A Critique of Kamarulzaman bin Omar & Ors v Yakub bin Husin & Ors[1]
The provisions of sub-sections 340(1), (2) and (3) are rather straight forward and provides for a couplet of an oxymoron.
Firstly, it provides that the title of the person, for the time being, shall be indefeasible[2], except in the event in which event that the title shall not be indefeasible[3]. Second, it provides that if that title shall not be indefeasible[4], it shall be indefeasible in the hand of a subsequent person who is a purchaser in good faith and for valuable consideration.[5]
Let us refer to the first owner of a piece of land as ‘A’ who then transfers the same piece of land to ‘B’ and which subsequently is transferred to ‘C’, per Zaki Azmi, Chief Justice in the judgment in Tan Ying Hong.[6]
Since A’s land has been transferred to B, the starting point is that the title of the person for the time being registered B is indefeasible, it shall not be indefeasible if the acquisition of the title by B, is tainted by the several reasons provided in S 340(2). Where B’s title is so tainted and hence liable to be set aside, it shall remain liable to be set aside in the hands of any persons to whom it may subsequently be transferred, hence in the hands of C and onwards (hereinafter referred to as ‘the successor-in-title”). The proviso provides an exception in that if that defeasible title is acquired by a bona fide purchaser in good faith and for valuable consideration, it shall become indefeasible.
Zaki Azmi, Chief Justice at paragraph 9 of the judgment in Tan Ying Hong, expressly confirms that C‘s title is protected if he is a purchaser in good faith, whereby he stated –
“[9] The third instance where B’s title or interest could be defeated is where it was unlawfully acquired through the exercise of any power or authority conferred by any law. Section 340(2)(c) of the NLC deals with one who was, for example, acting in his capacity as an agent to a power of attorney. Even if C is in the same position as B, sub-s (3) also does not give protection to C unless he can show that he had acquired the title or interest in good faith and for valuable consideration.” *underline is mine.
The Federal Court in Tan Ying Hong expressly overruled Adorna Properties[7] as it was clear that in the earlier judgment of the Federal Court it had misconstrued s 340(1), (2) and (3) and thus come to the erroneous conclusion that the proviso to s 340(3) applied equally to s 340(2)[8]; i.e. to B.
The law was then restored and it was restated that the exception in the proviso does not apply to B, hence to any person subsequent to B, i.e. C and onwards.
Per Jeffrey Tan FCJ, para 15, Kamarulzaman bin Omar & Ors v Yakub bin Husin & Ors [2014] 2 MLJ 768 “On the matter of interpretation of s 340, two cases (Adorna Properties [2001] and Tan Ying Hong) stand out, for different reasons. While Adorna Properties [2001] iconoclastically changed the law, Tan Ying Hong restored it to where it was before.”
In Kamarulzaman case – a deceased landowner’s (A) title was transferred to (B), imposters claiming to be beneficiaries, by fraud and misrepresentation, and it was subsequently transferred to C. A’s beneficiaries applies to set aside the transfer to C, who in turn claims that they are bona fide purchaser for value and obtained an indefeasible title. The High Court and Court of Appeal held that C is protected by the proviso to section 340(3).
The Federal Court accepted the fact that C is a bona fide purchaser but that the trial court and the Court of Appeal has failed to inquire if C were immediate or subsequent purchasers; only a subsequent purchaser is entitled to raise the shield of indefeasibility, see para 43 page 796 of judgment. Such a statement by the Federal Court is confounding, to say the least.
The word “subsequent purchaser” which is not used in the section, is a figure of speech, ambiguous and make a poor choice in the description of a legal right. One does not intend the literal interpretation of his words when he is using a figure of speech.
Subsequent purchaser could bear at least two very different meaning; firstly, a purchaser following next after the person whose title is made defeasible by s 340(2) (as was described Zaki Azmi, Chief Justice in Tan Ying Hong, above) or alternatively, a purchaser following another purchaser, as is intended by the Federal Court in Kamarulzaman.
