Indefeasibility of title under the National Land Code requires good faith acquisition; knowledge of fraud by an agent, here a solicitor, can negate good faith defense.

[1] This is an appeal against the decision of the Court of Appeal which reversed the decision of the High Court after a full trial of the matter that arose out of a disputed registered land dealing.

[2] The dispute was about the competing claims on a same piece of land between two parties namely, the original registered owner of the land and a chargee bank, a subsequent holder of interest in the land, who were both affected by the fraud of a third party. The subject matter of the dispute between the two parties was whether or not a chargee bank, a subsequent holder of interest, was entitled to raise the shield of indefeasibility under s 340 of the National Land Code 1965 ("NLC").

[3] The appeal originated from an action commenced by the appellant (T Sivam a/l Tharamalingam as the administrator of the estate of the deceased Nagamuthu a/l Periasamy ["deceased"]) in the Muar High Court vide Civil Suit No: 22NCVC-78-10-2013 ("2013 Suit"). The appellant was the plaintiff in the High Court. The High Court allowed the appellants claim against the respondent (Public Bank Berhad, the defendant in the High Court). In allowing the claim, the High Court primarily held that the registered charge over the land in question created in favour of Public Bank Berhad was invalid in law and should be cancelled immediately. The Court of Appeal reversed that decision, which eventually led to the decision being appealed against herein.

[4] We shall refer to the parties in this judgment as they were cited in the High Court.

Essential Facts

[5] The relevant facts are as follows. At all material times, the deceased was the original registered proprietor of a piece of agricultural land held under Hakmilik No HS (M) 3612 Lot No 913, Mukim of Rengam, District of Kluang, Johor ("land").

[6] On or about 16 May 2006, one of the deceaseds sons, Nagarajan a/l Nagamuthu ("Nagarajan") fraudulently transferred the land to himself through Presentation No 1639/2006. The solicitor who acted for the deceased and Nagarajan, as a common solicitor, was one Mr P Thirumalai ("solicitor"). On 22 June 2006, the title of the land showed that Nagarajan was the registered proprietor.

[7] Later, upon Nagarajans and one Sithra Velusamys ("Sithra") application, the defendant granted a fixed loan of RM100,000.00 to Nagarajan and Sithra pursuant to a letter of offer dated 18 October 2006 and facility agreement dated 22 February 2007.

[8] In the context of the present case, what was far more important, a memorandum of charge over the land was duly registered on 26 February 2007 under Charge Presentation No 520/2007. In this land transaction, the solicitor who acted for Nagarajan also acted for the defendant. The defendant appointed the solicitor for the financing transaction whose duties necessitated the preparation of the security documentation for the creation of a charge over the land in favour of the defendant. As we shall explain later in the judgment, this is an important point that should be kept in mind.

[9] Insofar as the evidence goes, it is undisputed that the land was already transferred and registered in Nagarajans name when the defendant granted the loan to the Nagarajan and Sithra, who then created a charge in favour of the defendant over the land. Thus, from the facts, the defendant was not the immediate acquirer of the interest in the land. The defendant, as the registered chargee, was the subsequent holder of interest in the land.

The 2007 Suit

[10] More significant still, when the deceased came to know of the fraudulent transfer, the deceased on 29 June 2007 brought a claim against Nagarajan at the Muar High Court vide Civil Suit No 22-77-2007 ("2007 Suit") to recover the land alleging that the transfer of the land was by fraudulent