Question A Question A
Generally
Generally security transactionssecurity transactions are dealings efected by the registered proprietor are dealings efected by the registered proprietor o an alienated land to coner an interest on such land to the lender in order to obtain a o an alienated land to coner an interest on such land to the lender in order to obtain a loan. Such interest unctions as a guarantee o repayment o the loan and in the event o loan. Such interest unctions as a guarantee o repayment o the loan and in the event o deault by the borrower, the lender will be entitled to commence oreclosure proceedings deault by the borrower, the lender will be entitled to commence oreclosure proceedings or an order or sale o the said land to recover the loaned sum.
or an order or sale o the said land to recover the loaned sum.11 In other words, security is In other words, security is
created when the creditor obtains rights eercisable against some property in which the created when the creditor obtains rights eercisable against some property in which the debtor has an interest in order to enorce the discharge o the debtor!s obligation to the debtor has an interest in order to enorce the discharge o the debtor!s obligation to the creditor.
creditor."" #ender is usually disinclined to ofer loan by merely basing it on the borrower!s #ender is usually disinclined to ofer loan by merely basing it on the borrower!s
personal credit and hence, security is a orm o $certainty! or repayment in enorcing a personal credit and hence, security is a orm o $certainty! or repayment in enorcing a claim in debt.
claim in debt.%% &here are three 'inds o security namely lien, mortgage and also pledge (an &here are three 'inds o security namely lien, mortgage and also pledge (an
int
intermermediediate ate betbetweeween n lien lien and and mormortgatgage)ge)**. +o. +owevwever er in in esest t -a-alaylaysisia, a, chchararges ges anandd
statutory liens are the security transactions recognied under our /ational #and 0ode 123 statutory liens are the security transactions recognied under our /ational #and 0ode 123 and remedies are also provided.
and remedies are also provided. Lien
Lien is unde4ned under /#0 but -alaysian courts is unde4ned under /#0 but -alaysian courts33 approved the de4nition as laid approved the de4nition as laid
down in
down in +alsb+alsbury!s #aws o ury!s #aws o 5ngla5nglandnd22 which means 6a right at common law in one man to which means 6a right at common law in one man to
retain rightully and continuously in his possession belonging to another until the present retain rightully and continuously in his possession belonging to another until the present and
and accruaccrued ed claims claims o o the the persoperson n in in posspossessioession n is is satissatis4ed.7 S4ed.7 S"81(1) "81(1) o o the the /#0 /#0 layslays down the principles governing a valid creation o &orrens statutory lien. &he method down the principles governing a valid creation o &orrens statutory lien. &he method o
o creacreating ting a a lien lien in in the the /#0 /#0 is is by by deposdepositing iting the the issuissue e documdocument ent o o title title by by thethe proprietor
proprietor or or lessee lessee as as a sa security ecurity or a or a loan and loan and that that lien9holder may lien9holder may thereupon thereupon apply apply oror the entry o
the entry o a a lien9hlien9holder!older!s caveat.s caveat.:: &he &he proprproprietor may also deposit his title with a ietor may also deposit his title with a lenderlender
or
or the the benbene4t e4t o o a a thithird rd parpartyty. . ;nc;nce e a a lielien9hn9holdolder<er<s s cavcaveat eat is is ententereered, d, the the lielien9hn9holdolderer
1
1 =rinciples o -alaysian #and #aw, pg =rinciples o -alaysian #and #aw, pg "%%."%%.
"
"Bristol Airport Plc v PowdrillBristol Airport Plc v Powdrill >1?@ 0h. :** >1?@ 0h. :**
%
% 0ousins, &he #aw o -ortgages, pg 1. 0ousins, &he #aw o -ortgages, pg 1.
*
*Halliday v HolgateHalliday v Holgate (1828) #.. % 5ch. " (1828) #.. % 5ch. "
3
3Palaniappa Chetty v Dupire Brothers & Anor Palaniappa Chetty v Dupire Brothers & Anor (1"") 1 B-S# %:? (0A) at (1"") 1 B-S# %:? (0A) at pg %::Cpg %::C ORMORM Manickavasagam Chetty vORMORM Manickavasagam Chetty v homas !ames Mc"regor
homas !ames Mc"regor >1%%@ " -#D "3 (+0) at >1%%@ " -#D "3 (+0) at pg "2Cpg "2C Perwira A#n Bank Bhd v $elangor Properties $dn Bhd & OrsPerwira A#n Bank Bhd v $elangor Properties $dn Bhd & Ors >"?1?@ % >"?1?@ % -#D *% (0A) at pg *.
-#D *% (0A) at pg *.
2
2 Eol 28 (3 Eol 28 (3thth 5d) at pg "3:. 5d) at pg "3:.
:
becomes a secured creditor.8 +ence the holder o any lien will be entitled an order or the
sale o the land or lease ater he has obtained Fudgement or the amount due to him under the lien in the event o deault payment by the debtor.
