Chapter 2

LIEN
LAND LAW II

1
 INTRODUCTION

• A lien is a non registrable interest. Unlike a

charge, a lien is a dealing which gives rise to a
non registrable interest in the land or lease.
Though it is not registered, it is still a dealing.
• Liens are not transferable and duration of a
lien is in force as long as the caveat remains in
the register.
2
 What is meant by ‘lien’?

• “Lien is a right in one man to retain that

which is in his possession belonging to
another man until certain demands of the
person in possession are satisfied.”

• Halsbury’s Laws of England. (Vol. 19 p.2)

3
What is meant by ‘lien’?

• Lien is the act of depositing something

valuable to the amount owed to the person
who holds the property.
• There must be an intention to pledge that
property.
• The person who holds the property has the
right to that property until payment is settled.

4
 What is meant by ‘lien’?

• Palaniappa Chetty v Dupire Brothers & Anor. [1919]

1 FMSLR 370, Earnshaw, J.C ., FMS Court of Appeal
had said that the meaning of lien is said to have
been derived through French from Latin that is
ligo, ligamen is that of binding or securing
something. A lien is one and a special form of
security. In fact “security” is the genus of which
“lien” is a species.

5
 What is meant by ‘lien’?
• Osborn Dictionary:
• The right to hold the property of another as
security for the performance of an obligation.
• S. 281 NLC provides that:
• “Any proprietor or lessee for the time being may
deposit with any other person or body as security
for a loan, his issue document or title or duplicate
lease”

6
 Lien Under NLC

• Section 281 (1)

• No exact definition of lien
• Elements for creation of statutory lien
• 1. Deposit of IDT
• 2. For security of loan
• 3. Enter lien-holder’s caveat
• the caveat gives interest to the person entering it

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8
 Creation of Lien

 Who may create a lien?

 See s.281(1) – proprietor/lessee
 How created?
 2 stages:
 1) Proprietor / lessee deposits IDT/duplicate lease
to a Lender for purpose of securing a loan.
 2) Lender enters a ‘lien-holder’s caveat’ on the said
land/lease.
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 TYPES OF LIEN

• 1. EQUITABLE LIEN
• 2. STATUTORY LIEN

10
 Stage 1: EQUITABLE LIEN

• At this stage, what is created is an ‘equitable lien’

• when IDT or duplicate lease has been deposited to
the bank/lender (B) and the lender fail to enter LHC but
still keep the title as security.
• This type of land creates an equitable interest in the land.
Deposits
A IDT/Duplicate Lease B
11
 B Lodges
Lienholder’s LAND OFFICE
Caveat

• At the stage of entry of a lien-holder’s caveat by the lien-

holder, a statutory lien is created under the NLC.
• Bank/lender, as a lien-holder lodges a LHC under S. 330
using Form 19D

Stage 2: STATUTORY LIEN

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• A Lien holder is a person who is entitled to
obtain satisfaction of a debt by means
depositing the property belonging to the
person indented to him without affecting a
transfer of the property.
• In short, a lien is a species of security. It
does not import a right of sale until
another legal process ie an order of sale is
obtained from the court. 13
 CHARATERISTICS OF A LIEN

• 1. Lien is an exception to the general principles of

registration of title because a lien is a dealing that
gives rise to a non-registrable interest. (see
s.206(2)(b) NLC)
• 2. There is no special instrument (form) to create a
lien.
• 3. In order for a lien to be recognised under the NLC,
the lien-holder must enter a lien-holder’s caveat to
restrain other dealings on the land.

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Differences between a charge and a
lien
CHARGE LIEN
1 Creation: Form 16A must be Creation: No registration
registered. form.
Lien-holder must lodge a
lien-holder’s caveat in
Form 19D.
2 Remedy: Order for sale / lien-holder to prove the debt in a
possession civil action & get order for sale.

3 Creation of a statutory charge is Creation of a lien is speedy

onerous. 15
The prerequisites of a lien before a
LH caveat can be entered:

[Link] of proprietorship

2. Element of deposit

3. Element of intention

4. Lodgment of a LHC

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• All the prerequisites must be fulfilled in order to
claim a valid and enforceable lien.
• Section 281(1) NLLC:
• - registered proprietor
• - registered lease holder and
• - co-proprietor of undivided share [by
depositing a copy of IDT-section 343(6)]

17
• Literally: the act of the proprietor handling over the
subject matter of lien to the lender and the act of
keeping the subject matter of lien by the lender will
give rise to a lien:
• Subject matter:
• IDT – registered proprietor (sec 281 (1) NLC)
• Copy of IDT – co proprietor ( sec 343 (6) NLC)
• Duplicate lease – registered lessee (sec 281(1) NLC)
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 Element of Proprietorship

