The Federal Court reaffirmed that under section 340 of the National Land Code, UOB, as a subsequent purchaser, holds an indefeasible interest, while the fraudulent transfer to Heveaplast renders its title defeasible.

Vernon Ong Lam Kiat FCJ:

Introduction

[1] The central issues in these two appeals relate to (i) the indefeasibility of title and interest and the question of whether a party is an immediate or subsequent purchaser under s 340 of the National Land Code ( NLC ), and (ii) the circumstances under which a term may be implicated to a letter of undertaking.

[2] The parties in these appeals were brought together by a series of fortuitous events. It began with the transfer of land to Heveaplast Marketing Sdn Bhd ('Heveaplast') by way of fraud and forgery, the creation of two charges ('UOB charges') over the land by Heveaplast in favour of United Overseas Bank Bhd ('UOB'), the aborted sale of the land by Heveaplast to Kum Hoi Engineering Industries Sdn Bhd ('Kum Hoi') and the giving of undertakings to refund monies by UOB and Heveaplast to Kum Hoi's financier Public Bank Bhd ('PBB').

[3] The owners of the land, See Leong Chye @ Sze Leong Chye and See Ewe Lin ('See brothers') sued Heveaplast, UOB and the solicitors involved for damages and the recovery of the land on the ground that it was fraudulently transferred; in turn, Heveaplast sued the Registrar of Lands and Mines for an indemnity and contribution. In a separate action, Kum Hoi sued Heveaplast and UOB for the refund of monies paid. The two suits were heard together in the High Court.

[4] After a full trial, the High Court held that Heveaplast obtained the land through fraud and forgery of instruments ie, the sale and purchase agreement and the memorandum of transfer. The High Court also held that the forged instruments were a nullity and incapable of conferring any right, interest or title in favour of Heveaplast. The UOB charges created thereout were also a nullity. Consequently, both Heveaplast's title and UOB's interest are defeasible under s 340 of the NLC . Heveaplast's claim against the Registrar of Lands and Mines for indemnity and contribution was dismissed. The High Court also ordered Heveaplast and UOB to refund the monies to Kum Hoi.

[5] There were altogether four appeals to the Court of Appeal.

CA Appeal 489 - Heveaplast's appeal against the See brothers and three others;

CA Appeal 2129 - Heveaplast's appeal against Kum Hoi;

CA Appeal 33 - UOB's appeal against the See brothers and six others; and

CA Appeal 173 - UOB's appeal against Kum Hoi and Heveaplast.

[6] The Court of Appeal dismissed Heveaplast's CA Appeal 489 against the See brothers, Heveaplast's CA Appeal 2129 against Kum Hoi and UOB's CA Appeal 173 against Kum Hoi. However, the Court of Appeal allowed UOB's CA Appeal 33 against the See brothers and held that the UOB charges are valid.

[7] Leave was granted to the See brothers to appeal to the Federal Court arising from the Court of Appeal's decision in allowing UOB's CA Appeal 33 against the See brothers. Leave was also granted to UOB to appeal against the decision of the Court of Appeal on dismissing UOB's CA Appeal 173 against Kum Hoi.

[8] There are five questions of law in the See brothers' appeal and four questions of law in the UOB appeal. For convenience, the questions of law are numbered consecutively.

Question 1

Must the transaction in question have a valid registrable issue document of title prior to invoking a provision of s 340 of the National Land Code ?

Question 2

Whether an acquirer of registered charge of interest or title under the National Land Code by means of a nonexistent forged title acquire an immediate indefeasibility of title or interest?

Question 3

Can an acquirer of registered charge or interest registered by means of a non-existent forged title be regarded as an immediate purchaser or a subsequent purchaser since the acquirer of the interest was merely a conduit for the purchase?

Question 4

Can a person who has not acquired any title or interest as a result of the non-existent forged title, convey or pass any title or interest to another?

Question 5

Whether a chargee in whose favour a charge is created by a registered proprietor whose title