Mortgage is both a contract and a transaction which creates an interest in land by way o security. It is a conveyance o land or an assignment o chattels as a security or
the payment o a debt, or the discharge o some other obligation or which it is given. -ortgage securities coner contractual right (including the right to sue or debt) which is supported by proprietary rights over the property that is the subFect9matter o the security to the lender, but which are not dependent on the lender obtaining possession o that property.1?A mortgage deed generally stipulates that the mortgagor shall repay on a 4ed
date rom the eecution o the deed, ailure in which the property will be vested in the mortgagee. &he common law mortgage is redeemable on the payment or discharge o such debt or obligation and it is complementary to the lender!s power to return the property (or money euivalent represented by the surplus on the sale o the property) on repayment. 0onversely, i the lender is unable to return the property or money euivalent, as happens on oreclosure, the personal covenant, even i unsatis4ed, is etinguished.11 /#0 does not
recognie common law mortgage.1"
A mortgage is a conveyance o property subFect to a right o redemption, whereas a charge conveys nothing and merely gives the chargee certain rights over the property as security or the loan.1% Charge is provided in /#0 by virtue o s3 and s"*1 and it is ineuivalent to
5nglish mortgage at common law although both are meant to secure repayment o loan.1*
A statutory charge is created over any alienated land or lease or undivided share to secure the repayment o a loan and it ta'es efect only upon registration. 0harge passes no title or
8Perwira A#n Bank Bhd v $elangor Properties $dn Bhd & Ors >"?1?@ % -#D *%.
+alsbury #aw o 5ngland.
1?$antley v %ilde >18@ " 0h *:*
11oakes & Co 'td v Rice >1?"@ A0 "*, +#C $utton v $utton (188") "" 0hH 311.
1"oakes & Co 'td v Rice >1?"@ A0 "*, +# Jut our land law certainly recognises a mortgage in the sense o &orrens system, reerred as &orrens -ortgage in which the mortgagor retains the legal ownership whilst the mortgagee acuires a statutory right to enorce his security. Bor the purpose o avoiding conusion, our /ational #and 0ode drops the word KmortgageK and uses the word KchargeK in place o &orrens mortgage.
1% &he #aw o eal =roperty (3th 5d), Sir obert -egarry L + ade at pg 1*.
ownership rom the registered proprietor o the land to the chargee or lender. It is clearly stated under s"*% o /#0 that the charge merely renders the land in uestion liable as a security. egistered charge only amounts to an interest in land but is not to be considered as a contract.13 As such, no power o sale or oreclosure is conerred on the chargee himsel
upon deault o the chargor but legal proceedings must be ta'en by the chargee to obtain a Fudicial order o sale o the charged property.12
Agreement to secure repayment o a loan created by contracts outside any enactments o the &orrens system<s registration o titles such as the /#0 may still give rise to an equitable charge.1: 5uitable charge does not contravene /#0 and is a orm o security
uite outside o /#0 to which efect may be given as a contract inter partes18 by virtue o
s"?2(%). 5uitable charge gives rise to an euitable right in avour o the creditor even though such charge was not eecuted according to /#0.
&he distinction between euitable mortgage and euitable charge depends very much on the intention o the parties and the remedies available on deault.1 Equitable mortgage
is a conveyance o property subFect to a right o redemption whereas an euitable charge conveys nothing but merely gives the charge the certain rights over the property as security or the loan."? Joth o these happen in the contet o modi4ed security
transactions being recognied contractually and euitably. 5uitable mortgage has a lower legal standing than registered mortgage (i there is more than one mortgage on the same property, registered mortgage ta'es precedence) and it is created when the borrower delivers to the lender the title intending the said title to be a security, usually con4rmation was done verbally instead oMpending registration."1
13Co)operative Central Bank 'td v * & % Development $dn Bhd >1:@ % -#D %:% (0A) at pg %:2.
12 5norcement o 0harges +andboo', pg 1?9%?
1:Chuah +ng ,hong v Malayan Banking B hd >18@ % -#D : (B0) at page 11".
18 ARRM Arunasalam Chetty s-o $itham.aram Chetty v eah Ang Poh & Anor >1%:@ 1 -#D 1: (S0) at pg "?.
1Phileoallied Bank /M0 Bhd v Bupinder $ingh a-l Avatar $ingh & Anor >"??"@ " -#D 31% (B0)
"?Cheshire and Burn1s Modern 'aw o2 R eal Property (13th 5d) by 5+ Jurn
An euitable lien arises under our /#0 when there is a ailure to enter lien9holder!s caveat or, pending such entry, the lender will acuire a right to a lien in euity."" A lien in euity
over a land can be claimed by a registered chargee who has custody o the title pending registration o the charge and subseuently the right to enter into a caveat."% In the event
o conNicting euities, a lender with whom the title is deposited earlier in time will not lose his priority Fust because o his ailure to caveat the property."*
Question J
Security &ransactions under the /ational #and 0ode in =eninsular
Onder the /ational #and 0ode, there are two types o security transactions in land which are statutorily provided, namely, charge"3 and lien"2. 5ssentially, these transactions
are to ensure that in the event o a deault by a borrower to repay loan, there are some orms o compensation available to the lender through security o loans.
