Kcsb Konsortium Sdn Bhd
[2014] MLRHU 96 v. Malaysian Building Society Berhad & Anor pg 1
KCSB KONSORTIUM SDN BHD
v.
MALAYSIAN BUILDING SOCIETY BERHAD & ANOR
High Court Malaya, Johor Bahru
Gunalan Muniandy JC
[Originating Summons No: 24M-154-04/2013]
22 January 2014
Case(s) referred to:
Hassan Seman v. Jusoh Awang Kechik [1981] 1 MLRA 123; [1982] CLJ (Rep)
110 (refd)
Kuah Chiew Ann v. Pendaftar Hakmilik Tanah Wilayah Persekutuan [2000] 2
MLRH 263; [2000] 6 MLJ 127; [2000] 6 CLJ 246 (refd)
Tan Tock Kwee & Anor v. Tey Siew Cha & Anor [1995] 3 MLRH 185; [1995] 4
CLJ 658 (refd)
Woon Kim Poh v. Sa'amah Hj Kasim [1985] 1 MLRA 632; [1987] 1 MLJ 400
(refd)
Legislation referred to:
National Land Code 1965, ss 242, 340(2)(b), 380(1)(a)(b)(c), 417, 418, 419
Other(s) referred to:-
Mozley and Whiteley's Law Dictionary , 11th Ed
Counsel:
For the plaintiff: Mohd Adlizan; M/s Hazli & Ihab
For the 1st defendant: K Gopinath (M Sanjay with him); M/s Kadir Andri &
Partners
For the 2nd defendant: Nor Jamilah Tohed (Shahrizal Dato' Shaari with her);
Pejabat Kamar Undang-Undang Negeri Johor Nusajaya
[Allowed with costs of RM5,000.00 and MBSB's application vide its counter-claim
for correction of the error under s 380, NLC was dismissed.]
GROUNDS OF DECISION
Gunalan Muniandy JC:
[1] In this application, the Plaintiff ('P') prayed for the following orders:
"(a) Selaras dengan s 340 (2) (b) Kanun Tanah Negara 1965, gadaian
yang dimasukkan oleh Defendan Pertama melalui perserahan no
35022 bertarikh 2hb Ogos 1999 ke atas harta tanah yang dipegang di
bawah Pajakan No. 548, No. Lot 139, Mukim Tebrau, Negeri Johor,
milik Plaintif diketepikan dan tidak mempunyai kesan;
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pg 2 v. Malaysian Building Society Berhad & Anor [2014] MLRHU 96
(b) Defendan Kedua mengeluarkan dan membatalkan gadaian yang
dimasukkan oleh Defendan Pertama melalui perserahan no 35022
bertarikh 2hb Ogos 1999 keatas harta tanah yang dipegang di bawah
Pajakan No. 648, No. Lot 1876, Mukim Plentong, Negeri Johor dan
harta tanah yang dipegang di bawah Pajakan No. 548, No. Lot 139,
Mukim Tebrau, Negeri Johor, milik Plaintif daripada buku
pendaftaran Pejabat Tanah dan Galian Johor;
(c) Apa-apa relif yang difikirkan suaimunafaat dan adil oleh
Mahkamah Yang Mulia ini;"
Background Facts
[2] P was awarded a contract by the Government of Malaysia pursuant to a
letter of intent issued by the Prime Minister's Department dated 02.03.1996 for
a Ministry of Defence Army Camp Project on 3 pieces of land in Pulai, Johor
Bahru ('JB') at a price of RM250 million. The 3 lots of land were:
(i) HS(D)19560, Lot 2967 measuring in area of 308.25 acres;
(ii) HS(D) 116425, Lot No. 27633 measuring in area of 10.229 acres;
and
(iii) HS(D) 116424, Lot 27634 measuring in area of 232.457 acres.
In consideration, the Government agreed to transfer to P these 2 pieces of land
located in JB:
(i) Lease No: 648, Lot 1876, Mukim of Plentong measuring in area of
approximately 310.75 acres; and
(ii) Lease No: 548, Lot 139, Mukim of Tebrau measuring in area of
approximately 71.406 acres.
[3] Upon negotiations, P and the Government entered into a Privatisation
Agreement dated 10.07.2007 for privatisation of the project and development
on the said land.
