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2021 MarsdenLR 2840
HIGH COURT MALAYA SHAH ALAM
CHONG KIAN YONG & ANOR – Appellant
Versus
LEE KIM CHENG & ORS – Respondent
[Civil Suit No: BA-22NCVC-437-07/2017]
Negligence in property transactions involving fraud results in liability for the negligent parties, while courts may not impose a duty of care on solicitors acting for fraudsters to protect third-party purchasers.
Headnote:(A) Civil Law Act 1956 – Sections 12(6) – Land fraud involving imposter – Plaintiffs claimed special damages due to negligent misrepresentation by defendants in property transaction – Court found 1st defendant was an imposter; negligence of 5th and 10th defendants established; 5th to 9th defendants vicariously liable for their negligence – Claim against 2nd, 3rd, and 4th defendants dismissed. (Paras 89)
(B) Duty of Care – No duty of care owed by solicitors of imposter to plaintiffs – Relevant case law considered: Pushpallela R Selvarajah & Anor v. Rajamani Meyappa Chetiiar & other Appeals; Yap Ham Seow v. Fatimawati Ismail & Ors. (Paras 40-59)
Facts of the case: Plaintiffs entered into a sale and purchase agreement with an imposter claiming to be the true owner of the land, paying RM1,742,690.31. The 1st defendant delivered a forged title deed, which led to the registration of ownership under the plaintiffs’ names. The real owner lodged a caveat after the transfer was discovered as fraudulent.
Findings of Court: Plaintiffs suffered losses due to the fraudulent transaction facilitated by the negligence of the 5th and 10th defendants, who failed to verify the authenticity of the identity and title documents.
Issues: Court addressed the identity of the 1st defendant, duty of care of defendants in land transactions, and negligence in the handling of fraudulent documents.
Ratio Decidendi: The court ruled that the negligent acts of the 5th and 10th defendants caused the plaintiffs' losses, leading to a ruling of 30% liability against them, but no duty of care owed by the solicitors for the fraudster. Dismissed the counterclaims of the defendants against the plaintiffs.
Result: Plaintiffs entitled to damages from the 6th to 9th defendants; counterclaims by defendants dismissed.
JUDGMENT
Introduction
[1] This case involves a fraudulent sale and purchase transaction of a piece of land. The fraudulent transaction was orchestrated by an imposter who claimed to be the real owner of the said land. The plaintiffs were the victims of the unscrupulous scam.
[2] The parties had gone through a full trial. On 4 January 2021, this Court allowed the plaintiffs' claims in part. The reasons for the decision are set out as below.
The Background Facts
[3] The plaintiffs and the 1st defendant entered into a Sale and Purchase Agreement dated 14 January 2016 (hereafter 'the SPA'), wherein the plaintiffs agreed to purchase and the 1st defendant agreed to sell a piece of freehold agriculture land known as PM1307, Lot 528, Mukim Ijuk, Daerah Kuala Selangor, Negeri Selangor Darul Ehsan (hereafter 'the said land') for a sum of RM1,742,690.31 (hereafter 'the purchase price').
[4] The plaintiffs were represented by Messrs. Thashin, S.L. Wong & Co. (hereafter 'the plaintiffs' SPA solicitors) in the sale and purchase transaction, whereas, the 1st defendant was represented by Messrs. Mazwan Pathma & Co., which is the 4th defendants in the action. The 2nd defendant, Mr. Pathmarajah s/o Mylvganam, was the solicitor in-charge of the sale and purchase transaction and a partner in the 4th defendants solicitors firm. The 3rd defendant, Azlina Binti Abdul Azis, was also the a partner of the 4th defendants solicitors firm at that material time.
[5] The plaintiffs paid the full purchase price to the 1st defendant. The 1st defendant delivered and surrendered a title deed, ie, the Issue Document of Title (bearing serial No. HS 0313528, Version 1, dated 13 May 2011) (hereafter 'the 1st defendant's IDT' or 'the forged title deed' or 'Exhibit D11') purportedly belonging to the said land to the plaintiffs for the registration of transfer of ownership into their names.
[6] A memorandum of transfer and the forged title deed and other relevant documents were presented to the Land Office of Kuala Selangor. The said land was successfully transferred to the plaintiffs, and their names were registered as the registered proprietors on 10 January 2017. The Land Office of Kuala Selangor issued a fresh Issue Document of Title (bearing serial No. SDEP 1524563, Version 2, dated 10 January 2017) (hereafter 'the plaintiffs' IDT') of the said land for the safekeeping of the plaintiffs.
[7] On 7 February 2017, a private caveat and a registrar caveat were lodged against the said land. The private caveat was lodged by the 12th defendant, who is the real owner of the said land. The 12th defendant appointed Messrs. Karam Singh Sangha & Co. to write to inform the plaintiffs and the 4th defendants that the 12th defendant is the real and actual owner of the said land, and that he did not sell the said land to the plaintiffs. The 12th defendant was, and still is, in possession of the original Issue Document of Title of the said land (bearing serial No. SDE 0459924, Version 1, dated 13 May 2011) (hereafter 'the 12th defendant's IDT' or 'the original title deed') at all material times.
[8] After the fraudulent transaction of the said land had been exposed, the plaintiffs brought this action against the defendants. The plaintiffs sued the defendants in their respective capacities as follows:
- 1st defendant - an imposter who pretended to be the 12th defendant;
- 2nd defendant (DW1) and 3rd defendants - the partners of the 4th defendants solicitors firm;
- 4th defendants - the solicitors firm that acted for the 1st defendant/imposter;
- 5th defendant (DW 4) - the Assistant Land Administrator who endorsed the transfer of the said land;
- 6th defendant - the Land Administrator of Kuala Selangor Land Office;
- 7th defendant - the Director of Land and Mines of the State of Selangor;
- 8th defendant - the Registrar of Titles in the State of Selangor;
- 9th defendant - the State Government of Selangor;
- 10th defendant (DW7) - the counter clerk who received the 1st defendant's IDT (