0harge
A charge can be granted over the whole o an alienated land or any undivided share in an alienated land and also any lease o alienated land but not parts o an alienated land":. Bor
a charge to be efective, it has to be registered accordingly with the #and ;Pce or the #and egistry"8. It is also possible or a registered proprietor to charge his property ew times in
succession".Generally, a charge to two or more persons or bodies is not permitted but it
can be created in avour o them as trustees or representatives Fointly%?.
""Mercantile Bank 'td v O#cial Assignee o2 the Property o2 How Han eh >12@ " -#D 12 (+0)
"%$tandard Chartered Bank v *ap $ing *oke & Ors >18@ " -#D * (+0)
"*Paramoo v 3eno 'td >128@ " -#D "%? (B0)
"3 /ational #and 0ode 123, section "*%
"2 Ibid, section "81(1)
": Ibid, section "*1(1)
"8 Ibid, section "*%.
" Ibid, section "*1(")
In order to create a legal charge, the prescribed statutory orm%1 should be used to avoid
reFection upon presentation or registration. +owever, a mista'e between the usage o Borm 12A and 12J was held not detrimental or the usage o the statutory orms is deemed to be Neible%". hen a charge is registered, the efect would be that the land would be
encumbered and thus urther dealings by way o sale or transer is prevented and consent rom the 4rst chargee would be reuired or urther charges to be efected%%. Burthermore,
upon registration o the charge, the chargee will have an indeeasible interest in the land%*
which also coners the charge priority over other dealings that would be created ater the registration o the charge.%3 hen there is a charge created, there would be provisions
which are implied on the part o the chargor in all charges%2 and when there is an absence
o a contrary intention epressed in the charge%:.
Jy virtue o section "**(1), the 4rst chargee is entitled to the custody o the issue document o title to the land charged or in certain circumstances, the duplicate lease subFect to any agreement to the contrary. It is also provided that, the chargee may when reuired by and on the written reuest o the proprietor or lessee produce the issue document o title or duplicate lease at the land registry or oPce or a purpose speci4ed under the /ational #and 0ode(/#0)%8.Hue to charges being able to be subseuently
%1 Ibid, section "*"(1) and "*"("). &he type o orm used should depend on whether it is or the repayment o a debt or or a periodic sum.
%" See 4 'etchumanan v Central Malaysian 5inance Bhd >18?@ " -#D 2 and an *en *ee & Anor v +6uity 5inance Corp Bhd >11@ 1 -#D "%:
%% ow, #ainah ;i #in ("??%) Conveyancing Practice and Procedure in %est Malaysia, Ruala #umpur, -alayan #aw Dournal at pp. "%
%*ai 'ee 5inance Co $dn Bhd v O#cial Assignee & Ors >18%@ 1 -#D 81
%3 Ainul Daria -aidin, et. al. "??8. =rinciples o -alaysian #and #aw. =etaling Daya #eis /eis at pp. "*3
%2 /ational #and 0ode 123, section "*
%: Ibid, sections "3?9"3"
granted, there is the possibility that the issues o priority o charges may arise. Such priorities could be altered by tac'ing,%consolidation*? and postponement*1.
&he rights and remedies o the charger and charge are ehaustively and eclusively dealt with under the /#0*". Onder the /#0, two remedies are available to a charge in the
event o a deault o the loan by the charger. &hey are to obtain a sale o the land charged*%
or to ta'e possession o the property charged**. +owever, the right to ta'e possession o
charged land is restricted to certain types o land*3 and only eercisable by 4rst chargees
only*2. An eercise o the right o possession is no bar to subseuently obtaining an order o
sale o the land*:.
#astly, a rare practice*8 among ban'ers which is epressly allowed in the /#0 is the
transer o charges* . &he efect o the transer would be that subFect to agreement to the
contrary, the transeree is subFect to the obligation and has a duty to perorm and observe the provisions o the charge3?.
