The court affirmed that under the Torrens system, a subsequent purchaser is not obligated to investigate the underlying transactions if the register reflects clear ownership, establishing the principle of indefeasibility of title.

JUDGMENT

Zabariah Mohd Yusof FCJ:

[1] The appellant, Malayan Banking Berhad appealed against the decision of the Court of Appeal. The Court of Appeal had dismissed Malayan Banking Berhad's appeal against the High Court 's Order dated 28 February 2022 which held that the Charge created in favour of Malayan Banking Berhad over the subject lands is null and void.

[2] This Court had granted leave to Malayan Banking Berhad to appeal on the following questions of law:

1. Where there is contractual representation that the chargor is the legal and beneficial owner of the property and there is no notice of any adverse claim to the property, whether it is incumbent on the bank to investigate if there is any illegality attached to the underlying sale and purchase agreement, failing which the bank cannot qualify as a bona fide purchaser under the proviso to s 340(3) of the National Land Code 1965 ?

2. In order to qualify as a subsequent purchaser in good faith under the proviso to s 340(3) of the National Land Code 1965 , whether the bank must clearly show that it was impossible for the bank to have known of the unlawfulness of the sale and purchase transaction even after proper examination and verification of the sale and purchase agreement documents between the vendor and the chargor?

3. In order to qualify as a subsequent purchaser in good faith under the proviso to s 340(3) of the National Land Code 1965 , whether the bank must critically look into the documentation, transactional documents (payments and receipts) leading up to the sale and purchase of the properties even though the sale and purchase transaction has been completed and title transferred and registered in the name of the chargor free from encumbrances prior to the creation of the charge with the consent of the vendor?

4. As a matter of law, given the conflicting decisions in the following cases of:

• Bayangan Sepadu Sdn Bhd v. Jabatan Pengairan dan Saliran Negeri Selangor & Ors; 2021 MarsdenLR 1905 ; ; [2022] 2 AMR 525 - which in effect answered the 1st, 2nd and 3rd Questions above in the negative as opposed to the case of

• Au Meng Nam & Anor v. Ung Yak Chew & Ors; [2007] 5 MLJ 136; [2007] 4 CLJ 526 - which in effect answered the 1st, 2nd and 3rd Questions above in the affirmative which of these conflicting decisions is correct in measuring the extent of good faith and/or bona fide required of a purchaser within the meaning of the proviso to s 340(3) of the National Land Code 1965 ?

5. Whether the burden of proving valuable consideration of a subsequent purchaser under the proviso to s 340(3) of the National Land Code 1965 extends to proving that valuable consideration has passed between the immediate purchaser and the vendor?

[3] The appeal before us only concerns Malayan Banking Berhad.

[4] We heard the appeal on 3 July 2024. After having perused the Records of Appeal, the relevant cause papers, and hearing oral submissions, and reading written submissions from both parties, we unanimously allowed the appeal by Malayan Banking Berhad and set aside the orders of the lower courts on the same day. We now provide our reasons for so deciding.

[5] In this judgment we will refer to parties, as they were, in the High Court . The 1st, 2nd and 3rd defendants will be referred to as D1, D2, and D3 respectively. Malayan Banking Berhad is D3 in this judgment.

Background:

[6] The plaintiffs are the administrators/executors of the estate of the one Ahmad bin Buang (hereinafter referred to as "the deceased"), pursuant to letters of administration dated 4 May 2011.

[7] D1 and D2 are property developers, whilst D3 is a bank.

[8] The dispute between the parties is 4 lots of lands ie Lot 430, Lot 60, Lot 97, and Lot 716. As far as the present appeal is concerned, only Lot 97 and Lot 716 form the subject matter of the dispute before us. We will refer to Lot 97 and Lot 716 as "the 2 lots" in this judgment.

[9] D1 was wound up on 13 July 2020. After leave was granted, Jabatan Insolvensi on