Meaning of Lien

What is a Lien
• Lien is a security dealing created by virtue of Section 281 of NLC 1965.
• The court in Palaniappa Chetty v Dupire Brothers, refer to the meaning of
Lien as provided by the Halsburry Laws of England.
• “Lien in its primary sense is a right in one man to retain that,
which is in his possession belonging to another man until certain
demands of the person in possession are satisfied.”
• Derived through French from Latin that is Ligo, Ligamen is that binding or
tying or securing something.
 Elements of a Lien
• 3 Elements:
• Deposit
• Intention
• Lodging or entry of Lien-holders caveat
 Deposit of IDT/Duplicate Lease
• Element of deposit of idt is important.
• The lien will only be considered not in existence if the depositee
or lien holder returns the issue document of title upon full and
final settlement of the loan
 ORMOMRM Manickavasagam Chetty v
TJ McGregor[1933] MLJ 295
• the lien is not lost when possession of the issue document of
title is given up 'in cases where [there is] some intention other
than that of giving up the lien', such as surrendering it to the
collector of land revenue for sub-division purposes.
Perwira Habib Bank (M) Berhad v Loo
& Sons Realty Sdn. Bhd. (No.1) [1996]
3 MLJ 409.
• The court in this case said that only the registered proprietor or
lessee can deposit the issue document of title or duplicate lease
with a creditor with the intention of creating a lien. A third party
(someone other than the registered proprietor or lessee) with
whom a title has been deposited with for safe keeping cannot
use it to create a lien in his name.
•
• s. 331(4)(a) NLC
 2nd element-Intention to create Lien

• Paramoo v Zeno Ltd (1968) 2 MLJ 230.

• This requirement may be seen from the fact that there must be
an intention to deposit the issue document of title or duplicate
lease with the lender as a security for the loan and for not other
purpose.
 How to identify the intention?
• may be inferred from the relevant circumstances of the case
• Raja Azlan Shah J
• Zeno v Prefabricated Construction Co (Malaya) Ltd
 Palaniappa Chetty v Dupire
Brothers(1922) 1 FMSLR 370 at p 374,
• Ernshaw JC expressed the view that the existence of a loan
contract under which the lender was entitled to possession of
issue documents of title gave rise to the presumption that the
deposit was made by the borrower with the intention to create a
lien.
 3rd Element- Lodgment or Entry of Lien-
Holders Caveat
• According to S.281 NLC a lien may be created over the land or
an undivided share or lease.
• lien holder can proceed to enter the lien holder’s caveat over
the land.
• It is only after entry of lien holders caveat that the lien will then
take effect in law as provided in S.281 (a)(b) & S.330 NLC in
order to render the land, lease or the undivided share liable as a
security for the loan advanced by the lender
• Entry of Lien Holders caveat protects the interest of the Lender
in respect of the land, undivided share or the lease in that it will
prohibit any further dealings with the said land
 Creation of Lien
• Section 281(1), any proprietor or lessee for the time being, deposits an IDT or
duplicate lease to the lender
• And Section 281(1)(a) the lender, shall lodge a lien-holder’s caveat as in the Form
19D, as mentioned in section 330(1) of NLC .
• Section 330(2), the form must be duly attested accompanied by prescribed fee and
the IDT or duplicate lease..
• Upon application, serve a notice in Form 19A to the proprietor..
• The entry becomes effective on RDT when it was endorsed under the hand and
seal of the Registrar “Caveat (Lien)”.
 Mercantile Bank v The Official Assignee of
The Property of How Han Teh

How Han The deposited his land title for loan.

Failed to repay loan. Committed The applicant registered caveat
AOB. against the title.
 After declared bankrupt, Official assignee opposed as no
Applicant argue has equitable right
registered caveat at the time of
applicant applied order for sale. AOB.
under lien contract.
 Held..
• The applicant has an equitable right at the time of AOB and the official
assignee has no better title than the applicant.
• The applicant has a prior interest and entitled for order for sale.
• As lien is initially from contractual basis, S 206 (3) of NLC recognized the
existence of equitable right.
• Section 206 (2) (b) Lien does not need registration because there is no special
form to register.
• The prerequisite elements is important.
• Disadvantage: risk losing priority if there is bona fide party.
 Remedy for Lien Holder
Section 281 (2) NLC

or Lien Holder
1. To obtain judgement in 2. To apply to court for an
civil action. It must prove order for sale
the debt.