% Ibid, section "*2
*? Ibid, section "*3
*1 Ibid, section "*:
*",imlin Housing Development $dn Bhd v Bank Bumiputra /M0 Bhd & Ors >1:@ " -#D 8?3
*% /ational #and 0ode, section "3%
** Ibid, section ":1
*3 Ibid, section ":?(1)
*2 Ibid, section ":?(")
*: Ibid, section "3%(")
*8 ong, Rim Batt,(1) 5norcement o 0harges +andboo', Ruala #umpur, -alayan #aw Dournal at pp. %3
* /ational #and 0ode, section "1*(1)(d)
An unregistered chargee is not entitled to a statutory remedy under the /#0,31 but
he can see' euitable recognition o the charge and obtain a contractual relie.3" I he has
custody o the issue document o title, he can claim or a lien over the land.3% In act,
according to S"?2(%) o the /#0, an agreement to secure a debt in avour o the creditor in respect o the debtor!s land may create an euitable charge3* giving rise to an euitable
right in avour o the creditor, although no charge has been created under the /#0.33
#ien
Onder the /#0, a lien is created when the registered proprietor deposits his issue document o title or a loan.32 &he person or body can later apply to enter into lien9holder caveat3: and
shall upon the entry o the caveat, become entitled to a lien over the lease or land. Bor the creation o lien, nothing needs to be recorded or entered in the register. It is a dealing of the register and thus, is not a registered interest.
&he statutory lien is not capable o being created by deposit o title documents alone. Its creation also reuires the ormality o an entry o caveat in the register.38 A lien is
a non9registered interest but it becomes protected as against registered interests as soon as it is created. &he entry o caveat itsel does not warrant the validity o a lien. &he validity o a lien is dependent on the ul4llment o the prereuisite with regards to the deposit o title documents as security or loan. &he entry o a lien9holder!s caveat is a statutory orm o dealing or efecting a valid lien and it is distinguishable rom the lodgment o an ordinary caveat in other cases or the purpose o protecting claims to land.
31Oriental Bank v Chup $eng Restaurant /Butterworth0 $dn Bhd >1?@ % -#D *%.
3"Daito ,ogyo /$arawak0 $dn Bhd v Port Dickson 'and Development $dn Bhd >"??1@ " -#D 3%1. An unregistered charge unctions as a debt but it is not a proprietary interest in the land or lease or undivided share.
3%$tandard Chartered Bank v *ap $ing *oke & Ors >18@ " -#D *.
3*Malayan Banking Berhad v 3ahari .in Ahmad >188@ " -#D 1%3. An euitable charge can be created where there is no instrument capable o registration.
33Mahadevan s-o Mahalingam v Manilal & $ons /M0 $dn Bhd >18*@ 1 -#D "22 at ":?9":1C gan ,hong v Bamah .te Pakeh !amin Rashid >1%3@ -#D 12:C Arunasalam Chetty v eah Ah Poh rading >1%:@ -#D 1:C 4allipuram $ivaguru v Palaniappa
Chetty >1%:@ -#D 3C and Mercantile Bank v O#cial Assignee o2 the Property o2 How Han eh >12@ " -#D 12.
32 Ibid, section "81(1)
3:Ibid,section %%?
38eh eck Huay v hor Hor Chooi (13*) "? -#D "":C 3eno 'td v Pre2a.ricated Construction Co7 /Malaya0 'td7 >12:@ " -#D 1?*.
S"81(") o the /ational #and 0ode provides that a lien9holder is entitled to apply to the 0ourt or an order or the sale o the land or lease, upon the obtaining o Fudgement or the amount due to him thereunder. &he only remedy or a lien9holder upon deault o payment is to have the debt discharged out o the land by way o sale o land under the direction o the 0ourt. A lien holder might only apply or and obtain an order o sale when he had obtained a Fudgement o the 0ourt o the actual sum due, and his right to enorce the lien by Fudicial sale was conditional upon proo o the personal obligation o his borrower to repay the debt.3 A lien9holder may proceed as a mere Fudgement creditor
against the land by way o an attachment.2?
A statutory lien is not transerable as there is no statutory provision or its transer. Its duration depends on the continuing presence o the caveat on the register. A lien9 holder!s caveat does not lapse by passage o time as does a private caveat which will lapse over the period o si years. here the caveat is withdrawn or cancelled, the lien will be determined.
Histinguishes between 0harge and #ien
&he case o =aramoo v eno21 made it clear that a charge is uite diferent rom that o a
lien and that they can eist independently o each other.
A star' diference apparent rom the /#0 is the type o interest that is conerred upon the lender rom a charge and a lien. Onder a charge, by virtue o section %*?(1), the interest conerred upon the lender is indeeasible, whereas or a lien the interest is a statutory but non9registrable interest. &hus, rom the lender!s point o view, an indeeasible interest weighs more than an interest which is not registered.
+owever, because o the various reuirements and procedure that is reuired to register a charge, some borrowers would opt or a lien or greater epediency to get a loan. In the past when the usual period to get a -emorandum o &ranser adFudicated was " months, some developers would opt or a lien rom the lender as interim security or aster loans2". A lien9holder!s caveat can be entered at any time and the ailure to caveat
timeously will not cause the prior uncaveated lien to lose priority against later caveated 3Cheong ,am v 'oke Chow ye (1"*) * B.-.S.#.. "*C Alagappa Chetti v Perianayagam (1?8) Innes 11:.
2?Dyal $ingh v Pandak Dahalim (1%) 8 -#D "*2.
