrued S.340(1), (2) and (3) of the NLC by coming to
the erroneous conclusion that the proviso to subsection (3) applied equally to subsection (2). The
court further held that the registered charges in this case was liable to be set aside under S.340(2)
as it was not disputed that they were void instruments which were executed pursuant to a forged
power of attorney. The 3 respondent could not avail itself of the proviso to subsection (3) of
rd

S.340 as it was the immediate holder of those charges. The prevailing question is whether
Malaysia applies immediate or deferred indefeasibility. Tan Ying Hong is a landmark decision as
it restores the principle of deferred indefeasibility to S.340 of the NLC and rectifies, in the words
of the learned Chief Justice of Malaysia, Tan Sri Zaki bin Tun Azmi, the "obvious and blatant
error" committed in Adorna Properties. What then is position of law from now on when dealing
with indefeasibility? With the decision of Tan Ying Hong, a registered proprietor will now be
required to prove his right to indefeasibility if the circumstances of the exceptions set out in
S.340(2) are raised. In other words, the title or interest of a registered proprietor is indefeasible
under S.340(1) of the NLC unless it is made defeasible under S.340(2).

o Mohamed bin Buyong v Pemungut Hasil Tanah, Gombak,

o Agrimal Project Sdn Bhd v Pendaftar Hakmilik, PTG, Johor,
o OCBC Bank (M) Bhd v Pendaftar Hakmilik Negeri Johor (CA),

o Pekan Nenas Industries Sdn Bhd v Chong Ching Chuen (FC),

In Pekan Nenas Industries Sdn Bhd v Chang Ching Chuen, the basic element of good faith
was described as “the absence of fraud, deceit or dishonesty and the knowledge or means of
knowledge of such at the time of entry into a transaction.”

o Ong Ban Chai v Seah Siang Mong

(CA)

In Ong Ban Chai & Ors v Seah Siang Mong, The judge had erred in law in ordering the half
share to be registered in favor of the respondent. In order to be a bona fide purchaser, one

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Topic 2 Indefeasibility of Titles and Interests

should have contracted in good faith for value, and knowledge of an adverse claim is not
fraud. The material time is the time of the transaction.

Please prepare the above for discussion.

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