[4] On the same date, P entered into an assignment agreement with one
Kausar Corporation Sdn Bhd ('Kausar') whereby P assigned all its rights and
benefits under the Privatisation Agreement ('PA') to Kausar. In return, Kausar
agreed to assume all of P's obligations and liabilities under the PA.
[5] MBSB Development Sdn Bhd ('MDSB') was thereafter invited by Kausar
to participate in the development of the land on a joint venture basis and to
share the benefits thereof. As a result, the 2 parties executed a Joint Venture
Agreement ('JVA') pursuant to which they agreed to establish a joint venture
company named Definite Pure Sdn Bhd ('DP') to carry out mixed
Kcsb Konsortium Sdn Bhd
[2014] MLRHU 96 v. Malaysian Building Society Berhad & Anor pg 3
development on the land.
[6] At the request of DP and pursuant to a Loan Agreement dated 21.10.1997,
the 1st Defendant ('MBSB') provided 2 loan facilities to DP, namely:
(i) A term loan of up to RM465 million ("Term Loan") for principal
only inclusive of a Land Bond ("Land Bond"); and
(ii) An advance of up to RM65.1 million ("Advance").
By virtue of a term of the Loan Agreement, P was to create a 3rd party charge
against the said land. Vide Form 16A dated 02.08.1999, a charge was created
in favour of MBSB on the said land as security for the loan facilities.
[7] Contrary to above term of the agreement, the charge instrument (Form
16A) was registered as a 1st party charge instead of a 3rd party charge whereas
the Charge Annexure clearly classifies the charge as a 3rd party charge. Both P
and MBSB admitted that the Form 16A was a mistake and thus, defective.
Hence, this application to set aside the charge on the ground that the Form
16A creating the charge was an insufficient instrument that rendered the
charge void and invalid.
The Defence Case
[8] MBSB contended that the charge was wrongly registered as a 1st party
Charge instead of a 3rd party Charge as a result of an error or mistake made in
the instrument of Charge (Form 16A). It did not nullify the Charge as there
were provisions in the NLC for rectification of the mistake. This position was
supported by the 2nd Defendant. There was no fraud or insufficient instrument
filed in the registration of the charge that rendered the charge defeasible under
s 340 (2), NLC.
Issues Arising
[9] 1) Whether the mistake or error in the Form 16A rendered it an insufficient
instrument and the Charge defeasible under s 340(2), NLC?
2) Whether the said mistake or error was a mere technical defect that was
curable by rectification under the provisions of s 380 NLC?
3) Whether the Charge should be set aside on the ground of being null and
void?
Analysis of Issues and Grounds of Application
[10] It was not in dispute that at all material times the parties intended to
create a 3rd party charge in favour of the 1st Defendant over the said land.
This intention is reflected in the Loan Agreement and the Charge Annexure.
The 1st Defendant contended that the error or mistake in wrongly registering
the charge as a 1st party charge instead of a 3rd party charge was not serious
Kcsb Konsortium Sdn Bhd
pg 4 v. Malaysian Building Society Berhad & Anor [2014] MLRHU 96
enough to warrant a setting aside of the whole charge. The contention was
premised on 2 grounds, namely, that removal of the charge would be highly
prejudicial to the 1st Defendant as it would be deprived of any security for the
loan granted to the borrower ('DP') and that the court had the power to rectify
the mistake pursuant to s 380 of the National Land code ('NLC').
"S 380 (1), NLC provides that:
(1) Where the Registrar is satisfied:
(a) That any document of title has been registered or
issued in the wrong name, or contains any
misdescription of land or boundaries, or other error or
omission, or
(b) That any memorial or other entry has been made
in error an any document of title or other instrument
relating to land, or
(c) That any memorial or other entry made on any
such document of title or instrument itself contains
any error or omission,
he may, subject to sub-sections (2) and (3), make such
correction on the document or interest in question as may be
appropriate in the circumstances of the case.".
[11] In Hassan Seman v. Jusoh Awang Kechik [1981] 1 MLRA 123; [1982] CLJ
(Rep) 110 the Federal Court held:
"We are of the view that indefeasibility is not affected, when the
correction only relates to a mere technical mistake. As has been stated
earlier there was neither evidence, nor even a suggestion that the
discrepancy between the memorandum of transfer and its memorial on
the register was a fraud, it must therefore be a genuine mistake which
can be corrected by the Registrar of Title as "an error or omission"
within the meaning of s 380(1)(c) of the National Land Code.".