21 >128@ " -#D "%?
interests. &he reason why lien9holders are able to overrule the usual priority principles is because the lien9holder retains the issue document title. 5ntering a lien9holder caveat is usually done pending the registration o a charge. /onetheless, i there is a restriction in interest on the title, such an option or lien may not be as epedient because o the need to obtain prior consent and advent o the e9adFudication system in our current times.2%
Another distinguishable diference is the possibility o subseuent similar transactions that can be made. Bor a charge, section "*1(") permits the creation o second and subseuent charges but or a lien, while it is not epressly stated that there cannot be subseuent liens, the basis or such a prohibition is that there can only be one copy o issue document o title to the land and as such there cannot be subseuent liens 2*. &he
result o this is that it is harder to get urther advances or loans when we have a lien as compared to. As such, there is also no issue o alteration o priority or statutory lien.
Burthermore, section "*1 (1) allows a charge to be used to secure the repayment o debt or the payment o any sum other than a debt, but a lien can only be used to secure a loan under section "81. +ence, the scope o usage o charge is wider than lien. Also, unli'e charge, a Fudgment or debt owed must 4rst be obtained beore he is entitled to apply or an order or sale o land23. Such an arrangement is less bene4cial to lenders or in the
event o deault, obtaining compensation is less epedient and discouraging. 0ases
&he 0ourt o Appeal!s decision in +ong #eong Binance Jhd v Staghorn Sdn Jhd22
highlights the advantage o lien. #ien under s "81 o the /#0 allows 6a registered proprietor to raise money on loan speedily by depositing the document o title registered in the lender!s name, as compared to the comple process o registering a legal charge over the land7.2: In act, according to +alsbury!s28, there is no reuirement o a ormal contract or
2% Ibid.
2* See &he /ature and Application o the &orrens #iens and #ien9+olders! 0aveats in est -alaysia >18%@ 1 -#D l
23 /ational #and 0ode, section "81(")
22Hong 'eong 5inance Bhd v $taghorn $dn Bhd >"??3@ 3 -#D 1?1.
2: Ibid 11 >%*@. &he Dudge stated $S "81 o /#0 is intended or a registered proprietor to raise money on loan speedily by depositing the document o title registered in the lender!s name, as compared to the comple process o registering a legal charge over the land.!
evidence in writing or a lien to be created. &hus, a statutory lien can be created more conveniently and easily as compared to a legal charge.
&he Bederal 0ourt in +ong #eong Binance2, overturning the 0ourt o Appeal!s
decision, held that a third9party lien holder caveat, Fust li'e a third9party charge:?, is
allowed.:1 +owever, the Bederal 0ourt held that the actual depositor needs not be the
registered proprietor himsel so long as the registered proprietor consents to the depositing.:" :%. hen a depositor is not a registered proprietor, a lien will only be valid
under s "81(1) o the /#0 i the registered proprietor consents to the depositing o document o title and i the depositing does Fustice to the registered proprietor.
In lien cases:*, a depositor o issue document o title oten happens not to be a
registered proprietor. &hese have given rise to issues on whether the registered proprietor in uestion consents to the depositing and whether the depositing does Fustice to the registered proprietor. Jut or a charge, issues li'e these do not arise. 0harge is a registrable interest and thus, must be presented or registration under the /#0. A charge instrument is registered on the register document o title.:3 Similar to lien, a chargor must be a registered
proprietor.:2 I the chargor is not a registered proprietor, the charge in uestion cannot be
registered. +ence, once a charge has been registered, the ban' is sae. Since the creation o a lien does not reuire registration, it is dangerous or the ban' as it has to 4nd out whether the depositor o the document o title is a registered proprietor. I the answer is negative, the ban' also has to ensure that the registered proprietor in uestion consents to
2Hong 'eong 5inance Bhd v $taghorn $dn Bhd >"??8@ " -#D 2"".
:? J &an Sri Abdul Gani =atail, $Securities ;ver #and! ("??) 1?(1) Hals.ury8s 'aws o2 Malaysia %:" >"3?.%3:@.
:19nited Overseas Bank /Malaysia0 $dn Bhd v 9!A $dn Bhd >"??@ 2 -#D 3:. &he 0ourt o Appeal upheld the Bederal 0ourt!s decision in +ong #eong Binance. A lien can be created as a security in avor o third party borrowers.
:"Hong 'eong 5inance Bhd v $taghorn $dn Bhd >"??8@ " -#D 2"".
:%Perwira A#n Bank Bhd v $elangor Properties $dn Bhd & Ors >"?1?@ % -#D *%. &he 0ourt o Appeal upheld the Bederal 0ourt!s decision in +ong #eong Binance. A depositor needs not be a registered proprietor.
:*Hong 'eong 5inance Bhd v $taghorn $dn Bhd >"??8@ " -#D 2"": Perwira A#n Bank Bhd v $elangor Properties $dn Bhd & Ors >"?1?@ % -#D *%.
