Harun Hashim SCJ:

Chandan Daya Sdn. Bhd., a housing developer, is the registered owner of land Lot 55 Section 95 held under CT 11533 Bandar Kuala Lumpur. In 1981, Chandan Jaya obtained a loan of RM2.2. million from Keng Soon Finance Bhd. and charged the land to the latter as security for the loan on 28 November 1981 which was registered on 19 April 1982. Chandan Jaya then constructed a building on the land consisting of 16 units of apartments.

In 1984 Chandan Jaya sold the units to several purchasers who each executed a sale and purchase agreement with Chandan Jaya. James Edward Buxton and Elizabeth Buxton jointly purchased Apartment 2A on 26 June 1984 and Elsa Constance Radcliffe purchased Apartment 2B on 30 August 1984. Four other purchasers obtained end-financing from Supreme Finance Bhd. (who by then had succeeded Keng Soon Finance Bhd.), in respect of the purchases of Apartments 5A, 5B, 8A & 8B. James Edward Buxton (the 1st Appellant) applied for a similar loan from Supreme Finance but was turned down. He assigned his rights in Apartment 2A to Peggy Mavis Moreira nee Leembruggen (the 2nd appellant). Radcliffe has since died and the 1st appellant is the executor of the deceased's estate in respect of Apartment 2B. The full purchase price of RM205,000 for each of the Apartments 2A and 2B have been paid to Chandan Jaya. The estate of Radcliffe is in occupation of Apartment 2B through a tenant. The 2nd Appellant is in personal occupation of Apartment 2A.

Chandan Jaya (the Chargor) failed to repay the loan with accrued interests despite three extensions of the period for repayment. The last date for settling the loan and interest was 13 May 1985. As a result, Supreme Finance Bhd. (the respondent), through their solicitors, issued the statutory notice in Form 16D under s. 254 of the National Land Code, 1965 (the Code) on 2 September 1986 to remedy the breach within 14 days of the receipt of the said notice failing which the respondent would apply for an order of sale. The Chargor neglected to remedy the breach specified in the statutory notice. The respondent then took out an originating summons on 26 November 1986 for an order to sell the land by public auction together with the apartments building thereon under s. 256 of the Code. At the time of the application, the outstanding sum secured by the charge was RM2,006,297.58 with further interest thereon at an additional daily rate of RM921.41 or 20% p.a. from 7 August 1986.

In the application for the order of sale, the respondent excluded Apartments 5A, 5B, 8A and 8B. The application did not exclude Apartments 2A and 2B. So the appellants applied by summons in chambers on 28 April 1987 to intervene in the proceedings. The Court granted leave to intervene and defend the originating summons on 9 July 1987. The learned Judge on 14 February 1990 dismissed the appellants' objections and ordered the sale of the property. Hence this appeal.

Section 340 of the Code (so far as material) provides:

(1) The title or interest of any person or body for the time being registered as proprietor of any land, or in whose name any lease, charge or easement is for the time being registered, shall, subject to the following provisions of this section, be indefeasible.

(2) The title or interest of any such person or body shall not be indefeasible:

(a) in any case of fraud or misrepresentation to which the person or body, or any agent of the person or body, 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 or body in the purported exercise of any power or authority conferred by any written law.

It is not the appellants' case that the charge in the respondent's favour is invalid and therefore defeasible under s. 340(2). They contend, however, that all they are required to do is to show cause to the contrary under s. 256(3) so as to exclude Apartment