[12] The first and crucial point to note is that the power conferred by s 380 (1),
NLC is confined to correction of errors in documents of title or any other
instrument relating to land and more importantly, that the power is vested in
the Registrar of Titles and not in the Court. Nowhere in s 380, NLC is there
provision for the Court to exercise its powers to correct any error or omission
as stated. The 1st Defendant's contention in this regard was, thus, plainly
misconceived and erroneous. Despite being fully aware of the purported
genuine mistake or error in the registration of the impugned charge, the 1st
Defendant had to date not made any application to the Registrar to correct it
and rectify the charge pursuant to the powers provided for in s 380, NLC.
Kcsb Konsortium Sdn Bhd
[2014] MLRHU 96 v. Malaysian Building Society Berhad & Anor pg 5
[13] I agree with the proposition of law that under s 380, NLC only the
Registrar of Titles was empowered to make the correction of any error and
that the Court was only empowered to act on appeal from the Registrar's
decision under s 418 or on reference by the Registrar under s 419, NLC. This
was decided by Mohd Hishamudin Yunus, J (as he then was) in Kuah Chiew
Ann v. Pendaftar Hakmilik Tanah Wilayah Persekutuan [2000] 2 MLRH 263;
[2000] 6 MLJ 127; [2000] 6 CLJ 246 where it was held:
"The court does not possess the power to make the order as prayed for
because under s 380 of the National land Code 1965 ('the NLC'), the
party authorized to amend the document of title is the registered
proprietor and not the court. Therefore, an interested party who
wishes to have the amendments must defer to the registered
proprietor. The court can only act where the matter has been brought
to court under s 418 or s 419 of the NLC (see pp 130D, 132B-C).
Under s 380(1)(b) of the NLC, the registrar of titles was empowered to
make the correction where an error had been committed by another
party (see p 132B); Mohammad bin Buyong v Pemungut Hasil Tanah
Gombak & Ors [1982] 2 MLJ 53 followed. In addition, the provisions
under s 380 (1) (a), or (b), or (c) were not restricted to errors
committed by the registry office alone but also covered errors made by
the registrar's office which resulted from someone else's mistake (see p
133D - E).
What the plaintiff should have done, according to s 380 of the NLC
was to make an application supported by a statutory admission by
attaching relevant documents that have been certified true (see p
130E). In the event the registrar of title dismissed such an application,
the applicant may refer to the High Court by lodging an appeal under
the provision of s 418 of the NLC (see p 131G). On the other hand, if
having considered the application the registrar was satisfied that a
mistake had been made in the document of title in question but, based
on reasonable grounds, found it difficult to decide whether to dismiss
or approve the application for correction, the registrar of titles would
be under a duty to refer the matter to court under s 419 of the NLC
(see pp 131H-132A).] ".
[14] From the clear and unambiguous terms of s 380, NLC read literally, there
can be no doubt that the 1st Defendant did not have recourse to the Court to
correct or amend the mistake in the charge instrument without having applied
to the Registrar to do so in the exercise of his powers under the same section.
[15] The Plaintiff next submitted that the power conferred by s 380, NLC did
not extend to correcting the nature or vital terms of the document creating the
charge, the document in this case being the Form 16A. Under s 380, NLC, the
errors or omissions on documents of title or instruments amenable to
correction or amendment are as specified therein. I upheld the submission that
these do not include mistakes relating to the very nature of the instrument itself
or amendments to its fundamental terms. In this case, the Form 16A that
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pg 6 v. Malaysian Building Society Berhad & Anor [2014] MLRHU 96
created the charge was in conflict with the Loan Agreement and JVA entered
into between the parties. The mistake that occurred went to the type of charge
as intended by the parties or the nature of the instrument itself that wrongfully
created a first party charge over the subject land to the detriment of the
Plaintiff. The Form 16A had the effect of changing the nature of the
transaction between the parties in that the Plaintiff was described as the
borrower of the loan of RM465,000.00 from the 1st Defendant whereas the
2nd Defendant was the borrower to whom the loan had been released. It had
clearly altered the capacity of the Plaintiff from that of a third party chargor to
that of a borrower liable under the Loan Agreement. A mistake of this nature
going to the type and status of the charge, was in my view, fundamental and
serious that did not fall with the types of error or omission that were curable or
rectifiable under s 380, NLC.