:3 Section %?* (")(a) o the /#0. hen registering a charge instrument, the egistrar will ma'e a memorial and seal in the terms and description o the charge on the register document o title.
the depositing and the depositing does Fustice to the proprietor, in order or a lien to be valid.
#awyers! ;pinions
According to -r. 0hew::, a practicing lawyer, ban's nowadays preer charge,
because holding a lien is unsae as evidenced in cases above. A chargee has the right to sell the land using an IH& but a lien9holder does not have an automatic right to sell even with an IH&. A Fudgement needs to be obtained rom the court or the amount due under a lien prior to applying to court or an order or sale,:8 and this may ta'e up to one year.
Burther, i a Fudgement debt order is statute9barred, a lien9holder cannot apply or an order or sale.: &he lengthy and tedious process involved in getting an order or sale8? coupled
with court cases81 above, have caused the ban's to be reluctant in ta'ing up a lien
nowadays.
According to -r. Goh8", another property lawyer, 4nancial institutions now avor a
legal charge under the /#0 because they eel more secured having their interest registered on the register document o title, and the /#0 provides comprehensive provisions to deal with the property on deault. #ien is outdated and appears as an option to non94nancial institutions. Generally, legal charge provides a better notice to third parties as ar as 4nancial institution!s interest is concerned.8% Jy having a registered charge on the title, the
whole world will be aware o it when a search is conducted on the title. In a lien, i there is only a deposit o issued document o title, and a lien9holder caveat is not yet endorsed on
:: -r. 0hew =hye Reat, a practising lawyer at aFa, Harryl L #oh #aw Birm, at ?12""8"*:.
:8 S "81(") o the /#0.
: Alagappa Chettu v Periyanayagam (1?8) Innes 11:. A lien9holder is not entitled to a remedy under lien i the Fudgement debt order is statute9barred. A lien9holder might only apply or and obtain an order o sale when he had obtained a court Fudgement o the actual sum due. +is right to enorce the lien by Fudicial sale was conditional upon the recoverability o the
debt rom the borrower.
8? S "32 (%) o the /#0 states that or a charge, a Fudgement debt order is not reuired prior to an application to court or an order or sale. &his has made the process o getting an order or sale under a charge much more easier and uic', as compared to a lien.
81Hong 'eong 5inance Bhd v $taghorn $dn Bhd >"??8@ " -#D 2""C Perwira A#n Bank Bhd v $elangor Properties $dn Bhd & Ors >"?1?@ % -#D *%.
8" Goh Sea &ai, a practising lawyer at St. Goh and Dohari law 4rm.
8% Borm 12A o the /#0 shows the identity o a chargee, something that a 4nancial institution is concerned about. Jy
registering a charge, the identity o a chargee is 'nown to the public, when a search is conducted on the land title. Borm 1H o the /#0 does not disclose the identity o a lien9holder. It only shows the entry o a lien9holder!s caveat. hen a search is conducted on the land title in uestion, the public will only 'now about the eistence o a caveat but they will not 'now the identity o the lien9holder.
the register document o title8*, the interest o the ban' as a lien9holder is not reNected on
the title.
Security transactions in Sabah and Sarawa'
#ien can only be ound in the /#0 but it is not provided by the Sarawa' #and 0ode and the Sabah #and ;rdinance. In Sabah, the Sabah #and ;rdinance (S#;) li'e the /#0, reuires a charge over a land or an interest83 to be registered or it to be valid.82 +owever,
unli'e the /#08:, the S#; does not provide or indeeasibility o a registered charge. A
registered charge merely becomes valid and creates a proprietary interest over a land or a registered sub9lease in avour o the chargee.88 &he procedure o sale o land by the
0ollector in Sabah is similar to that in the /#0 or the sale o land with land oPce title8,
where a hearing is to be held in the presence o interested parties, and ater the hearing, i there is a satisaction o a deault, the sale by public auction must be ordered.? &he only
diference is S#; allows or the sale o part o the land which is not allowed in the /#0. A charge in the /#0 can be efected over the whole o an alienated landC the whole o an undivided shareC and any lease o an alienated land. +owever, a charge under the Sabah #; can only be efected over a land (not limited to alienated land)C an undivided share in the land1C or a sub9lease." Section "12(1)(b) o the /#0 is also diferent rom
section 1?: o the S#;.%Burther, in the /#0, a discharge is efected upon the registration o
8* S %%? (%) o the /#0.
83 Section 1?* o the Sabah #and ;rdinance.
82 Section 88 o the Sabah #and ;rdinance.
8: Section %*? o the /#0 provides or the indeeasibility o a registered charge.
88 Section 88 o the S#;.
8 Section "21 and section "2" o the /#0. Section "2"(") and "2"(%) o the /#0 is similar to ule 1*(*) and ule 1*(2) o the Sabah #and ules 1%?.