• Only the registered proprietor or

lessee can deposit the original
document of title or duplicate lease to
the lender as security for a loan.
• (COA in Perwira Habib Bank (M) Bhd. v
Loo & Sons Realty Sdn. Bhd. [1996])

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 Case: PERWIRA HABIB BANK (M) BHD V LOO & SONS
REALTY SDN BHD & ANOR (no 1) [1996] 3 MLJ 409

Facts: 1st R was a registered proprietor of a piece of land and 2nd

R purchased the land from 1st R. It was agreed in the SNP
agreement that the balance of the purchase price was to be
settled within 4 months from the date of the agreement
subject to State Authority’s consent to transfer the land. If
consent was not obtained, the period will extend to another 2
months and if it is still not obtained, the SNP would deemed to
be terminated.
Following this, the 2nd R deposited the IDT to with A for the loan
where A entered a LHC over the land. 2nd R defaulted in
repayment of the loan.

20
 Judgment

• Section 281- only the registered proprietor had the

power or the right to deposit IDT for the purpose of
creating a lien. No evidence showed that the first R
authorized the second R to deposit the IDT nor the
former knew about the deposit.
• The evidence showed that the entry of LHC was not valid.
• There was also no equitable lien as the in the SNP
agreement, the agreement was deemed to be terminated
if the consent from State Authority was not obtained.

21
Case: HONGKONG & SHANGHAI BANKING CORP. THE V HAJI SALAM
BIN HAJI DAUD (MOHD AZNI BIN SUDIN, AUCTION PURCHASER;
RHB BANK BHD, INTERVENOR) [2002] 3 MLJ 483

High Court:
• Section 281(1), in very clear language, provides
that only a proprietor of alienated land or a
lessee may deposit his respective issue document
of title or duplicate lease as the case may be.
• The word 'proprietor' is defined in s 5 of the NLC
as 'any person or body for the time being
registered as the proprietor of any alienated
land'. 22
• However, under section 281(1) of the NLC, the proprietary
element has been expressly widened to include the concept of
creation of a lien by a lessee by depositing his duplicate lease
and co-proprietor of undivided share (sec 343(6) NLC) -
deposit copy of IDT with a creditor with the intention of
creating a lien.
• Only that creditor who has granted a loan is authorised to
lodge a LHC to effect the statutory lien.
• Lien can be created irrespective as to whether the land
concerned is held under a Registry title or a Land Office Title.

23
 Case: HONG LEONG FINANCE BHD V STAGHORN
SDN BHD [2005] 5 MLJ 101
• COA held that: Thus it is material in the creation of
a lien holder's caveat under s. 281 NLC to have the registered
proprietor to deposit the document of title to the lender for it is the
registered proprietor who intends to surrender his rights to the
lender to deal with the said land in the event of default in repayment
of the loan which he obtained from the lender. As a borrower, no
other person can substitute the registered proprietor in performing
this task of depositing the document of title with the lender for the
creation of this statutory instrument. To allow this would defeat the
concept of the right of the registered proprietor to deal with his own
land.
• Section 281 NLC is intended for a registered proprietor to raise
money on loan, speedily, by depositing the document of title
registered in his name with the lender as compared with the more
24

complex process of registering a legal charge over the land.

• The creation of LHC under s281 is that it must be the
registered proprietor to deposit the IDT to the lender
for it is the registered proprietor who intends to
surrender his rights to the lender to deal with the
land in the event of default in repayment of the loan
which he obtained from the lender.
• It does not extend to a beneficial owner who is yet to
become a registered proprietor.

25
 But …

• Whether a registered owner can create lien on behalf of a third party?

borrower?

26
• In other words, it is allowed a lien to be
created over a third party loan provided
that there is an authorisation by the
registered proprietor for the borrower to
use the proprietor’s land as security for a
loan granted in favour of the borrower by
the lender.
27
• It is not possible for a third party with whom the relevant
document of title has been deposited to then use the
document to create a lien in his name.
• PETER P’CHIENT V RAMASAMY CHETTY [1923] 3 FMSLR
220, in this case, the IDT had been deposited with a
creditor, that creditor then sought to use the IDT as
security for a lien in his favour.
• However, this was not successful and the court affirmed
that the right to use the IDT for the purpose of creating a
lien belonged only to the proprietor.
28
 NALLAMMAL & ANOR v KARUPPANAN &
ANOR [1993] 3 MLJ 476

• Facts: P, the registered proprietor of a piece of land

loaned the title of the disputed land to D (her husband)
upon his request, in the belief that he required it in
respect of some contract works and on condition that the
title be returned to her within a month or two.
• Under undue influence, D brought a document for P to
affix her thumb-print on. D used the title as security for a
loan obtained from the 2nd D where 2nd D lodged a lien-
holder's caveat over the disputed land.