[16] A charge that is created, inter-alia, by an insufficient or void instrument, is
rendered defeasible under the exceptions to indefeasibility specified in s 340
(2), NLC. In this case, the Form 16A that fundamentally conflicted with the
Loan Agreement that was the basis of the charge over the subject land and the
express intention of the contracting parties, could be regarded as an
insufficient and defective instrument. It was, thus, voidable at the instance of
the affected or aggrieved party, viz., the Plaintiff as the chargor. [See Tan Tock
Kwee & Anor v. Tey Siew Cha & Anor [1995] 3 MLRH 185; [1995] 4 CLJ 658].
Section 340, NLC states that:
"340. Registration to confer indefeasible title or interest, except in
certain circumstances
(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.".
[17] As regards s 417, NLC, the 1st Defendant's reliance on this section in
support of its case that the Court had the power to order rectification of the
aforesaid mistake in the Form 16A was patently misplaced. The wording of s
417 is plain and clear that its purpose is for the Court to direct the Registrar to
Kcsb Konsortium Sdn Bhd
[2014] MLRHU 96 v. Malaysian Building Society Berhad & Anor pg 7
do all acts that are necessary to give effect to the relevant judgment or order of
the Court. The party seeking to invoke this section for an order against the
Registrar or Collector should first have obtained a judgment or order relating
to land under the relevant provisions of the NLC. To put it another way, the
said judgment or order is a condition precedent to s 417, NLC being invoked
to obtain the order therein directing the Registrar to do any act. Without the
condition precedent being satisfied, the question of an order being granted
under s 417, NLC would not arise. In the Supreme Court case of Woon Kim
Poh v. Sa'amah Hj Kasim [1985] 1 MLRA 632; [1987] 1 MLJ 400 Hashim
Yeop A Sani, SCJ (as he then) was remarked:
"Section 417 of the Code provides that the court or a judge may by
order direct the Registrar or Collector to do all such things as may be
necessary to give effect to any judgment or order given or made in any
proceedings relating to land, and it shall be the duty of the Registrar or
Collector to comply with the order forthwith.".
Conclusion
[18] Under s 242, NLC, the Form 16A is a formal requirement that is
mandatory for registration of a charge over property. It entitles the chargee to
enforce the charge on the land belonging to the chargor (Plaintiff) and confers
on the charge an indefeasible interest in the land.
[19] The mistake in the Form 16A adverted to is serious and fundamental as,
inter alia, it altered the status of the Plaintiff from that of a mere third-party
chargor to a borrower of the substantial loan from MBSB. This altered
capacity carried serious implications as to the legal liabilities and obligations of
the Plaintiff under the charge. The charge annexure could not rectify the
situation as the Form 16A was the only instrument recognised under s 242,
NLC. The said mistake was not a mere error, omission or technical defect as
envisaged under s 380, NLC that could, on application to the Registrar, be
corrected. In any event, the Registrar and not the Court was empowered to
make the correction that was required. MBSB, thus, cannot in law invoke s
380, NLC to seek on order for rectification of the Form 16A.
[20] The above mistake renders the Form 16A an insufficient and defective
instrument for registration of the charge, which would, thus, become
defeasible under the provisions of s 340 (2), NLC. It was, accordingly,
voidable and liable to be declared void at the instance of the chargee.
[21] For the reasons alluded to, s 417, NLC did not have any application to the
issues in dispute in the present case as MBSB had not obtained any judgment
or order for the Registrar to give effect to.
[22] By reason of the foregoing, I held in conclusion that the Plaintiff had
raised sufficient grounds as to why the charge instrument should be held null
and void and for an order that the charge be accordingly set aside for being
void and bad in law. This application was, therefore, allowed with costs of
RM5,000.00 and MBSB's application vide its counter-claim for correction of
Kcsb Konsortium Sdn Bhd
pg 8 v. Malaysian Building Society Berhad & Anor [2014] MLRHU 96
the error under s 380, NLC was dismissed.