? Sabah #and ules 1%? r 1*(%).
1 Section 1?2 o the Sabah #and ;rdinance. It is not possible to charge part o the land until the land has been subdivided and a new document o title has been issued.
" Sabah #and ;rdinance, n %". Section * reers to the charge over landC Section 1?* reers to a charge over land or interest thereinC Section 1?A reers to a charge over $land or sub9lease!. &he combined efect is that a charge can be efected over a land or a sub9lease. A land here is a land contained in the Government lease, and the sub9lease reers to a lease created by the Government lessee.
Borm 12A.* Jut in the S#;, discharge o a charge may be efected by registering a
memorandum and endorsing the word $release! on individual titles.3 Also, in the /#0, only
ull payment o debt can warrant a discharge.2 Jut in the S#;, a charge can be discharged
even i the debt has not been paid in ull.: In addition, in the /#0, the court (or a registry
title) or the land administrator (or a land oPce title) is empowered to order the sale o a land or lease by public auction.8 Jut in Sabah, the 0ollector is the one who can order the
sale by public auction o the whole or any part o the charged land upon a deault. 1??
In Sarawa', sections 1*% to 13: and section 1?* o the Sarawa' #and 0ode (S#0) (0ap 81)1?1 provide or the creation o charge. &he S#0 does not epressly prohibit the
creation o an euitable charge.1?" #i'e the /#01?%, an unregistered charge coners on the
lender caveatable interest in Sarawa'.1?* Similar to the /#01?3, a charge in the S#0 is
% Section "12(1)(b) o the /#0 states that any charge with a land transerred shall be implied on the part o the transeree to be bound by it unless the instrument o transer otherwise provides. Jut section 1?: o the S#; provides that the chargor who is the transeror is reuired to obtain the agreement o the transeree to ta'e over the payment o debt due to the chargee. Bailure to do so will give the chargee a right to pursue the original chargor on the transeree!s deault.
* Section ":8 o the /#0.
3 Section 1?:A and section 1? o the Sabah #and ;rdinance.
2 Section ":8(") o the /#0.
: Section 1?A o the S#;.
8 Section "32 and section "2? o the /#0.
Section 111 o the S#;, and Sabah #and ules 1%? r 1*(1?).
1??$tandard Chartered Bank v Mukah $ingh >12@ % -#D "*?. &he court held that the sale o land under the Sabah #and ;rdinance is used to satisy the statutory charge over the land.
1?1 Sarawa' #and 0ode (0ap 81).
1?"ing $ieh Chung v Hock Peng Realty $dn Bhd, Jintulu ;S /o "*9*:9"???. It was held that this case should not be ta'en as an authority or reFecting euitable charges. &he ratio decidendi is that a mere monetary underta'ing does not provide a basis or a caveat.
1?%,umpulan $ua Betong v Dataran $egar $dn Bhd >1"@ 1 -#D "2%. It was held that according to the /#0, an unregistered charge can be caveated pending registration.
1?*$tandard Chartered Bank v *ap $ing *oke & Ors >18@ " -#D *C $tockalingam Mudaliar v Ramasamy Chettiar & Anor >1%8@ -#D "%:C Pica 5irst Credit $dn Bhd v 'ai ,im eng & Anor >"??:@ " A- 2:%C Mahadevan & Anor v Patel >1:3@ " -#D "?:C 'eie $iew yuk /20 v ong ,wong 5eedmills Co $dn Bhd ;- /o RG 1 o 18*.
efected by the eecution o a memorandum o charge in Borm +(1) or +(")1?2, and it must
be registered.1?:
+owever, certain provisions o S#0 are uniue and cannot be ound in the /#0. Bor eample, the S#0 allows a negative pledge covenant or the eclusion o dealings to be included in a charge, and upon registration o a charge, the covenant operates as a caveat during the period o charge.1?8 Also, the S#0 allows an amendment to be made to a charge
to increase or reduce the principal sum or rate o interest, or the terms o the charge.1?
Burther, s. 1*: o the S#0 provides or the creation o a subcharge by the registered chargee, something that is not ound in the /#0.
&he scope o security provided by a charge in S#0 is also wider and more clearly de4ned than the /#0.11? Burther, the remedies available to a chargee in Sarawa' are more
comprehensive than those provided in the /#0.111 &he remedies provided in s. 1*8 (") o
the S#0, including the right to be registered as a proprietor o the land, the right to ta'e possession by any chargee (not necessarily the 4rst chargee) and the right to receive rents and pro4ts o the charged land are not provided in the /#0. In the /#0, the remedy o an order or sale is more restrictive as the sale must only be made by public auction.11" In
Sarawa', an amendment11% to s. 1*8(%) o the S#0 allows a sale to be made by 6tender or
such other mode o sale as may be directed by the court7 to realie a registered charge.11*
1?2 Section 1*% o the S#0.