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 High Court

• Held: The possession of the IDT title to the disputed

land was obtained through fraud or
misrepresentation, the deposit of title had never
been authorized by the proprietor of the land.
• There was insufficient proof of the statutory lien
purported to be created by the proprietor.
• LHC was wrongly entered and 2nd D could not
enforce the security.

30
PEWIRA HABIB BANK MALAYSIA BHD V MEGAT
NAJMUDDIN MEGAT KHAS & ORS [1999]5 MLJ
334

• RK NATHAN J said that: based on section 281(1) and (2)

of the NLC, the right to grant a LHC over property
belongs only to the registered proprietor or lessee of
property.
• It is not possible for a third party such as the plaintiff
[bank] in this case, with whom the original document of
title has been deposited for some other purpose, to be
able to create a lien-holder’s caveat in favour of the third
party or the plaintiff in this case.

31
• But according to section 281(4) of the
NLC allowed the lien holder to
produce IDT at any Registry or Land
office to lodge LHD on the land upon
written request made by proprietor
or lessee.
32
 i) Deposit

• A mere deposit of an IDT by a proprietor with

any person but without an intention to
borrow money from that person will not be
sufficient to establish the element of deposit.
• The deposit would amount to safe keeping
and is not in the ambit of section 281 of NLC.

33
• Sothat the holder must prove that the
deposit was made as security for a loan
advanced by the holder to the depositer.
• If the deposit is for any reason other than
‘as security for a loan’, the act of depositing
cannot be construed as being connected
with a loan or advance and therefore no
valid lien could be validly created under
section 281(1) of the NLC. 34
 CONSOLIDATED CREDIT COMPANY SDB BHD V
GLADYS LOH & ORS AND ANOTHER CASE HIGH
COURT [2014] 6 CLJ 308

• Section 281 of the NLC provides that the party holding

the title as security for a loan obtains a statutory lien only
upon entry of a lien-holder's caveat. The single most
essential fact that had to be established by Consolidated
Credit Company Snd Bhd was that there was a deposit of
title by Loh (the registered proprietor) to the lender
(Consolidated Credit) coupled with an intention on the
part of the registered proprietor (Loh) when depositing
the title that it be held as security for a loan.
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 iii. INTENTION TO CREATE LIEN

• There must be an intention to create lien i.e. the act of

depositing IDT is for the purpose of securing the loan.
• A mere deposit of IDT by a proprietor with any person but
without the intention to borrow money from the person
will not be sufficient to establish the element of deposit.
• Thus, if it is a deposit for safe keeping, no lien will be
created.

36
 AMCARD SERVICES BERHAD V DATO’ JOSEPH
CHONG CHECK AH & ANOR [2015] MLJU 1983

•The courts held that the Ds

deposit the IDT to lien holder
which was the intended P was for
the only purpose of securing the
repayment of the loan.
37
 Paramoo v Zeno Ltd.
[1968] 2 MLJ 230

Facts: D was a registered proprietor of a land. The

company then created a memorandum of charge to
secure the repayment of $75k lent to D where the
charge was never registered in the Land Office
though it was registered under Companies
Ordinance. It was a term of the charge that D deposit
the IDT for the land with P as security for the principal
and interest of the loan and the lender may lodge a
caveat to create a lien. The caveat was duly entered.

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Suffian FJ
“ the intention to create a lien may be gathered
from the fact that the IDT to the land has been
deposited with the lender as a security for the
loan and for no other purposes”
• Principle from case: The intention to create a lien
can be gathered from the fact that the IDT was
deposited with the lender only for securing the
loan.

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PALANIAPPA CHETTY V DUPIRE BROTHERS &
ANOR (1922) 1 FMSLR 370

Earnshaw JC:
The existence of contract of loan under which the lender
was entitled to possession of the borrower’s IDT as
security gave rise to the presumption that the deposit by
the borrower in such an instance was made with the
intention to create a lien
Thus, an express documentation declaring the intention to
create a lien is not necessary as the purpose of lien is to
do away the rigid scheme of registration in charge.

40
• The element of intention is not
satisfied if possession of IDT was
obtained through fraud or
misrepresentation and the deposit of
IDT as security was never authorised
by the registered proprietor.
41
 Effect of failure to lodge a LH
caveat?
• Mercantile Bank Ltd. v Official Assignee
of How Han Teh
• Held: (Raja Azlan Shah,J.)
• Although registration of a LH caveat is essential for a
valid statutory lien, the court can still give effect to
equitable rights existing between the parties. Thus,
Mercantile bank has an equitable right to a lien.