The meaning of subsequent is simply “following” or “coming after“, as you discovered, but it does not necessarily mean immediately or directly following. Here, “subsequent” means “coming later“, but it obviously doesn’t mean “right after”. Hence, subsequent in S 340(3) (a) means any persons coming after B or subsequent to B, he need not be right after B but only if he is a purchaser in good faith and for valuable consideration.
Whilst the pendulum swing too much to the right in Adorna Properties (i.e. that the proviso applies to B), which was corrected in Tan Ying Hong (that the proviso does not apply to B but B’s successors-in-title), the pendulum now swing too much to the left in the Federal Court in Kamarulzaman –
“An immediate purchaser of a title tainted by any one of the vitiating elements acquires a title that is not indefeasible. It flows from Tan Ying Hong that the bona fides of an immediate purchaser is not a shield to defeasibility”, as per Jeffrey Tan FCJ para 43, page 797 A[9].
With due respect to his lordship, I could find no such statement in the judgement of Tan Ying Hong, neither can I find any support of the proposition that “the bona fide of an immediate purchaser is not a shield to defeasibility” in the litany of cases quoted in the judgment of Kamarulzaman.
Clear provisions aside, there is another powerful reason the interpretation in Kamarulzaman should not be accepted.
For a start, it must be remembered that there is a duality of ownership; the equitable and the legal owner. An absolute owner has both equitable and legal ownership. The legal title is made defeasible when the equitable title prevails.
Where there is competing equitable ownership, the first in time prevails but where the subsequent owner has obtained the legal ownership, he is on a different level. Where the legal owner’s title is challenged, his reply is that we are purchaser for valuable consideration; we ask no relief but only ask to be left alone, see Pilcher v. Rawlins[10]. The court of equity will not intervene and equity will follow the law.
The court of equity will have no reason to deprive the legal owner of his title unless there is fraud which took away the bona fide of a purchaser for valuable consideration; which is agreeable to the definition of fraud in the civil law, see Le Neve v. Le Neve[11].
The concept of a bona fide purchaser is not a new invention of the Land Code and there is no definition as such in the code. The only possible reference is to the existing common law and the assumption is that the code does not intend to change the law unless its intention is made clear. Likewise, the proviso to S 340(3) makes the exception to any challenge to the title of a bona fide purchaser and it is frivolous, to say the least to suggest that, the proviso defer the exception to subsequent innocent purchaser and intend to deprive the first or immediate bona fide purchaser of its legal title.
For completeness, it should be noted that the exceptions to S 340(2) are not restricted to equitable challenges. S 340(2) (b) provides for legal defects, where registration was obtained by forgery, or by means of an insufficient or void instrument; needless to say, such conveyances are ineffective under the common law and is made defeasible under the Land Code. Nevertheless, the proviso to S 340(3) made an exception to the Nemo dat rule, and a subsequent purchaser who acquired the title in good faith and for valuable consideration is made effective; therefore the defeasible title could be the root to a good title.
[1][2014] 2 MLJ 768
[2]S. 340(1) The title or interest of any person …for the time being registered as proprietor of any land … shall, subject to the following provisions of this section, be indefeasible.
[3]S.340(2) The title or interest of any such person … shall not be indefeasible—(a) in any case of fraud or misrepresentation to which the person … 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 … in the purported exercise of any power or authority conferred by any written law.
[4] S. 340(3) Where the title or interest of any person … 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 … to whom it may subsequently be transferred; and (b) any interest subsequently granted there out shall be liable to be set aside in the hands of any person or body in whom it is for the time being vested:
[5]Proviso to S. 340(3), 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
[6] Tan Ying Hong v Tan Sian San & Ors [2010] 2 MLJ 1, para 5.
[7] Adorna Properties Sdn Bhd v Boonsom Boonyanit @ Sun Yok Eng [2001] 1 MLJ 241; [2001] 2 CLJ 133, FC
[8] Ibid paras 11 and 12 per Zaki Azmi Chief Justice; and para 53 per Arifin Zakaria CJ (Malaya)
[9] ibid
[10] (1872) L.R. 7 Ch App. 259 at p 263
[11] 1 VES. SEN. 64