1?: Section 11(1) o the S#0 provides that no instrument shall be efectual to pass an interest until it has been registered. Section 11(*) provides that the deposit o any document relating to land as a security or the payment o money may operate as an agreement to create a charge, but shall not be enorced as a charge unless the charge has been registered on the egister.
1?8 Section 1*%(") and 1*%(%) o the S#0.
1? Section 1*3 o the S#0.
11? Section " o the S#0 provides that a charge can be used to secure repayment o loanC repayment o uture advances or unascertained debtC payment to holders o any bonds, debentures, promissory notes or other securities made beore or ater the creation o a chargeC or payment o periodic sum or o any annuity, rent, charge or sum o money other than a debt.
111 &he /#0 provides " remedies in the event o a chargor!s deault (1) ;rder or sale by way o public auction in s. "3% o the /#0C (") &a'ing possession o the charged property by the 4rst chargee in s.":? o the /#0. In Sarawa', s. 1*8(") o the S#0 states that the chargee is entitled to (1) the right to ta'e possession o the land and to be registered as a proprietor o the landC (") the right to receive the rents and pro4ts o the charged landC or (%) the right to sell the land, ater the 0ourt has heard evidence o the chargor!s deault and issued the appropriate order.
11" Section "3: and section "2% o the /#0.
&he remedies available or a charge in the /#0 are eclusive and ehaustive113, but in
Sarawa', the remedies provided under s. 1*8(") o the S#0 are not mutually eclusive.112
&he Sarawa' +igh 0ourt can grant an order o possession even when the chargee applies or an order or sale. Also, unli'e the /#0 where the issue document o title is placed in the custody o the 4rst chargee11:, in Sarawa', the document o title may or may not be
deposited with the lender.118
Although s. 1*8 (%) o the S#0 is o similar efect to s. "3*(1) o the /#0, s. 1*8(1) and (") o the ormer are diferently constructed rom s. "32 o the latter.11 &he word 6shall7 in
s. "32 (%) o the /#0 indicates that the court is under a duty to ma'e an order or sale when no cause to the contrary is shown.1"? &here is only one order that the court is
permitted to ma'e, namely, an order or sale. Jut under s. 1*8(") o the S#01"1, the court is
given a choice to ma'e one o the % orders1"" and the only consideration is Fustice and
euity in the circumstances o the case. +ence, when a chargee applies or an order or sale, the court may, i the circumstances do not seem Fust1"%, reuse that order1"*, and
instead ma'e an order directing the chargee to receive rents and pro4ts rom the charged
11*,imlin Housing Development $dn Bhd v Bank Bumiputera /M0 Bhd ;<==>? @ AMR (@<. =rior to the amendment, the /#0!s position in this case was applicable in Sarawa', where a Fudicial sale must be made by public auction or the protection o the chargor. See also an article, #oh, S.0. and Aggie =# 0hew in >1?@ 1 -#D vi entitled 6A #egal Impossibility Arming
charges with private power o sale o charged land outside the provisions o the /ational #and 0ode.7
113,imlin Housing Development $dn Bhd v Bank Bumiputra /M0 $dn Bhd >1:@ " -#D 8?3 at p 81:.
112$tandard Chartered Bank Malaysia Bhd v ing ,ah ,uong >"??8@ : -#D 3?8.
11: Section "**(1) o the /#0.
118 0hew, Andrew =.+., Caveat $ystem in $arawak (Sweet L -awell Asia, "?1")
11Century 'and Resources $dn Bhd v Alliance Bank Malaysia Bhd >"??*@ * 0#D :%C Re Rindaya %ood Processing $dn Bhd: e parte ,enneth eh Ah ,iam & Anor >"??"@ 2 -#D %1".
1"?'ow 'ee 'ian v Ban Hin 'ee Bank >1:@ " 0#D %2.
1"1 Section 1*8(") o the S#0. &he court may grant an order entitling the chargee to enter into possession and to be registered as a proprietor o the charged landC an order to receive rents and pro4ts o the charged landC or an order or sale o the charged land.
1"",uching Plaa $dn Bhd v Bank Bumiputra Malaysia Bhd and another appeal >11@ % -#D 12%. &he power o a court to grant a remedy under s. 1*8 (") o the S#0 is discretionary.
1"%Malayan Banking Bhd v *a8kup .in Oe & Anor >"??:@ 2 -#D %8. &he court may not grant an order under s. 1*8(")(c) o the S#0 i the order is going to be perverse to the deendants.
land.1"3 In s. "32 o the /#0, a statutory demand in Borm 12H is necessary or the eercise
o the court!s power, but in s. 1*8 o the S#0, it is the chargor!s deault and not the notice o demand that is a condition precedent to the ma'ing o an order or sale.1"2
("3?? words ecluding ootnotes)
1"3 Such an order can be made where the value o the charged property ar eceeds the sum due and the charged property is producing suPcient income to repay the loan within a reasonable time.
