Indefeasibility of title can be challenged on grounds of fraud if proven, as per section 340 of the National Land Code.

[1] This is an appeal by the appellants from the judgment of the Court of Appeal that reversed the judgment of the High Court, in allowing the appellants claim that the registered title of the respondent as the proprietor of the land in question was defeasible on the ground of fraud. The appeal concerns a piece of land together with a 2½ storey bungalow to be erected thereon.

[2] The appellants are the plaintiffs in the High Court. The respondent is the 3rd defendant. The parties will be referred to according to the titles assigned to them in the High Court.

Background Facts

[3] Janavista Sdn Bhd ("1st defendant") was at the material time a housing developer of a project. On 12 August 2005, the main contractor, Design Selection Sdn Bhd ("2nd defendant") awarded Biaxis Sdn Bhd ("2nd plaintiff") a contract for piling works on a project land ("project works").

[4] The project works was completed by the 2nd plaintiff on 30 December 2005 with the certificate of practical completion issued accordingly. However, the 2nd defendant failed to pay the 2nd plaintiff the amount of RM1,477,972.89 for the project works done ("the sum due"). In order to resolve the sum due, the 2nd plaintiff, 1st defendant, and 2nd defendant mutually agreed to enter into a Settlement Agreement dated 4 April 2006 ("Settlement Agreement").

[5] As reflected in the Settlement Agreement, the 1st defendant was the beneficial owner of a parcel of land, and had intended to sub-divide the said land into bungalow lots, one of which is identified as Lot PT 8656, measuring approximately 6,297.09 square feet ("the land") and thereafter to develop the area into an exclusive gated bungalows housing estate known as the "Polo Vista". Perbadanan Kemajuan Negeri Selangor ("PKNS") was the registered proprietor of the land. On 20 July 2005, issue document title for the land was issued to PKNS, as the proprietor.

[6] The 2nd plaintiff agreed to accept the transfer of the land from the 1st defendant to the 2nd plaintiff and/or its nominee, "free from encumbrances ... together with the house erected thereon ..." in full settlement of the sum due. Mr Yeo Ping Tieng ("1st plaintiff") (as the shareholder and director of the 2nd plaintiff at the material time) was nominated by the 2nd plaintiff for the purpose of being the nominated purchaser under the Settlement Agreement.

[7] Apart from the Settlement Agreement, the parties on 4 April 2006 also concurrently signed two other inter-related agreements.

[8] The second agreement was a Sale and Purchase Agreement signed between the 1st defendant and the 1st plaintiff for the sale of the land at the price of RM879,335.00 ("SPA").

[9] The third agreement was a House Construction Agreement ("HCA") signed between the 2nd defendant and the 1st plaintiff for the construction of a bungalow on the land for the construction price of RM1,008,565.00 resulting in the total purchase price of the land and the bungalow to be RM1,887,900.00.

[10] Pursuant to the SPA and the HCA, the 1st defendant was to deliver vacant possession and the 2nd defendant was to complete the remaining construction of the bungalow within 36 calendar months from 4 April 2006.

[11] As the SPA and the HCA were entered by the parties pursuant to the Settlement Agreement, both the 1st and 2nd defendants through their respective letters both dated 24 May 2006 had duly confirmed that the