Comparison between Boonsoom Boonyanit vs Adorna Properties and Tan Yin Hong

vs Tan Sian San

1. Land Law and Administration in Malaysia

 Malaysia adopted Torrens system in land law and administration
through National Land Code 1965.
 Derived from South Australia created by Sir Robert Torrens in early
1800s.
 Emphasized on the indefeasibility of title through registration. Land
ownership and interest is transferred through registration of title.
 What is registered in the title is the fact material of the land and the
interest and ownership therein e.g particular of the land, size, location,
owner, chargor (if any) etc.

2. Indefeasibility of title
 Section 340 of the NLC 1965, the title of anyone who is registered as
the owner of the land will be indefeasible.
 Section 340(2) - exception to the indefeasibility of title i.e fraud,
misrepresentation, forgery, insufficient or void instrument, and
unlawfully acquired.
 Section 340(3) - indefeasibility of title by subsequent transfer under
proviso of bona fide purchaser/transferee.
 2 types of indefeasibility, immediate or deferred.
i. Immediate indefeasibility - that immediate purchaser gets an
undisputed title and stands strong against all other claims.
ii. Deferred indefeasibility - the indefeasibility is conferred to the
title or interest only upon a subsequent transfer.
 Example of immediate indefeasibility:
A obtains a land via fraud and sells it to B. C, the true owner of the
land, discovers the fraud and sues for the return of the land. Even
though fraud can be proven, B still keeps the land because of the
concept of immediate indefeasibility of title.
 Example of deferred indefeasibility:
A obtains a land via fraud and sells it to B. B then sells that land to D.
C, the true owner of the land, discovers the fraud after the sale to D. C
sues for the return of the land. However, because the land has been
transferred from B to D (subsequent transfer), D now has the protection
of an indefeasible title. C will not be able to get his land back.
MAIN ISSUE OF THE PRESENTATION:

WHETHER MALAYSIAN LAW ADOPTS IMMEDIATE OR

DEFERRED INDEFEASIBILITY OF TITLE UNDER
SECTION 340 OF NLC 1965???

Adorna Properties Sdn Bhd v Boonsom Boonyanit [2001] 2 CLJ 133

 The Respondent was the registered proprietor of a piece of land which had
been sold and transferred to the Appellant. The Respondent claimed that the
vendor had forged her signature, sold and transferred the land to the
Appellant. The High Court dismissed the Respondent’s claim. The decision of
the High Court was reversed by the Court of Appeal and the Appellant
appealed.
 The Federal Court held that by virtue of the proviso to section 340(3) of the
NLC, a purchaser in good faith and for valuable consideration is excluded
from the application of the substantive provision of Section 340(3). Therefore,
this category of registered proprietors obtains immediate indefeasible title to
the land even if they acquired title through instruments of transfer which are
forged.
 Following the case of Adorna, seems that Malaysian
law adopted immediate defeasibility which means that
immediate purchaser gets an undisputed title and
even if they acquired title through instruments of
transfer which are forged.
 This decision drew much criticism from the legal academia as being 'clearly
wrong'. It also caused grave concern amongst land owners who became
vulnerable to losing their land even through the use of forged instruments of
transfer. Many courts reluctantly followed Adorna Properties as it was a
judgment of the apex court of Malaysia.
 In the case of Au Meng Nam & Anor v Ung Yak Chew & Ors [2007] 5 MLJ
136, Raus Sharif JCA decided that Federal Court need to review Adorna
Properties but refuse to against doctrine of stare decisis. Gopal Sri Ram JCA
stated that in Section 340(3) "to whom it may subsequently be transferred"
applies to subsequent acquires of land taking from registered owner whose
title are defeasible. Adorna is not subsequent purchaser, it took its title from
forger.

Tan Ying Hong v Tan Sian San & Ors [2010] 2 CLJ 269
  The Appellant is the registered owner of a piece of land in Kuantan, Pahang.
The 1st Respondent purporting to act under a power of attorney executed 2
charges in favour of United Malayan Banking Corporation Berhad, the 3rd
Respondent, to secure two loans granted to Cini Timber Industries Sdn Bhd,
the 2nd Respondent. The Appellant claimed 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 3rd Respondent on 9
March 1985.
 The main question arise in this case is whether the law established in
Adorna’s case had to be followed.
 The Court, in a unanimous decision, concluded that the judges in the Federal
Court in Adorna Properties had misconstrued Section 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). By so doing, the Federal Court in Adorna
Properties gave recognition to the concept of immediate indefeasibility under
Proviso of bona
the NLC contrary to the provisions of Section 340.
fide purchaser in the Section 340(3) only apply to the
subsection (3) only and not equally apply to
subsection (2).
 The Federal Court then applied the re-stated principles of indefeasibility to the
facts of Tan Ying Hong and held that the registered charges were liable to be
set aside under Section 340(2) NLC as it was not disputed that they were void
instruments which were executed pursuant to a forged power of attorney. The
Court further held that the 3rd Respondent could not avail itself of the proviso
to subsection (3) of Section 340 as it was the immediate holder of those
charges.

Conclusion

The judges overturned the established principle in Adorna’s case and closed the gap
in the law by setting out that the proviso found in section 340(3) can only be applied
within the confines of section 340(3). In other words, it means that the concept of
indefeasibility in Malaysia is one of deferred indefeasibility.

In simple words, if your land has been sold by forger to one party,
you can still claim back your land because the title is not yet
indefeasible. However, if that one party sell your land to a 3rd party
(bona fide, of course), then you could not claim back your land as
the title now become indefeasibly belong to that 3rd party.
Tan Yin Hong is a decision which should be welcomed by landowners as it provides
them with an additional layer of protection against the loss of their lands by
fraudulent means or forged instruments. Tan Yin Hong is a landmark decision as it
restores the principle of deferred indefeasibility to Section 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.