42
 STANDARD CHARTERED BANK
BHD V YAP SING YOKE [1989] 2
MLJ 49
• Lamin J stated:” as the IDT was at all time
in the custody of the P, it had acquired a
lien in equity over the land. The equitable
interest is not affected by the absence of
a caveat. The P had by right to lodge a
caveat and may do so at any time under
the provision of the NLC 1965”
43
 SAMUEL NAIK SIANG TING V
PUBLIC BANK BHD [2015] 8 CLJ
944

• The FC decided that the failure on

the part of the R to lodge a caveat
timeously does not in any way
negate or defeat its equitable rights.
44
 (iii) Entry of LHC

•Section 281(1)(a)- the

requirement to enter LHC
•The effect of LHC [S281(1)(b)]
• the person who enters LHC
becomes entitle to the lien.
45
• DATO’ JOSEPH CHONG CHEK AH &
ANOR V AMCARD SERVICES BHD (COA,
PUTRAJAYA) [2017] 6 CLJ 151.
• Held that the whole purpose of
a lien holder's caveat is to allow
statutory lien to be created as a form of
security over land.
46
 LEKCHUMANAN A/L SUPPIAH &
ANOR V RAVI A/L RAJU [2016]
MLJU 1316
• The transfer of land to R is illegal, null and
void for breach of the provisions requiring
the R to register a LHC before the security
created is enforced by the holding of a
document of title to land in accordance
with the relevant provisions under NLC.
47
LHC UNDER SECTION 33O (1) NLC

• Section 330(1) : creation of LHC

• Effect of caveat: protects the interest of the lender
in respect of the land, undivided share or the lease
in that it will prohibit any further dealings with the
said land.
• However, failure to enter the caveat still enables
the lender a right in equity but not a lien under the
NLC.
48
• RHB Bank Bhd (previously known as United Malayan
Banking Corp Bhd and then as Sime Bank Bhd) v Wong
Kok Leong (as executor and trustee of the estate of Wong
Kwong Wah, deceased) & Ors [2017] 4 MLJ 281

• Held that the defendant’s lien, which had enabled it to

enter the lien-holder’s caveats under sub-s 330(1) of the
NLC.

49
 Dato Joseph Chong Chek Ah & Anor v Amcard Services
Berhad (dahulunya dikenali sebagai Arab-Malaysian
Credit Berhad) [2016] MLJU 1383

• The enforcement of the lien holder’s

caveat by the Respondent was to secure to
repayment of the balance judgment debt
of the 1st Appellant arising from the loan
granted by the Respondent through the
creation of the Lien Holder’s caveat of the
property.
50
 MAHADEVAN & ANOR v MANILAL & SONS (M) SDN BHD
[1984] 1 MLJ 266

• Salleh Abbas CJ said that:

• “No provision in the National Land Code
prohibiting the creation of equitable charges and
liens. The Code is silent as to the effect of
securities which do not conform to the Code's
charge or lien. Therefore equitable charge and
liens are permissible under our land law.”

51
 MERCHANTILE BANK V OFFICIAL
ASSIGNEE [1969] 2 MLJ 196

• Held: failure to enter a LHC will not

necessarily deprive the lender of a right to
a lien in equity.
• So long as the prerequisite intention to
create a lien coupled with the deposit of
the title to the land are present.
52
 EFFECT OF LODGEMENT OF LHC

• 1. Same effect as a private caveat – it

will restraint all dealings with the land.
• 2. in the event of default by the
borrower, the lender is entitled to
invoke remedy available under section
281(2) NLC.
53
 Remedy For Lien Holder

• Section 281 (2)

• Lien holder obtain judgment for the amount due
• Section 281(3)- Civil procedure
• Order 42 of the Rules of High Court 1980 –
Rules of Court 2012
• Apply to the court for order of sale-
• Application for order for sale is similar to a charge
under section 256 [Section 281(3)]

54
 Order For Sale

• Section 281(3)
• Application of order for sale :
section 256
• Similar provisions to that of the
charge.
55
• Section 331(1) of the NLC- a lien is
terminated by a withdrawal of the caveat
and the return of the IDT on payment of
the debt and interests.
• The lien holder must give notice in writing
to the Registrar to effect the withdrawal.
56
• Under the NLC, a lien-holder’s caveat can only
cease to exist upon being cancelled under s 331 in
various prescribed circumstances. Unlike a private
caveat (which could lapse), a lien-holder’s caveat
did not lapse under the NLC except upon the
registration of the certificate of sale of the land
which had been sold pursuant to a court order.

57
• Why Lien?

58