BWBB 3043 BANK SECURITIES

CASE STUDY

Adorna Properties Sdn Bhd v Boonsom Boonyanit @ Sun Yok Eng [2001] 1 MLJ 241, Federal Court

Boonsom Boonyanit v Adorna Properties Sdn Bhd [1997] 2 MLJ 62, [1997] 3 CLJ 17, Court of Appeal (Ref. Banking Law, p753)

Facts:

The appellant owned property in Penang. An unknown person, claiming to be the appellant, having procured a duplicate land title from the Land Registry and a forged passport, sold the property to the respondent for valuable consideration.

The appellant sued the respondent. The High Court held that the appellant has failed to prove the forgery beyond a reasonable doubt and the respondent's title was indefeasible by virtue of section 340 of the National Land Code (NLC). The appellant appealed.

Court of Appeal held, allowing the appeal, inter alia:

(1) The standard of proof to be applied in civil forgery suits is the balance of probabilities.

(2) The words 'any purchaser' in section 340 of the Code refers to a subsequent and not to an immediate purchaser, hence creating a deferred indefeasibility which benefits subsequent purchasers. The title of an immediate purchaser is defeasible if tainted by one or more of the vitiating elements set out in section 340(2) but creates an exception in favour of a bona fide purchaser who takes his title from such a registered proprietor.

(3) By virtue of section 340, a registration obtained by forgery is of no effect

(4) In Malaysia, under section 340 of the NLC, deferred indefeasibility applies. The registered proprietor who by registration of a void or voidable instrument does not acquire an indefeasible title. The indefeasibility is postponed until the time when a subsequent purchaser acquires the title in good faith and for valuable consideration.

The Federal Court in reversing the Court of Appeal decision, upheld the High Court decision.

Held:

Even if the instrument of transfer was forged, a purchaser in good faith and for valuable consideration nevertheless obtained an indefeasible title to the land. The court said in the following words:

The proviso to subsection (3) of section 340 of the NLC deals with only 1 class or category of registered proprietors for the time being. It excludes from the main provisions of subsection (3) this category of registered proprietors is not caught by the main provisions of this subsection.

Who are these proprietors? The proviso says any purchaser in good faith and for valuable consideration or any person or body claiming through or under him is excluded from the application of the substantive provision of subsection (3). For this category of registered proprietors, they obtained immediately indefeasibility notwithstanding that they acquired their titles under forged documents.

Questions (50 marks)

1. Describe the issue of the above case.

(20 marks)

2 (i). What are the documents that were fraudulently used to obtain the transfer of the appellant property?

(15 marks)

(ii) How does the high court arrive at their decision including use of section in NLC. Elaborate your answer.

(15 marks)